Breakbulk Magazine Issue 3 2020

Issue 3 / 2020

The Publication for the Industrial Project Supply Chain Industry

WHAT A DIFFERENCE A YEAR MAKES Is the World Economy Facing Its Biggest Challenge?

A CRISIS LIKE NO OTHER

|

ENTERING THE OFFSHORE AIRSTREAM

|

ULRICHS: SOLACE IN SHIPS

WE KNOW WHAT WE'RE DOING Hรถegh Autoliners is a global leader in deep sea RoRo transportation services. To transport wider, longer and higher breakbulk and project cargo, we have developed specialised handling equipment to ensure your cargo's smooth and safe transportation. With over 90 years of experience from shipping, we can safely say that we know what we're doing, and we do it well.

www.hoeghautoliners.com

IN THIS ISSUE

8

18

Cover Story

40

8 WHAT A DIFFERENCE A YEAR MAKES Energy Outlook Turned Upside-down by Coronavirus

14 REGIONAL REVIEW

ENTERING THE OFFSHORE AIRSTREAM U.S. Makes Wider Wind Moves

18 ENERGY UPDATE

PINNING HOPES ON HYDROGEN

Green Hydrogen Economy to Spark Infrastructure Boom

22 LOGISTICS PERSPECTIVE

A CRISIS LIKE NO OTHER

40 CARGO LENS

GRIND OF STEEL TARIFFS US Charges Drag Down Breakbulk

44 EMERGING MARKETS

CLEAN SLATE IN PERU President Bids to Restore Business Confidence

48 EXECUTIVE SUMMARY

INFECTION OF CARGOES True Picture of Covid-19 Impact

Covid-19 Tests Breakbulk Industry’s Disaster Preparedness

26 REGIONAL REVIEW

TRANSMISSION VS TRANSPORTATION

An Asian Perspective on Covid-19’s Impact

36 PROFILE

SEEKING SOLACE IN SHIPS How BBC Chartering Won Over MPV Veteran

NEW SECTION

BREAKBULKONE

PAGE 30

04 EDITORIAL 06 C ONVERSATION 50 BREAKBULK MIDDLE EAST RECAP 56 BACK PAGE www.breakbulk.com BREAKBULK MAGAZINE 3

EDITORIAL

THE WAY FORWARD The global Covid-19 pandemic has pulled at every fiber of society and business in the few months since our last issue of Breakbulk magazine. Within these pages, we’ve explored and reported the virus’ impact on the project cargo industry and business going forward.

The pandemic is front and center in Breakbulk’s annual energy outlook (“What a Difference a Year Makes,” Gary Burrows page 8), in which shuttered factories, grounded flights and choked demand have led to a meteoric crash in energy markets. Amy McLellan attempts to make sense of the industry’s recovery and what it means to the project industry.

In “A Crisis Like No Other,” (page 22), Helen Campbell looks at how the breakbulk industry has responded to disasters, natural and manmade, and its different and more complex response to the medical and economic emergencies of Covid-19.

Thomas Timlen offers the Asian perspective on Covid-19’s impact, as China eases some of the restrictions that have affected logistics, and brought a halt to manufacturing and many construction projects (“Transmission vs. Transportation,” page 26).

In “Infection of Cargoes,” (page 48), Johan-Paul Verschuure and Merdan Haydarov of WSP analyze ship data to determine the actual impact of the pandemic on general cargo trade. Exclusively for Breakbulk, they examined vessel movements data for general cargo vessels for a set of ports in China and North Europe.

And even our regular columnist and industry veteran Margaret Vaughan weighs in on where the pandemic will lead us (“Cursed Cogs of Industry?,” page 7), as she remembers the saying, “May you live in interesting times.”

Indeed.

4 BREAKBULK MAGAZINE www.breakbulk.com

BREAKBULKONE

On March 24, Breakbulk Events & Media started BreakbulkONE, a weekly newsletter and breakbulk.com feature that shares important industry information and insights, helping customers to stay connected with us and one another. We invite your company to share news and information that could benefit colleagues around the world (the submission form is available at breakbulk.com/one). In this issue, we highlight several stories shared since BreakbulkONE launched, in a special section starting on page 30.

Breakbulk continues to monitor and respond to global restrictions created by the pandemic. In late April, we announced that Breakbulk Americas will take place Nov. 3-5 at the George R. Brown Convention Center in Houston. The schedule change completed the slate of new dates for the remaining Breakbulk events in 2020. Breakbulk Asia, Aug. 3-4 at the Shanghai World Expo Exhibition & Convention Center, in Shanghai, China; and Breakbulk Europe, Sept. 29-Oct. 1, at Messe Bremen, in Bremen, Germany.

Beyond the Covid-19-related coverage in this issue, the pandemic has also impacted Breakbulk magazine, as complications from the outbreak have led to this issue being distributed digitally only. We will resume our print edition along with digital edition with Issue 4, which will distribute to delegates and exhibitors at Breakbulk Asia.

As I write, there are signs of and efforts to return to some levels of normalcy – although wherever we’re heading won’t likely, truly return to whatever we remember as “normal.” We search for small signs of progress and promise, helpless but hopeful. Some countries appear ahead of the curve, although the arc if infection is just starting in others. There are projections that imply this process will be one step forward, two steps back, but it’s vital that we keep dancing.

As you read this issue, I pray that you and your families and colleagues are safe and well. As McLellan concludes in her energy outlook, “The message for 2020?

Stay safe and hold on.”

Oh, and wash your hands.

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 Helen Campbell Felicity Landon Amy McLellan Lori Musser Malcolm Ramsay Thomas Timlen Simon West

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 PORTFOLIO DIRECTOR Nick Davison nick.davison@hyve.group ACCOUNT MANAGER Robert Janusauskas / +66 62 804 6746 robert.janusauskas@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 3 / 2020

RoRo by WW Ocean -The safer, smarter way for your breakbulk

Find out more at walleniuswilhelmsen.com

CONVERSATION Conversation is a forum of thought leaders, commentaries, letters, editors’ notes and note-worthy 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.

IMF PREDICTS GLOBAL RECESSION The International Monetary Fund has declared that the world should prepare for the “worst recession since the Great Depression.”

The prognosis will have dramatic impacts for breakbulk operators worldwide as spending is slashed across sectors.

“It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago,” said Gita Gopinath, the IMF’s chief economist.

Modeling by research consultancy Drewry had predicted slight growth for the breakbulk multipurpose sector this year. However this was predicated on a U-shaped recession where the global economy picked up in the second half

of the year. The latest forecast from the IMF now suggests that a return to growth in 2020 is now unlikely for many parts of the world.

“Our low-case scenario would see rates weaken further into 2021 and no recovery until 2H21 … Large scale unemployment and business casualties lead to increasing uncertainty across global markets and a prolonged downturn in freight rates in the dry cargo sector,” said Susan Oatway, senior analyst for multipurpose and breakbulk shipping at Drewry.

The IMF noted that the baseline assumption is that the pandemic will recede in the second half of this year. If outbreaks and shutdowns persist longer, there are significant downside risks to the forecast.

“Under the assumption that the pandemic and required containment peaks in the second quarter in most countries in the world, and then recede in the second half of this year, we are projecting global growth in 2020 to fall to minus 3 percent,” Gopinath said.

The April agreement by OPEC+ oil producing states to limit production helped to stabilized oil prices, but the IMF cautioned that the long-term outlook for spending by oil producers is likely to be weak.

“For oil exporters, obviously weakness in oil prices implies lower fiscal revenues, hence lower spending by the government, lower support of the nonoil sectors, lower revenues flowing to that sector and hence lower growth,” Gopinath stated.

MPV SECTOR FACES FINANCING DIFFICULTIES The multipurpose shipping sector is facing a massive shift in value distribution and difficulty over the medium term raising finance, according to shipping consultancy Toepfer Transport.

The impacts of the Covid-19 pandemic are likely to create “difficult weeks and months ahead,” but underlying trends to introduce new environmental regulation and digitalization of operations will prevail, ultimately strengthening the sector.

“We clearly see that the current situ-

ation will make it more and more difficult to finance the inevitable transformation and fleet renewal. We also have to keep in mind that the current small orderbook in the short term mitigates the difficulties caused by the current drop in demand,” Topefer said in a recent report.

The firm reports that multipurpose time charter rates fell sharply in April, sliding beneath the US$7,000 per day mark for the first time in more than a year.

“Our Multipurpose Index, the TMI, [fell] below US$7,000 within a small

spread. The decline [was] caused by the uncertainties created by both the Covid19 outbreak as well as the low oil price,” Toepfer stated.

The firm noted that year-on-year growth as measured by the TMI was -9.83 percent, while the three-year compound annual growth rate was 3.67 percent.

Topefer’s Multipurpose Shipping Report index is based on a 12,500 deadweight-tonne multipurpose/heavylift F-Type vessel for a six to 12-month charter.

TOEPFER TRANSPORT MULTIPURPOSE SHIPPING TIME CHARTER INDEX

RATE PER DAY

The index is based on a 12,500-deadweight-ton MPP/HL “F-Type” vessel for a six-to 12-month time charter, and represents the monthly assessment from operators, owners and brokers. $7,610 $7,440

$7,524

$7,529

$7,476

$7,547

$7,490

$7,515

$7,578

$7,554 $7,393

$7,415 $7,221

Mar 2019

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan 2020

Feb

Mar

Source: Toepfer Transport, www.toepfer-transport.com 6 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2020

Cursed Cogs of Industry?

‘M

BY MARGARET VAUGHAN

ay you live in interesting times.”

This supposedly ancient Chinese saying was actually first used by a Briton in the early 20th Century, and although it may sound like a benevolent wish, it is actually considered a curse.

When have we not lived in interesting times? If one looks back over the past 100 years in the U.S. alone we have suffered through: World War I, the Great Depression, Dust Bowl, World War II, Cold War, Vietnam War, Asian flu, Watergate, oil embargo of 1970s, Three Mile Island, 1980s Oil Crash, AIDS, 1987 Black Monday, Iraq War, domestic terrorism, U.S. Embassy bombings, 1999 dot-com crash, 9/11/2001, Wars in Iraq (redux) and Afghanistan, 2008 housing crash, swine flu, Star Wars Episode 8, Don Lemon and the decline of objective journalism, mass shootings, losing both David Bowie and Prince in 2016, and now the combination of Covid-19, deflated oil prices, and another Wall Street crash.

Generally after each crisis, an analysis is made of the causative events and then legislative and/or behavioral corrections are instituted to eliminate similar future incidents, though perhaps not always for the

better – there’s a tendency to throw the baby out with the bathwater. As it was said in the movie Top Gun: “A good pilot is compelled to always evaluate what has happened, so he can apply what he has learned.”

So, what have we learned from all this and where will it lead us? I have no crystal ball, but there are a few things that seem fairly clear. A recession is inevitable, but how strong and for how long remains to be seen? Our global supply chain is vulnerable. Its vulnerability will lead to an effort to bring it back into the U.S. especially in pharmaceuticals, medical supplies, and other key components.

Strong support, at least initially, for bringing our supplies (and jobs) closer to home may cause an upswing in U.S. manufacturing.

But the U.S. appetite for cheaper foreignmade goods, which has been the bedrock of our consumer economy, will only increase as the U.S. government raises taxes to pay for the multitrillion-dollar Covid-19 relief bill.

Most of the major oil companies have already announced suspensions of capital expenditure projects for the foreseeable future. Mergers, takeovers and bankruptcies will increase, and the job market will be much like what it was after the 2008 housing crash. The unemployment rate will surge and possibly for a longer period than people would want. And crime will escalate as it always does during times of high unemployment.

On the other hand, gas prices will be lower, and people will certainly be cleaner and possibly healthier. This crisis may lead to a diversification in existing manufacturing industries, as companies like Ford and GM churn out ventilators and other medical devices. The forced experiment in telecommuting may change the way we do business in the future. Certainly there will be innovations across all industries. We’ll just have to wait and see – “may you live in interesting times.”

BB

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

www.breakbulk.com BREAKBULK MAGAZINE 7

CREDIT: SHUTTERSTOCK

Ramifications of Wholesale Reinvention

COVER STORY

BY AMY MCLELLAN

WHAT A DIFFERENCE A YEAR MAKES

B

reakbulk’s 2019 Global Energy Outlook had a clear message: “More energy, fewer emissions.”

Twelve months on and the world has changed in ways no one could have imagined. Gripped by a global pandemic that has shuttered factories, grounded flights and choked demand, the world is awash with energy, and emissions will undoubtedly be down too.

It is hard to comprehend how quickly everything changed as a result of a novel coronavirus, SARSCoV-2, which crossed the species barrier in late 2019 and spread quickly through the Chinese city of Wuhan, the ground zero of the disease now known as Covid-19. At the time of writing in late April, there were at least 3.5 million confirmed 8 BREAKBULK MAGAZINE www.breakbulk.com

cases around the world, more than 250,500 dead and half of the world’s population was under some kind of quarantine or lockdown.

Governments around the world are on a war footing, triggering emergency powers, launching bailout packages for struggling businesses and individuals, and slashing interest rates. As a result, many now fear the impact of a looming deep recession more than they do the virus. At the time of writing, all eyes were on Wuhan to see whether there will be a resurgence of infection as restrictions are lifted in April: this will guide how other countries respond to the virus.

For energy markets, it has been a torrid first quarter: having opened the year at US$65 a barrel, by the end of March, benchmark WTI was trading at US$20.51, a 17-year-low, before

falling into negative territory on April 20. The crash was precipitated by the dramatic cut in Chinese oil demand, which fell off a cliff as the world’s second-largest economy brought in unprecedented measures to curb the spread of the virus. In early March, the International Energy Agency, or IEA, forecast a year-on-year fall of 1.8 million barrels per day, or bpd, in Chinese oil demand in the first quarter of 2020, with global demand dropping by 2.5 million bpd for the three-month period. The Paris-based energy watchdog anticipated a recovery over the second half of 2020 as countries successfully contained the virus, muting the global demand drop for the whole year to 90,000 bpd.

The virus moves fast, however. By late March, analysts were scrambling to keep pace with developments. OsloISSUE 3 / 2020

CREDIT: SHUTTERSTOCK/MARK CLUBB.

Energy Outlook Turned Upside-down by Coronavirus

based Rystad Energy, for example, which produces weekly Covid-19 reports, released “another shocking consecutive revision” of its weekly estimates as the crisis deepened. At the time of writing in late March, the Oslo-based analyst expected global oil demand, which was 99.9 million bpd in 2019, to fall 4.9 percent in 2020, or by 4.9 million bpd year-on-year, to 95 million bpd.

RETURN OF SINGLE-DIGIT OIL?

The turmoil in the oil markets has been exacerbated by the price war between Saudi Arabia and Russia. The oversupply of oil was expected to balloon when the agreement between the Organization of Petroleum Exporting Countries’ oil cartel and Russia ended in April, with Riyadh announcing plans to raise oil exports to a record 10.6 million bpd from May in a shockand-awe tactic to grab market share.

Then, on April 12, OPEC+ – a coalition of OPEC countries and cooperating non-OPEC countries, including Russia – agreed to cut output by 9.7 million bpd in May-June, 7.7 million bpd in July-December, and 5.8 million bpd in January-April 2021.

With the market massively oversupplied, global storage markets are nearing capacity: as of March 20, analysts at Rystad Energy calculated that 76 percent of the world’s oil storage capacity was already full.

With supply expected to outstrip oil demand by an average of almost 6 million bpd in 2020, this will result in an accumulated implied storage build of 2 billion barrels this year.

“The current average filling rates indicated by our balances are unsustainable,” said Paola RodriguezMasiu, Rystad Energy’s senior oil markets analyst. “At the current storage filling rate, prices are destined

to follow the same fate as they did in 1998, when Brent fell to an all-time low of less than US$10 per barrel.”

This was echoed by Jack Allardyce, oil and gas analyst at Cantor Fitzgerald Europe, speaking in late March. “Global storage is likely to hit capacity over the next two to three months,” Allardyce said. “This is likely to be particularly damaging for U.S. crude, with prices in the Permian region potentially hitting single digits.”

Shale producers, most of which budgeted for oil between US$55 per barrel and US$65 per barrel in 2020, are already reining in spending. And it’s not just debt-loaded independents that are curbing activity; even the mighty ExxonMobil has been forced to cut rig counts in the Permian in response to the price rout.

U.S. shale production has been a game-changer in world energy markets, but even slowing output from

Crude Oil and Oil Product Price Changes as of April 1, 2020 % 5 0

Crude oil imports and crude spot prices

-0.4

-10

Automotive diesel

Domestic heating oil

Fuel oil for industry 5.5

-0.5

-5

-15

Gasoline

0.3

-0.1

-2.9

-3.8 -8.9

-6.9

-7.6

-8.4

-6.0

-13.4

-20

-18.9

-25 -30 -35 -40 Source: IEA.org

-40.5

“This is likely to be particularly damaging for U.S. crude, with prices in the Permian region potentially hitting single digits.”

– Jack Allardyce, Cantor Fitzgerald

www.breakbulk.com BREAKBULK MAGAZINE 9

ENERGY UPDATE

these vast fields is unlikely to have much impact given the unprecedented demand-side disruption.

“The oil market is massively oversupplied, much more so than in 2014-2016,” said Dmitry Marinchenko, senior director, corporates, EMEA, at Fitch Ratings. “We don’t yet know how much demand will disappear, but it will be very significant.

This is a completely unprecedented situation. Even when we have had recessions in the past, the demand for oil has continued to grow albeit at a slower rate – now demand is shrinking and shrinking. The journey to recovery might be pretty long.”

GAS GLUT

It’s not just oil markets that are suffering from the coronavirus effect.

“Cuts are likely to be across the board, upstream, midstream, gas, LNG,” Marinchenko said. “The pressure will be felt everywhere.”

Natural gas markets, for example, are already “vastly oversupplied.” Gas prices in Europe and Asia have collapsed to record lows and U.S. prices are at a 25-year-low as stockpiles head towards all-time highs.

This weakness will continue for the next two years, making it an uncomfortable ride for those with exposure to this market. LNG markets are particularly under pressure. A number of major projects, such as BP’s Tangguh Train 3 in Indonesia, are suffering virus-related work delays, while Australia’s Woodside has delayed final investment decisions, or FID, for its high-profile Scarborough, Pluto LNG Train 2 and Browse projects. It will not be the only one deciding to hold off on taking FID this year.

“The LNG market was in glut even before the coronavirus crisis and prices were already low,” Marinchenko said.

“It may now take several years for the glut to be digested. In the next two years I expect we will see a very limited amount of LNG projects sanctioned.”

Operators are already running a slide rule over their portfolios in a bid to cut costs and conserve cash flows.

Some projects, of course, are too big or too strategic to be derailed. Hans Bergers, advisor, integration management office at Mammoet, which has a number of big petrochemicals clients, 10 BREAKBULK MAGAZINE www.breakbulk.com

“2019 was a record year for renewables.

This underlines the importance of service providers adapting to this long-term trend to transition what they offer from oil and gas to more holistic offshore work, spanning wind, tidal and other types of renewable power.”

– William Hill, GAC Energy

“At the current storage filling rate, prices are destined to follow the same fate as they did in 1998, when Brent fell to an alltime low of less than US$10 per barrel.”

– Paola Rodriguez-Masiu, Rystad Energy

“This is a completely unprecedented situation. Even when we have had recessions in the past, the demand for oil has continued to grow albeit at a slower rate – now demand is shrinking and shrinking. The journey to recovery might be pretty long.”

– Dmitry Marinchenko, Fitch Ratings

“For the next five years, we would expect world population and household income levels to continue to grow, and Mammoet will be there to support our customers in achieving this. For now, the most important thing is that our families, colleagues and customers return home safely, each day.”

– Hans Bergers, Mammoet

ISSUE 3 / 2020

ENERGY UPDATE

said “many of these large projects have a long-term horizon, and their owners will be looking beyond shorter-term factors.”

Many other projects, however, particularly on the exploration and production, or E&P, side, may be put on ice until prices recover. E&P budgets are expected to plunge by up to US$100 billion this year, about 17 percent down on 2019 levels, according to Rystad Energy. Cairn Energy, for example, is undertaking an assetby-asset view of its portfolio and has already reduced and deferred spending that represents an overall 23 percent reduction in capital expenditure for the year. Shell is slashing underlying operating costs by US$3 billion to US$4 billion over the next 12 months, and capex will be cut by about US$5 billion to US$20 billion. Project sanction of Siccar Point Energy’s Cambo development, one of the largest undeveloped fields on the UK Continental Shelf, has been pushed back from the third quarter of 2020 to the second half of 2021.

More projects will be shelved in the coming months. “Very low oil prices will shrink operating cash flows, which means oil majors and national oil companies will have to offset that by cutting capex, and it’s inevitable that they will start postponing projects,” Marinchenko said.

Big offshore construction projects will take a hit. “We had forecast growth in the floating production systems, or FPS, market for 2020 with up to 18 new contract awards. Now we expect only a handful to go ahead, which would take the FPS market to 2015/16 levels,” said Mhairidh Evans, principal analyst in Wood Mackenzie’s upstream supply chain research team.

“Our preliminary analysis suggests global upstream capital investment will fall by at least 25 percent in 2020.”

NO SLACK LEFT TO CUT

Little wonder that 2020 is shaping up to be a grim year for the oilfield services sector. “The industry has not yet fully recovered from the price collapse of 2014-2016, and many oilfield services companies in particular are still operating in survival mode,” Fitch’s Marinchenko said. “This time, however, there’s far less potential to cut costs. I expect we will see some cost deflation, perhaps around 10

Train 3 at BP’s Tangguh facility has suffered from virus-related work delays. CREDIT: BP.

percent to 15 percent in the services sector.”

This was echoed by Evans, who cited “major pricing concessions” in the U.S., where some pressure pumpers have reduced prices by as much as 20 percent, while rig rates have dropped by about 15 percent.

Offshore drilling markets are also feeling the squeeze, partly as a result of the crew and logistical challenges of moving personnel and equipment against the backdrop of a global pandemic, and partly because of contracts being canceled.

According to Westwood Energy’s RigLogix service, more than US$1.6 billion in contract value is at stake for options that are due to be exercised this year, with projects in Africa, Southeast Asia, and the Middle East making up more than half of the total.

With the number of idle rigs on the increase and debt repayments looming in 2021, Terry Childs, head of RigLogix, says many U.S. drillers will be in Chapter 11 bankruptcy protection in 2020 or 2021. He also thinks that “most” of the near 300 drilling

programs that currently have 2020 start dates will be delayed.

Rystad Energy adds that more than a million jobs in the oilfield service industry are likely to be cut in 2020, with shale services expected to bear the brunt of the cuts. WoodMac’s Evans is equally gloomy.

“Companies had already cut so much, it’s hard to identify further savings without drastic measures,” Evans said. “This includes refinancing and the restructuring of business models.

Headcount cuts and bankruptcies are inevitable.”

RENEWABLES DRIVING THE RECOVERY

The renewables sector is not immune from the crisis. Lockdown measures that inhibit worker mobility and disrupt supply chains could derail some offshore wind projects in the U.S., China, Spain, France and Italy.

According to analysis by Wood Mackenzie, total forecast wind additions for 2020 is now expected to be 73 gigawatts, down by 4.9 GW as a result of the crisis. www.breakbulk.com BREAKBULK MAGAZINE 11

ENERGY UPDATE

LEARNING FROM THE PAST Companies in the project cargo sector are, of course, highly experienced at dealing with emergencies and crises beyond their control, whether it’s sanctions, war or a global financial crash.

William Hill, executive group vice president of GAC Energy, said the industry can learn from lessons of the 2008 financial crash, which, he said, “served as a catalyst for new ways of working within our sector.”

“It is crucial that our industry cooperates and collaborates as we move forward,” Hill said. “One key structural advantage of our globalized industry is that we can apply lessons learned from one nation or region on a holistic basis. New technologies and an increase in data usage will also help us decide how to best navigate the coming months, where we must take a reactive stance to developments in the world economy.”

He thinks the capacity for real time reporting, which could mean the difference between certainty and uncertainty in the supply chain, means the shipping and logistics industries are better equipped to meet the challenges posed by the current global crisis than during the 2008 crisis.

Speaking in late March, Hill said the drop in oil prices had highlighted the benefits of diversifying into other energy projects, such as renewables.

“Many service providers, including GAC, recognized the need to transfer skills and experience into supporting such new projects,” Hill said. “The IEA has highlighted how service providers who have cut their teeth in oil and gas offer “excellent large-scale project management abilities and the ability to work in difficult offshore environments” – and that includes renewables. This means that although the oil price drop is a concern for the offshore industry, increasing diversification into other projects will slightly dampen the overall impact for some majors.

12 BREAKBULK MAGAZINE www.breakbulk.com

Spanish wind turbine plants LM Wind Power and Siemens Gamesa have been shut, Australia’s strong pipeline of projects relies on 3.6-4.2 megawattrated turbines imported from Europe, while auctions in South Africa, Poland, Ukraine and Chile are likely to be delayed as governments wrestle with the pandemic and travel restrictions make it impossible for developers to undertake feasibility studies.

The tougher economic backdrop could also make financing difficult.

Renewable projects in Australia, Brazil, Mexico and South Africa will be especially impacted, as projects in the procurement phase could face capital cost increases of up to 36 percent due to the rapid depreciation of local currencies, warned analysts at Rystad Energy.

Even so, the longer-term outlook is positive with WoodMac, noting that there could be a boost for renewables in any post-crisis stimulus package.

There is certainly talk of extending tax credits for the renewable energy industry in the U.S., and China is considering relief on its upcoming feedin-tariff deadline.

“In the months to come, there may be a more concerted effort to weave renewables policies into more sweeping omnibus bills aimed at providing fiscal stimulus in the countries hit hardest by the pandemic,” noted Dan Shreve, head of global wind energy research at WoodMac. And while in the short term the crisis is likely to stall the oil and gas industry’s carbon mitigation strategies, the longer-term impact could be an acceleration of the energy transition.

Valentina Kretzschmar, vice president of corporate analysis at Wood Mackenzie, points out that at US$35 oil, renewables compete with oil and gas projects – and without the associated price volatility.

“Capital allocation is no longer a one-way street for Big Oil – renewables projects suddenly look as attractive as upstream projects at US$35/barrel,” she said. “In a US$35/barrel oil price environment, investment in renewables represents an opportunity for companies with strong balance sheets, which are in position to think strategically and long term. Diversification into clean energies could ensure their longterm survival.”

Fitch’s Marinchenko backs this assessment. “The energy transition may be impacted in the short term, as for now companies have to prioritize other things because they are in a fight for survival,” he said. “Further out, these very low prices may remind companies that relying on oil and gas production may make their business model more volatile. The green agenda won’t be forgotten, but in the short term they are going to be focused on cutting costs in their traditional business.”

MEDIUM TERM OUTLOOK

But the Covid-19 crisis won’t last forever. Scientists are racing to develop a vaccine or effective treatment, while South Korea has shown that an early intervention and extensive testing program is a viable alternative to economy-wrecking lockdowns. Companies may have to go into survival mode for 2020, while also developing strategies for a return to normality, when the world’s hunger for energy is revived.

“It is hard to speculate where the next big oil and gas projects will be while we are in the middle of a ‘black swan event,’ ” said William Hill, executive group vice president of GAC Energy.

He does, however, think some wider trends are a guide to emerging areas of interest. “There’s no doubt that Guyana will be an area of interest for many, with ExxonMobil, the main operator in Guyana, announcing that it has discovered more than 5.5 billion barrels’ worth of oil off the country’s coast,” Hill said, pointing out that by the end of the decade, Guyana’s production is forecast to overtake Venezuela. “Africa and Southeast Asia are also growing markets for offshore work, and we shall probably see more deepwater extraction as subsea processing and production technologies continue to mature.”

Hill is also confident that big offshore wind projects will “go from strength-to-strength.”

“2019 was a record year for renewables, with global wind power capacity growing by almost one-fifth,” he said.

“This underlines the importance of service providers adapting to this longterm trend to transition what they offer from oil and gas to more holistic offshore work, spanning wind, tidal and other types of renewable power.”

ISSUE 3 / 2020

ENERGY UPDATE

St. Jacques Bridge in Montreal, Canada.

CREDIT: MAMMOET.

SPINNING PLATES Those on the frontline of the industry are certainly feeling the heat right now. Many companies contacted for this piece felt unable to comment, citing that their priority is keeping their people safe and trying to navigate new rules on moving cargo and people.

With authorities around the world gripped by the pandemic, there’s little spare capacity to handle the permitting of super-heavy loads while social distancing rules, from transport bans to closure of rest areas, means it is harder than ever to plan routes.

On some key infrastructure projects, stopping work is not an option, which means companies have to work harder and smarter to keep things moving.

“Since the start of the outbreak, we have implemented a number of measures to limit the spread of the disease – including reducing international travel undertaken for projects to a minimum, where safety considerations allow this,” said Hans Bergers of Mammoet. “We are particularly grateful to the many

By 2021, analysts expect the recovery to be underway – the IEA predicts a “sharp rebound.” Audun Martinsen, Rystad’s head of oilfield service research, said that by the second half of 2021, with better market fundamentals and a fading Covid-19, “recruitment is likely to pick up in the shale sector and from 2022 will also kick-off in the offshore sector.”

And those companies that do survive this year could be fitter, leaner and smarter as a result. “Companies holding onto idle assets ‘just in case,’

dedicated colleagues of ours, working on crucial projects in energy and infrastructure across the world where stopping work has not been possible.”

Already the crisis is starting to bite in the sector. Steven Todd, vice president of the U.S. Specialized Carriers & Rigging Association, said that the number of oversize permits being issued on a daily basis compared with this time last year is down by between 10 percent and 30 percent, depending on region/state/province.

“While some of that may be due to projects being slowed or halted, we believe it may also be in part due to how the virus has affected government permitting agencies around North America,” Todd said. “Many are being staffed in house by few if any employees, as many are working remotely from their homes. Despite their great efforts under difficult circumstances, permit issuance has and will undoubtedly slow somewhat … particularly in those states and provinces without any or without adequate automated permit issuance systems.”

will quickly think again,” WoodMac’s Kretzschmar said. “The prospect of sub-US$40/barrel oil will force profound change in the sector’s footprint.

While there’s short-term pain associated with this, it could ultimately create a more sustainable business for those that survive the downturn.”

Bergers of Mammoet, which recently acquired ALE, said the next 12 months may be more difficult, but the longer-term outlook is positive.

“For the next five years, we would expect world population and house-

hold income levels to continue to grow, and Mammoet will be there to support our customers in achieving this. For now, the most important thing is that our families, colleagues and customers return home safely, each day.”

The message for 2020? Stay safe and hold on. 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 13

REGIONAL REVIEW

ENTERING THE OFFSHORE AIRSTREAM U.S. Makes Wider Wind Moves

Block Island Wind Farm, a 30-megawatt, five-turbine demonstration project, is currently the only functioning offshore wind farm on the U.S. Northeast seaboard.

CREDIT: ØRSTED.

14 BREAKBULK MAGAZINE www.breakbulk.com

BY LORI MUSSER

O

ffshore wind farm leases are starting to pepper maps of the U.S. northeastern seaboard. New York State has joined the fray, promising to be a global leader in the fight against climate change, and kick-starting an unprecedented level of investment in port facilities and cutting-edge technology. Project cargo supply chains may have reason to celebrate.

The American Wind Energy Association’s U.S. Offshore Wind Power Economic Impact Assessment, released in March 2020, reported exponential growth potential for the offshore wind industry in the U.S. “Market projections anticipate between 20,000 to 30,000 megawatts of offshore wind capacity will be operational by 2030, representing between US$28 billion and US$57 billion of investment in the U.S. economy,” according to the report.

John Hensley, AWEA vice president of research and analytics, said to Breakbulk: “Offshore wind represents a major opportunity for domestic manufacturers, who will not only build the blades, towers and nacelles of the turbines themselves, but also the foundations, substations, cables, steel and other subcomponents, as well as critical logistics infrastructure such as transport and installation vessels and equipment.”

Tremendous economic benefits are forecasted. “All of this manufacturing activity will help create up to 83,000 family-supporting jobs in the U.S. over the next decade,” Hensley said.

To date, there is one functioning offshore wind farm on the northeast seaboard, a 30-megawatt, five-turbine demonstration project, Block Island Wind Farm, which began operating off Rhode Island at the end of 2016. It was constructed by Deepwater Wind, later acquired by Ørsted U.S. Offshore Wind.

For this project, the turbine foundations were engineered and constructed by offshore oil and gas players in Louisiana. Supply chain members barged foundations out of Louisiana, ISSUE 3 / 2020

WIND ENERGY DEMAND

U.S. northeastern states are driving demand for offshore wind. The AWEA report said that the industry certainty provided by the states of Connecticut, Maryland, Massachusetts, New Jersey, New York and Virginia, with their combined targets to procure a total of 25.4 gigawatts of offshore wind by 2035 (and 6 GW of projects as of February 2020), will enable investment and help create the U.S. supply chain.

The supply chains are expected to echo that of onshore wind, which benefited from technology improvements and cost reductions and saw land-based wind capacity grow from 2.5 GW in 2000 to more than 105.5 GW by the end of 2019, according to AWEA. There will be domestic opportunities for job growth, project construction and operations, and domestic manufacturing, as well as port revitalization and vessel construction.

“To date, project developers and manufacturers have announced planned investments totaling more than US$1.3 billion across a variety of projects including ports and new manufacturing facilities,” according to AWEA. “Most, if not all, states with active offshore wind procurement plans explicitly treat the development of an in-state supply chain as one of the key non-price decision criteria,” said AWEA’s report, citing plans by Ørsted, Eversource, Vineyard Wind,

State Offshore Wind Targets 26,000

16,300 Connecticut

24,000

2,500

Maryland

22,000

Massachusetts

20,000

New Jersey

6,600

New York

18,000 Wind power capacity (MW)

assembled foundations in ProvPort, built wind turbines in France and wind blades in Denmark, and addressed Jones Act requirements by transporting the generators from France on the Norwegian installation jack-up vessel.

While the supply chain for Block Island was truly innovative, developers must broaden it, while increasing U.S. domestic contributions. Hensley said, “The U.S. supply chain is growing substantially and will continue to expand over time, as more and more domestic manufacturers and service providers respond to the significant economic driver that offshore wind development represents.”

Virginia

16,000 14,000

4,000

12,000

1,200

10,000

5,100

8,000

25,400

2,000

3,500

6,000 2,400

4,000 2,000 0 Source: AWEA

1,600

1,600

2,400

1,600 2016

2017

Equinor and U.S. Wind to establish offshore wind assembly hubs and operations and maintenance hubs.

“For example, Ørsted and Eversource have a public-private partnership with the state of Connecticut to invest US$157 million in upgrades to State Pier’s infrastructure and heavy-lift capabilities in New London. In New York, Equinor, Ørsted and Eversource have announced combined investments of US$70 million for port improvements across the state,” the AWEA report confirmed.

Seaport infrastructure announcements related to offshore wind have

2018

2019

been made for Bridgeport and New London, Connecticut; Tradepoint Atlantic, Maryland; New Bedford, Massachusetts; Atlantic City, New Jersey; Port Jefferson and other seaports, New York; and the Port of Providence and North Kingston, Rhode Island.

DOMESTIC ORIGINS

There is room for growth in domestic manufacturing of blades, towers and nacelles, and also foundations, substations, cables, steel and other subcomponents, and in logistics infrastructure. www.breakbulk.com BREAKBULK MAGAZINE 15

REGIONAL REVIEW

Offshore Lease Map

a question as to what extent the market will grow.”

Northeast offshore wind is a frontier market.

Lassen said there will be bottlenecks, such as permitting issues delaying final investment decisions and construction.

The new contracts that the state of New York has finalized with Equinor Wind US LLC, for its 816 MW Empire Wind Project, and Sunrise Wind LLC, for its 880 MW Sunrise Wind Project, represent the largest procurement for offshore wind in U.S. history.

SUPPLY CHAIN OPPORTUNITIES

“To highlight a few announcements, in 2019, developer Ørsted and manufacturer EEW signed an agreement to establish a factory for steel foundations in Paulsboro, New Jersey.

In October 2019, Vineyard Wind announced a partnership with Marmon Utility to upgrade and build out its manufacturing facilities to become the first U.S.-based supplier of inter-array cable cores. Early in 2020, Siemens Gamesa Renewable Energy stated they are “actively considering” a US$200 million blade manufacturing facility in Virginia. Meanwhile, Welcon and Marmen have agreed to build a new manufacturing facility in the Northeast to manufacture towers and fixed and floating foundations,” AWEA reported.

As of the first quarter of 2020, investments announced included US$307 million in port-related infrastructure, US$650 million in transmission infrastructure, US$342 million in U.S. manufacturing facilities and supply chain development, and unspecified investments in offshore wind hubs and factories along the seaboard. Also, there are orders to build four new U.S.flagged crew transfer vessels.

16 BREAKBULK MAGAZINE www.breakbulk.com

Procurement at this level presents opportunities all along the breakbulk and project cargo supply chain.

Cuomo has committed to investments of US$287 million in manufacturing, service Source: AWEA and port facilities in New York and US$20 million for a AWEA anticipates that offshore university-level wind workforce trainwind benefits will be somewhat ing system. dispersed: “While activity will be Sunrise Wind is one of several concentrated in coastal states close projects in the Northeast by Danish to the offshore wind projects, supply renewable energy company Ørsted and chains and service providers across the New England’s Eversource Energy. It country will have an opportunity to will be operational in 2024. support this new industry.”

Together, Ørsted and Eversource’s In New York State, Gov. Andrew South Fork, Sunrise Wind and RevoluM. Cuomo has set a goal for 9 GW tion Wind projects are expected to have of offshore wind by 2035. Under the a total capacity of about 1.7 GW. act, the state must create a carbon-free Cameron Stoker is communications electricity system by 2040. manager for the U.S. Northeast with Søren Lassen is senior offshore Ørsted. He said the 880 MW offshore wind analyst with Wood MacKenSunrise Wind farm has “the potential zie Power and capacity to power more than half a milRenewables. lion homes.”

With recent, “Sunrise is a 50/50 partnership large tenders and between Ørsted and Eversource. As aggressive statethe largest offshore wind developer level targets in the in the world, Ørsted has unparalleled U.S., Lassen said experience developing, planning and to Breakbulk: building offshore wind farms. Not only “This is going to is Ørsted the perfect partner for New be a huge offshore York’s offshore wind goals, we are the wind market. perfect partner of the state’s climate Things are lingoals as well,” Stoker said to Breaking up from a bulk.

Søren Lassen demand point of Stoker said some of the main cargo view, but there is supply chain opportunities will include Wood MacKenzie ISSUE 3 / 2020

REGIONAL REVIEW

New York Gov. Andrew M. Cuomo, joined by former Vice President Al Gore, executes the nation’s largest offshore wind agreement and the single-largest renewable energy procurement by any state in U.S. history. CREDIT: POLARIS/NEWSCOM.

“marine transportation of project cargo: including, turbine components (blades, nacelles, towers), cables, electronic components; turbine component staging and pre-installation activities; and turbine and foundation installation.”

Empire Wind is an 816 MW project to be developed by Norway’s Equinor. The US$3 billion project will be equipped with 60 to 80 turbines offering 10 MW each. Like Sunrise Wind, it will also be completed in 2024 and will be able to power upwards of 500,000 homes.

But it’s not necessarily a quick win for project cargo movers. Lassen commented: “A lot of people look at the existing supply chain and compare that to huge growth potential. They say there are no Jones Act vessels, no existing component manufacturing, and no steel mills. Port infrastructure needs to be expanded. But there is no demand right here and right now. It is sequential. You need demand, and then you will see the supply chain build up,” he said.

Traditional energy industry, and recent offshore wind developments in Europe offer lessons for U.S. offshore wind. “There are similarities and synergies between offshore wind and oil and gas,” Lassen said, but he cautioned against overestimating those synergies.

Some oil and gas players have entered

the offshore wind market in Europe and exited quickly. “There is a lot of squeeze in the offshore wind supply chain. It is challenging,” Lassen said.

For example, “jacket foundations may be similar, but for oil and gas they are larger and more tailor made. For offshore wind there is a need for efficient, serial manufacturing … requiring investments to establish the right footprint to be successful and make a durable business case,” Lassen said.

While New York State has set very aggressive offshore wind and timeline targets, there is every likelihood that they can be achieved. Lassen said: “Europe has outperformed itself on its targets,” and, in the last few years, “the whole offshore wind narrative has changed positively. We see government increasing their offshore wind targets and construction timelines executed ahead of time, the technology has matured rapidly while players across the value chain have accumulated experience.”

U.S. IDIOSYNCRASIES

Lassen noted that many of the project developers active in U.S. are the same players that built up supply pipelines in Europe: “Technology, political targets, project pipelines and experienced developers are in place across the U.S. East Coast. The following and last piece that will have to be established

is the supply chain. As the other pieces have come into place, we also expect the supply chain to follow in the coming years.”

As offshore wind projects begin in the U.S. Northeast there will be some reliance on European expertise and suppliers. In the initial stages: “There is large opportunity for imports, carriers and for other European suppliers,” Lassen confirmed, indicating that now is the time to build those relationships.

Imports that go straight from Europe to an offshore site on foreignflag vessels may not require Jones Act vessels, although the intricacies and impact of cabotage policy on offshore wind is still under debate, according to Utsav Mathur, a shipping, offshore energy and global disputes lawyer based in Norton Rose Fulbright’s Houston office.

Investment in more coastwise vessels, and ports, is a necessity. Domestic and foreign components delivered first to the U.S. will need Jones Act-compliant barges for transport from ports to installation vessels. And, Lassen said, a number of potential port hubs have current infrastructure restrictions that require investment.

The U.S. offshore industry is already committing to investments in installation vessels or in some sort of alliance with European installers.

“The U.S. is going to see current and next-generation turbines, which set [elevated] requirements for the installation vessels. There will need to be significant investment to be competitive,” Lassen said.

In the U.S. system, local content requirements will further shape the supply chain. Bids for groups of items will allow for local content on certain items, strengthening and leveraging overall bids. “Tenders are already out.

Things are lining up. It is going to take off,” he added.

The U.S. offshore wind industry expects to secure cost-effective offshore wind power, with scale generating economies and knowledge transfers from parallel industries. Manufacturers, transportation companies, renewable energy providers and power customers are gearing up to benefit. BB Based in the U.S., Lori Musser is a veteran shipping industry writer. www.breakbulk.com BREAKBULK MAGAZINE 17

ENERGY UPDATE

PINNING HOPES ON HYDROGEN

U

ntil recently residents in Orkney lacked the means to store their surplus clean electricity. Blessed with strong gales and rough seas, the island chain off Scotland’s northeast coast was producing more power from its wind and tidal generators than the local grid could handle.

“Back when they constructed the national grid they never envisaged that Orkney was going to become this renewable generation powerhouse,” said Caron Oag, marketing officer at the Orkney-based European Marine Energy Centre, or EMEC. “So in a sense we have outgrown the cable that connects us to the Scottish mainland. And it means that while we can export a lot of electricity back 18 BREAKBULK MAGAZINE www.breakbulk.com

onto the grid, not everything can fit, so we’ve got this issue of almost having too much renewable energy.”

EMEC, the world’s first and only operator of open-sea testing facilities for developers of wave and tidal converters, came up with a solution: green hydrogen.

Since 2016, the group has been operating a 500 kW proton exchange membrane, or PEM, electrolyzer on the Orkney island of Eday that uses surplus renewable power to split water into oxygen and high purity hydrogen – a process known as electrolysis.

The compressed gas is kept in special cylinders as an energy storage medium until it is needed, then transported in mobile storage units to Orkney’s capital, Kirkwall. The hydro-

Green Hydrogen Economy to Spark Infrastructure Boom

BY SIMON WEST

gen is converted back into electricity through a fuel cell – electrolysis in reverse – and used by boats docked in Kirkwall harbor.

Nearby a refueling station dispenses pressurized hydrogen for vans fitted with their own fuel cells, offering motorists a clean, emissions free alternative to gasoline and diesel.

Production has also sparked several pilot projects around Orkney, including a seagoing ferry due to run on a hydrogen-diesel hybrid system, a small passenger aircraft to be powered by electric motors, hydrogen fuel cells and gas storage, and even a study into the feasibility of a hydrogen-fueled distillery to produce sustainable gin.

“When you see the demonstration projects we have on the go in Orkney, ISSUE 3 / 2020

Hydrogen mobile storage unit coming off Shapinsay ferry. CREDIT: COLIN KELDIE.

An artist’s impression of Tractebel’s offshore hydrogen platform. CREDIT: TRACTEBEL.

you are seeing how a potential hydrogen economy could work on a small scale, and how that potentially could be scaled up or applied in other areas,” Oag said.

TIME TO SCALE-UP

Orkney is not the only place in Scotland harnessing green hydrogen.

Aberdeen, for example, capital of the UK’s oil and gas industry, is fast becoming a hub for pioneering green technology, with plans this year to launch the world’s first fleet of hydrogen-powered double-decker buses in a £8.3 million project backed by the European Union’s Joint Initiative for Hydrogen Vehicles, or JIVE. For proponents, Orkney and Aberdeen give a peak into a carbon-free future in which clean, versatile and easily storable and transportable hydrogen plays a major role in the energy transition.

“Hydrogen is currently enjoying unprecedented political and business momentum, with the number of policies and projects around the world

expanding rapidly,” said a recent report by the International Energy Agency, or IEA. “Now is the time to scale up technologies and bring down costs to allow hydrogen to become widely used.”

The link between hydrogen and energy stretches back decades – the first internal combustion engine powered by oxygen and hydrogen was built more than 200 years ago, while it was a Welshman, William Robert Grove, who developed the first fuel cell in 1842.

Supplying hydrogen for industrial use, such as oil refining, ammonia production and iron and steel processing, is big business, with global demand rising threefold since 1975 to almost 80 million tonnes in 2018, according to the IEA report.

However, production almost entirely relies on fossil fuel feedstocks: 6 percent of global natural gas use and 2 percent of coal use is dedicated to making hydrogen.

Energy-intensive industrial processes such as steam methane reforming, or SMR, and coal gasification to produce

so-called gray or brown hydrogen are responsible for emitting 830 million tonnes of carbon dioxide per year – equivalent to the CO2 emissions of the UK and Indonesia combined, the IEA said.

Just a fraction of total output comes from electricity, but even then, it is not necessarily clean if electrolyzers are using power obtained from national grids.

READY FOR THE HYDROGEN RUSH

But as climate regulations become more stringent, governments and businesses worldwide are rushing to switch their carbon-intensive practices for more sustainable alternatives. And with renewable energy costs primed to fall, deploying electrolysis on a grander scale to produce clean hydrogen for use in sectors such as shipping, chemical manufacture, heating and long-distance transportation is starting to ramp up.

“A lot of the big traditional gas and energy utility players understand that hydrogen is going to be a key www.breakbulk.com BREAKBULK MAGAZINE 19

European Marine Energy Centre’s hydrogen storage cylinders in Orkney. CREDIT: COLIN KELDIE.

component of this electrification strategy,” said Louis Brasington, an associate at Cleantech Group.

“Therefore, they are all partnering up in joint consortiums to build up this infrastructure and get the electrolyzer costs down, and to share the costs of hydrogen transmission.”

This buildout of green hydrogen points to a new source of project cargo demand.

A report at the end of March by clean energy analyst BloombergNEF said that a hydrogen economy fueled by renewables could meet 24 percent of the world’s energy needs by 2050.

“Hydrogen has potential to become the fuel that powers a clean economy.

In the years ahead, it will be possible to produce it at low cost using wind and solar power, to store it underground for months, and then to pipe it on-demand to power everything from ships to steel mills,” the report said.

Meeting almost a quarter of energy demand, however, will need policy commitments from governments, US$150 billion of start-up subsidiaries over the next decade and massive amounts of additional renewable capacity.

According to the report, 31,320 terawatt hours, or TWh, of electricity would be required to power electrolyzers. Accounting for the future demands of the power sector, total renewable energy generation excluding hydropower would need to exceed 60,000 TWh compared with less than 3,000 TWh in operation today.

Such an expansion would call for big spending on storage infrastructure – an estimated US$637 billion by 2050, the report said. Tens to hundreds of 20 BREAKBULK MAGAZINE www.breakbulk.com

billions more would need to be spent on pipelines to transport hydrogen, while hundreds of billions would be required for electrolyzers, wind and solar farms.

“If a hydrogen economy is to develop to the scale where it provides 24 percent of primary energy in 2050, the infrastructure requirements are vast,” Kobad Bhavnagri, head of industrial decarbonization at BloombergNEF, told Breakbulk.

LOCATION OF PLANTS CRITICAL

According to Gniewomir Flis, senior analyst at Aurora Energy Research, consortiums are likely to install electrolyzers and storage facilities close to renewable energy sources, industrial plants or ports to keep a lid on transport costs, which remain high.

“From the transport perspective, moving hydrogen is very expensive unless you have specialized infrastructure to do it. The cheapest way to do it is of course by pipeline, and there is in essence a sweet spot, which optimizes hydrogen transport costs. As a general rule of thumb, I would expect any production facility to be situated close to the main off-taker.

“It is likely that we will see a lot of these facilities by ports for different reasons. Electrolyzers would benefit hugely from cheap power from offshore wind, so that is one reason to situate your electrolyzer plant close to the shore.”

Plants could even be installed offshore to minimize transmission costs.

Tractebel Engineering and Tractebel Overdick, subsidiaries of France’s Engie, last year unveiled a concept for an offshore platform that could convert wind energy to green hydrogen on

an industrial scale using electrolysis.

“Delivering up to 400 megawatts, this kind of plant exceeds the output of previous technologies many times over.

It could already be put into practice today, for example in the North Sea,” the companies said in a statement.

According to Flis, offshore hydrogen production options are viable, although companies would have to consider the impact of seawater on electrolyzers: “They have a lot of expensive catalysts, you do not want them to get corroded.”

Opportunities may also exist for a buildout of blue hydrogen produced from natural gas when carbon capture and storage, or CCS, is used with traditional SMR, although this is an expensive option, BloombergNEF said.

Despite the buildout, industrialscale deployment faces formidable challenges.

Green hydrogen is still more expensive to produce compared with fossil fuel-derived hydrogen, although costs are likely to slide in the coming years as cheaper wind and solar capacity comes online and electrolysis technology expands.

If the right policies are implemented, BloombergNEF estimates that renewable hydrogen could be produced at US$0.80 to US$1.60 per kilo in most of the world by 2050. That matches gas priced at US$6 to US$12 per million British thermal units, or MMBtu, making it competitive with natural gas prices today in Brazil, China, India, Germany and Scandinavia on an energy-equivalent basis.

“Deployment very much at this point requires us to put in place the necessary infrastructure, but also to level the playing field between green hydrogen and the potential uses, whether that is through carbon pricing, or green mandates in industries, such as steel, to use green hydrogen instead of coking oil,” Flis said.

“The actions that we take over the next decade will determine whether hydrogen will have a larger role in our energy system, or whether it will remain a niche product.”

Colombia-based Simon West is a freelance journalist specializing in energy and biofuels news and market movements in the Americas.

ISSUE 3 / 2020

ENERGY UPDATE

DEVELOPMENTS TO WATCH Some groundbreaking green hydrogen projects are already taking shape and serve as ones to watch for project cargo specialists.

A consortium of BP, Evonik, Nowega, Open Grid Europe and RWE Generation signed in March a memorandum of understanding, or MOU, to develop Germany’s first publicly accessible green hydrogen network.

The GET H2 Nukleus project will supply chemical plants and refineries in northwest Lower Saxony and North Rhine-Westphalia with green hydrogen produced from a 100-megawatt electrolyzer and transported along converted natural gas pipelines.

Access to the network, slated to come online in late 2022, would be open for use by third parties. “This will make a rapid, reliable integration of further hydrogen projects possible,” transmission operator OGE said in a filing.

Other projects are already up and running.

Air Liquide, which operates about 50 natural gas-based hydrogen production units and 40 small electrolyzers for small-scale on-site needs, is building what it claims to be the world’s largest PEM electrolyzer at its existing hydrogen facilities at Becancour in Canada, with a capacity of 20 megawatts, or MW. “The project is evolving as per schedule,” Guillaume De Smedt, hydrogen energy and energy transition strategy director at Air Liquide, told Breakbulk. “Construction began last year and is scheduled to be completed by year-end to produce renewable hydrogen mainly for industry customers, but also for mobility.”

The French industrial gases company is also investing US$150 million in a plant in North Las Vegas that will produce 30 tonnes per day of liquid hydrogen from biogas feedstock destined for western U.S.

transport markets, with completion slated for next year.

Biogas produced from various types of organic waste is an alternative feedstock for renewable hydrogen.

“This large-scale project is a first step to expanding hydrogen supply to the region, enabling the market in California to continue its growth to an expected 200 stations by 2025. To this day, there are more than 8,000 hydrogen cars in California,” De Smedt said.

Energy giant Shell and Dutch gas company Gasunie, meanwhile, have joined forces for what could be Europe’s largest green hydrogen facility.

The NortH2 plant in the northern Netherlands would use electricity from a new “mega” offshore wind farm to produce up to 800,000 tonnes of green hydrogen by 2040, Gasunie said in a filing. A feasibility study is slated for later this year. BB

A consortium intends to develop Germany’s first publicly accessible green hydrogen network. CREDIT: OGE.

www.breakbulk.com BREAKBULK MAGAZINE 21

CREDIT: SHUTTERSTOCK.

LOGISTICS PERSPECTIVE

BY HELEN CAMPBELL

A CRISIS LIKE NO OTHER

T

Covid-19 Tests Breakbulk Industry’s Disaster Preparedness

he world thought it had already experienced its fair share of crises; from hurricanes to earthquakes, volcanic ash clouds to tsunamis, floods to typhoons, civil wars to landslides, famines to plagues, the Australian fires to extremes of temperature in either direction. The world has seen them all.

While the Covid-19 outbreak does share characteristics with other disasters, natural and manmade, the current crisis facing the whole world is like nothing ever faced before. The world has experienced epidemics, and even pandemics, but nothing on the scale of the novel coronavirus. Not 22 BREAKBULK MAGAZINE www.breakbulk.com

only is it global, it is a medical and economic emergency all rolled into one. And it carries huge logistical challenges, whether the need is to move people or cargo.

Most, but not all, types of disaster events have the potential to lead to fatalities, serious injury, urgent need for medical assistance and equipment, difficulties in accessing food and water, and displaced persons. In all crises, moving urgent supplies around to where they need to be becomes even more of a challenge. In addition to the human first responders and urgent food and medical supplies, governments and non-governmental

organizations, or NGOs, could need to move large cargoes such as robotic search-and-rescue devices, components for emergency shelters and field hospitals, generators, emergency light towers, earth and debris-moving equipment such as bulldozers and tractors, other vehicles such as mobile health clinics, and building materials.

The experience and knowledge of breakbulk carriers comes into its own, but carriers will rarely find themselves acting on their own. Effective partnerships between governments, the private sector and NGOs are vital in disaster relief. In developing nations, where national governments are much ISSUE 3 / 2020

more likely to need to call for international assistance, large-scale response will be deployed by the UN. Four global logistics and transportation companies – UPS, A.P. Moller-Maersk, Agility and DP World – make up the Logistics Emergency Team, or LET, which supports the logistics cluster led by the United National World Food Program. This provides emergency responses to large-scale humanitarian crises. In 2018, LET expanded its scope from covering only emergencies brought on by natural disasters to also cover human-incurred disasters, often related to food insecurity, epidemics and conflicts.

SETTING THE STAGE

The first few days in any disaster are crucial, and the need for speed brings collaboration right into the spotlight.

“We have responded to just about every major crisis on the face of the earth, from the 2010 Haiti Earthquake up to the 2020 Covid-19 response, supporting about 100 different NGOs to help them bring aid and aid workers to the disaster site,” said Michael Rettig, founder of LIFT, a not-for-profit logistics provider that helps NGOs respond to disasters. “At the outset, we are usually helping to move first response groups, water-making and medical capabilities and, as disasters wear on, we help manage the supply chains of other resources once the needs assessments are completed.

“Disasters mean people need shelter, people need food, people need medical aid, so to get these things in to where they are needed, we use general aviation, heavy-lift air and a range of vessels including the usual customary container vessels, plus barges, yachts, skiffs [small one- or two-person rowing boats], flat-bottomed johnboats and other unconventional maritime assets like offshore supply and multipurpose vessels.”

LIFT aims to link responders with access to general aviation aircraft, heavy jets, helicopters, small and large vessels and ground transportation to bring people and cargo to disaster

Mobile medical clinic loaded aboard a flat-deck barge from Jacksonville, Florida, to San Juan, Puerto Rico, in response to Hurricane Maria.

CREDIT: MICHAEL RETTIG, LIFT.

sites. The group partners with truckers, ship operators and airlines to help aid organizations move urgent goods to where they need to go. The organization has helped to coordinate the movement of outsize cargoes to assist in a number of relief efforts, with the September 2019 Bahamas storms a recent example.

“Breakbulk is especially pertinent when it comes to the Bahamas and the ongoing recovery and rebuilding efforts there,” Rettig said. “Disasters mean there is often a lot of debris management and removal equipment, as well as equipment needed to reenergize and re-electrify communities that have been affected by an earthquake or whatever the disaster might be. This means things like earth movers, chippers, shredders and curtain burners which are used to safely burn onsite debris cleared from building collapse or similar.

“There was also a lot of salvage work in the aftermath of the storms in the Abacos Islands, for example, so crane barges needed to come in to pick up sunken vessels, bring them on deck and take them away. We have also moved mobile solar power units on a yacht in support of a hospital and

two medical clinics on Grand Bahama Island a couple of days after the storm hit, flying three or four of them to medical clinics in the Abacos.” As there is generally not enough time to put critical life-saving items into containers, LIFT uses whatever mode of transportation is available. Often it is shallow draft.

IMPORTANCE OF SUPPLY CHAINS

A similar organization, Humanitarian Logistics Association, works from a base in the UK, and was established to foster collaboration between individual logisticians working in humanitarian relief globally.

“The area of logistics has been typically undervalued as a function in delivering humanitarian aid,” said George Fenton, its founder and CEO. “The situation is getting a bit better now, but the aid sector is some years behind the private sector in recognizing the strategic importance of managing supply chains effectively.”

What is increasingly needed, Fenton added, is a much more connected means to prepare for disasters and crises and to prepare for and respond to ways in which the private sector at www.breakbulk.com BREAKBULK MAGAZINE 23

Moving a transformer in Puerto Rico, part of the relief effort following Hurricane Maria in 2017.

CREDIT: AIR CHARTER SERVICE.

a local level can be better positioned to assist in the first wave. “There is a growing interest from the private sector, which is encouraging, and a need for stronger engagement. And we are aiming to increase the number of private sector members because, particularly at the local level, they are key first responders and therefore we feel it is important that they are better aware of the need to understand how to operate in complex environments.”

For air transportation in particular, Covid-19 has shaken “normal” like never before, and made finding and brokering cargo space more challenging and more expensive, with many airports operationally restricted.

In many cases, individual countries

have put in place their own rules on who may come in or out, based on nationalities and/or travel origin. This of course has an impact on the rules governing flying crews including on stipulations on rest periods between flights, whether a country will allow them entry for the purpose of an overnighter, whether they have to be subject to a quarantine period and so on. All of these factors are increasing the challenge and pushing prices up.

“I’ve been here 17 years and have worked in aviation for 21 years, responding to tsunamis, earthquakes, fires, hurricanes, you name it,” said Dan Morgan-Evans, group director cargo at Air Charter Service. “I never thought anything could beat the ash

cloud in term of affecting air capacity, but Covid-19 is impacting everything.”

About 60 percent to 70 percent of all air freight travels in the belly of a passenger airliner, and up to 80 percent of all transatlantic freight is belly hold. With flights stopped in and out of China, President Trump’s announcement that Schengen Area passengers were banned from flying to the U.S. and all the world’s passenger airlines, or at least vast portions of their fleet, largely grounded, belly freight capacity disappeared, MorganEvans said.

FACILITATING THE INFORMATION FLOW

Whether moving by air, sea, road or rail, all parties agree that the most important thing in any crisis is information and the speed and flow of that information. The initial “shipments” out to disaster sites are very often human resources: search-and-rescue teams and medics, with any of their vital equipment that they need to get started on the ground. After that, it is whatever the aid agencies and governments determine the needs are to deliver a full response and relief effort.

The Disney Dream cruise vessel setting sail from Port Canaveral in March 2020 for its final departure before cruises stopped, with just a dozen people on the outside deck where there would normally be about 1,000. In the foreground is the offshore support vessel Glory, loaded with rebuilding material including over-dimensional steel for a housing project to withstand hurricanes for Green Turtle Cay in the Abacos. CREDIT: MICHAEL RETTIG, LIFT.

24 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2020

LOGISTICS PERSPECTIVE

GETTING HELP OUT FASTER Keen to enhance cooperation in the disaster relief logistics field and facilitate faster response to crises, DHL established its Getting Airports Ready for Disaster, or GARD, program about a decade ago. The scheme is designed to address gaps in airport preparedness and to ease bottlenecks that can hamper relief shipments.

“I’ve been doing this for 15 years, and I can tell you, one of the things we have noticed over all those years is that there is no golden rule and no manual for crisis response,” said Gilberto Castro, the company’s senior director operations in Colombia and also manager of its volunteer program for the Americas region. “Every NGO (nongovernmental organization) works for its own purpose. That’s why the GARD program came into term so quickly over the past five years, because we tried to filter the process throughout all the airports and the NGOs. “There is no manual to follow with crisis management, but the GARD program allows us to create a manual so that, when something happens, all NGOs, all airports and all governmental and all private parties in one country can come together and have a connection, communicate properly and work with each other and work as one.

We are a neutral process, we are not

there to shine, we are there to support the flow of things in and out of the airport.”

In cooperation with the United Nations Office for the Coordination of Humanitarian Affairs, DHL also established a 500-strong global network of specially trained employees who volunteer their time as part of one of its three Disaster Response Teams, or DRTs – for the Americas, the Middle East/ Africa and Asia-Pacific regions. When

“Our key goal is to organize pretty quickly,” Morgan-Evans said. “We find out aircraft availability, airport capability, what infrastructure there is on the ground, whether we can get someone there immediately to orchestrate things on the ground. We need to find out what equipment is there, whether we can offload, whether we can onload, and we need to find all this out as quickly as possible. We furnish the aid agencies with as much information as we can about the cargo planes themselves, then we have to find out about permits, flyover authorizations, whether crew can stay over, how long we can park the aircraft for, or whether it has to fly back out again.”

At the height of China’s lockdown, very little was being manufactured in the country in any case, so freight capacity for exports wasn’t an issue.

But this has changed since the restart of China’s industrial production.

“Now China is back up to 80 percent of its normal production levels, but the capacity isn’t there as people are still restricted on their movements,” Morgan-Evans said. “Freight rates are getting higher, so it becomes economic to fly planes without passengers. No one wants to see airlines go bust, and they do need cashflow. At the same time, with Europe on lockdown, there is a chance we won’t need the cargo coming in.”

A characteristic of the current Covid-19 crisis is that it had, at the time of writing, not resulted in large-scale displacement of persons – ironically, owing to the widespread lockdowns the outcome is quite the opposite. At least this is the case in developed nations; authorities fear that

DHL’s Gilberto Castro (foreground) during relief operations after severe floods in Peru.

CREDIT: DHL.

called up by the United Nations after a natural disaster, DRTs can be on the ground and operational at a disastersite airport within 72 hours.

In recent years, the DHL team has helped in disaster relief efforts ranging from hurricanes and resultant flooding in the Bahamas, an earthquake and tsunami in Indonesia, a volcanic eruption in Guatemala, floods in El Salvador and Pakistan, and forest fires in Chile. when the virus hits in Africa, people will find it almost impossible to distance themselves from each other to try to slow the spread. It is more likely that large numbers of people will feel forced to move to other areas, as has already happened in India; mass movement may increase the need for supply and shipment of shelters, field hospital components, emergency power generation and water and sanitation provision.

As the current global crisis continues to evolve, breakbulk carriers should stand by. BB Helen Campbell is a freelance journalist based in London who has specialized in energy, environment, sustainability and technology for more than 20 years. www.breakbulk.com BREAKBULK MAGAZINE 25

CREDIT: SHUTTERSTOCK.

REGIONAL FOCUS

TRANSMISSION VS TRANSPORTATION

BY THOMAS TIMLEN

An Asian Perspective on Covid-19’s Impact

O

n the same day that stakeholders were invited to share their views for this article, Wood Mackenzie reported that road traffic volume in China had increased for the first time since late January as quarantine restrictions were eased. With all the bad news we face these days, even that modest sign of improvement was welcome.

In an effort to hinder the spread of Covid-19, at the start of 2020 China introduced internal restrictions on cargo movements that eventually impacted global imports and exports.

26 BREAKBULK MAGAZINE www.breakbulk.com

China’s temporary transport and manufacturing shutdown slowed and stopped many shipments, but at the start of April some restrictions affecting logistics were eased.

Similar patterns have been seen throughout the Asia region, as countries attempted to limit the spread of Covid-19. Malaysia allowed the domestic road transport of foodstuffs, including exports to Singapore, while banning road transport of construction materials and putting a halt on construction projects. In some parts of Asia, breakbulk and project cargo movements that were affected are now

gradually beginning to move towards their destinations. But will future demand meet previous expectations anytime soon?

‘PROJECTS STILL GO ON’

Leo Liu, Protranser International Logistics Co’s marketing manager based in Shanghai, is close to the eye of this storm. Liu sees the air and sea freight markets facing similar challenges as a result of the pandemic, observing that despite the present dire straits, “projects still go on.”

He has seen continued demand for the transport of equipment such as ISSUE 3 / 2020

The AAL Kobe discharging rubber-tired gantry cranes at Felixstowe.

CREDIT: AAL SHIPPING.

transformers and other project cargo on flat racks, and Protranser has continued managing such movements.

Liu noted, however, that as “more and more countries start to shut down these days, such as Canada and South Africa,” there will surely be a shortterm impact on some shipments.

Turning his attention to the market’s prospects for the next halfyear, Liu acknowledged that making predictions is difficult. “To tell the truth, it is hard to say. The world is a small village, export and import links countries together. If there is a consignment that needs to be transported from country A to country B, both countries need to be workable.”

Liu feels that the timing of a return to normalcy depends on the ultimate number of countries impacted, from Asia to Europe and America. “Some say that it will take at least six months before the crisis has passed,” three months for the crisis to peak, then another three months to recover, although he also acknowledged that some have pre-

Leo Liu Protranser International

Kyriacos Panayides AAL Shipping

dicted that one year will pass before the world returns to a state of normalcy.

Kyriacos Panayides, managing director at AAL Shipping, headquartered in Singapore, echoed Liu’s view on the challenge of predicting the sector’s recovery. “Unfortunately, the exact timeline of recovery is unknown,” Panayides said, adding that “unsupported businesses face the real risk of serious repercussions and

possible collapse, which was being witnessed even before this crisis.”

Panayides noted that as the situation stood at the start of April, there was very little appetite for investment or project greenlighting. Within the carrier sector too, there is no appetite for immediate fleet expansion or vessel charters while distressed ships sit idle worldwide.

“As forecasted, production and international cargo movements have declined rapidly since the outbreak,” he said. “Initially, the slowdown of imports and exports took hold in China, then Korea and Japan. Each case resulted in the forced reduction of shipments, delayed project cargo readiness and, in many cases, cargo bookings cancellations.

“Now the virus has hit the rest of Asia, Middle East, Europe and the U.S., the same pattern of decline is happening worldwide. Cargo freight rates have also seen extreme pressure downwards, with carriers facing fleet deployment at totally unsustainable levels.”

MIX OF IMPACT

Wallenius Wilhelmsen Ocean’s, or WW Ocean’s, operations are truly global with a prominent presence in Asia. Vedran Muratbegovic, senior manager of business development, explained that different parts of the region, as well as the world, were being impacted at a varied pace.

“While the situation in China and some other parts of Asia, such as Korea, started to show positive signs and visible improvements in March, it is really the deteriorating situation across other parts of the world, particularly in Europe and the U.S., which is now the cause for concern.

“Just what exactly the impact on the project cargo industry will be, how long will it last, and when exactly it will manifest remains anyone’s guess for the moment, as is the matter of how long it will take to tame the global outbreak,” he continued. “This is a unique event in modern history, making it difficult to compare with and draw conclusions based upon events of the past, such as SARS, 9/11 or the global financial crises.” www.breakbulk.com BREAKBULK MAGAZINE 27

REGIONAL FOCUS

Breakbulk cargoes being exported from Asia.

CREDIT: WALLENIUS WILHELMSEN.

Muratbegovic felt that if the outbreak could be contained quickly, and governments begin to ease the enforced restrictions that at the time of writing were in place in almost every country, “we can expect to see major improvements, and an increase in business confidence.” In such a scenario he expected delays and/or periodic halts rather than complete cancellation of projects. “Obviously, a prolonged outbreak could have significantly negative effects on industry with a long road to recovery.”

With planning of industrial projects generally a long-term process, project cargo shipments are planned years in advance. As such, the impact of the pandemic on the immediate to short term will not be as drastic as it may be on the longer term, Muratbegovic pointed out. “Project cargoes are still moving, although at a slower pace, and for the moment we at worst see delays and/or periodic halts of major industrial projects. The reason for this is also that complex financing structures make it easier to delay/halt a project rather than completely cancel it.”

Nonetheless, he had concerns regarding the longer-term prospects.

“We are, however, afraid that there might be a slowdown in new project announcements, or significant progress of projects planned for the coming years, and from that point of view, 28 BREAKBULK MAGAZINE www.breakbulk.com

Stefan Kjellström

Vedran Muratbegovic

WW Ocean

WW Ocean

possibly the effects of Covid-19 on the project cargo/breakbulk sector will be seen more next year and in 2022 rather than right now.

“It is the new project pipeline that may well take a hit. It should be noted that governmental support packages could have a mitigating effect on a potential hit, but the total outcome is impossible to predict at this stage.”

KEEP SERVING THE TRADE

Predictions aside, businesses are feeling the impact in real time. Liu tells Breakbulk that as a freight forwarder, Protranser has managed to “keep working” for its clients, ensuring that staff continue to supervise packing processes at factories in Sichuan province for export from Shanghai, including

supervision of transformer loadings on flat racks. As almost all of Protranser’s staff can work via email and remotely on the company’s IT system, telecommuting has not posed any problems.

“In January and February, everything seemed to stop,” he said. “Starting from the end of February, factories started to work, with full staff back to work, and at this time all Protranser staff returned to work in the office. So everything is getting back on track step by step.”

WW Ocean, has, in line with other ocean carriers, seen fluctuations in volumes, meaning it has had to adjust capacities in order to maintain balanced supply and demand. Stefan Kjellström, the company’s vice president for breakbulk, said that in some ports, the carrier has experienced delays driven by a mix of limited operations as a result of less labor availability, as well as increasing inventories of non-critical cargoes in port, limiting operations. In response, WW Ocean is watching global developments closely as the pandemic continues, implementing contingencies to cover a number of scenarios. “Because of the difficulty to predict the outcome of the pandemic, and the situation being so fluid, there will undoubtedly be more impact on the transportation industry and global supply chains as a whole,” Kjellström predicts.

ISSUE 3 / 2020

REGIONAL FOCUS

FORECASTING IMPOSSIBLE

Transformers being loaded in Shanghai. CREDIT: PROTRANSER.

NO CANCELLATIONS … YET

For the time being consignments are moving, but with some consequences.

“We have not seen cancellations of shipments that had long been in the pipeline, and have recently taken sizeable power and energy project shipments from Europe to Australia,” Muratbegovic said. “Similarly, regular shipments in the renewable energy sector, as well as from other sectors, from Asia to the U.S. have continued to flow, supporting the view that drastic loss of volume isn’t likely immediately.”

However, he also pointed out that a problem that is starting to appear with some customers is requests to delay shipments and for longer transit times for shipments from Asia, as receivers in Europe and the U.S. struggle to maintain control of their own supply chains given the developing Covid-19 situation in those regions combined with the inherent capacity constraints faced by some.

“It is something that we have only recently started seeing, so it remains to be seen how long this lasts, and whether it escalates from here or whether it is just a temporary measure to help deal with bottlenecks caused by the initial disruptions to the supply chain,” Muratbegovic said.

Kjellström adds that the return to work in Asia is being hampered by lockdowns in Europe, and the

U.S., meaning that some receivers are opting to delay shipments rather than place them onto vessels now, pending an outcome to the lockdown situation seen in many countries.”

In China, Liu explained that Protranser has had to manage the usual challenges that come with the breakbulk business, but so far none that have been a direct result of the pandemic.

Panayides describes a different challenge at AAL: payments. “We have faced the freezing of receivables from Chinese accounts and severe liquidity issues all around us in the market. Nevertheless, AAL’s long-term focus on ‘key accounts’ comprising majors in every industry sector, whose payment terms are set and stable, has mitigated our negative exposure. However, with the escalating pandemic surge in the European Union and the U.S., the effect is still unknown.”

Asian breakbulk operators are carefully watching the international effort to contain the virus, as containment is inextricably linked to the performance of this market.

Thomas Timlen is a Singaporebased analyst, researcher and writer with 30 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

Views vary on the demand prospects in Asia for the transport of breakbulk and project cargo. AAL Shipping’s Kyriacos Panayides finds demand difficult to predict, “but the short-term will almost certainly remain pressured. Recovery time will depend upon the ability of markets to contain the virus spread, but also the appetite of governments and financial institutions to support businesses with desperately needed fiscal support policies.”

For the long term, Panayides sees reasons for a degree of optimism. “All being well, by the third quarter we could well see more stability in global markets and trade emergence.” By the fourth quarter, he believes there could be growth as markets recover and start to refill their depleted stocks of goods, resources and commodities.

Panayides called on world leaders to consider deploying more relaxed international trading terms to give trade a boost.

Vedran Muratbegovic, Wallenius Wilhelmsen Ocean’s senior manager of business development, felt that relative to Europe and the U.S., and based on reporting, China and North East Asia at large seem to have weathered the pandemic better, and those economies do not seem to have taken a significant hit yet.

“Sure, the full impact is yet to be seen, and some countries in Southeast Asia continue battling with the outbreak of the virus and there too, there will ultimately be an economic fallout, but overall we haven’t seen mass cancellations of large projects across the Asian continent,” he said.

He points out that an additional risk to project cargo demand is the downward spiral of the oil price, as it continues to plummet, “but this is a global issue rather just specific to Asia.

“If we don’t see a recovery and return to more sustainable oil price levels, then you would have to say that the project cargo sector will bear the consequences of that, which is something that we will see in the longer term, over the next 18 to 24 months.” BB

www.breakbulk.com BREAKBULK MAGAZINE 29

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.

NEAR DISASTER IN THE NORTH SEA Lessons Learned From Crisis Management I am sure that all my fellow colleagues from the capital project supply chain management industry have experienced a “crisis” in one form or another. These experiences help to improve leadership skills, present opportunities to mentor subordinates, and improve one’s ability to succeed when (not if) the next crisis occurs. As someone said to me long ago when I was laid off in the oil field in 1986, “in every adversity there are opportunities.”

I could share many harrowing crisis stories from my seagoing days such as surviving five hurricanes at sea, and some cargo movements that would be considered in our industry “the voyage from hell.” None would even come close to my experience on March 4, 1985, when I was the offshore installation manager and master of the self-propelled semi-submersible Oil rig graveyard in the North Sea off the coast of Scotland. Credit: https://flickr.com/photos/ joiseyshowaa/. CC BY-SA 2.0.

30 BREAKBULK MAGAZINE www.breakbulk.com

By Capt. Bill Schubert

Glomar Artic I. We were drilling an exploratory well off the coast of Scotland when we experienced an uncontrolled blowout due to a failure of the blowout preventer. This was very similar to the more recent Deepwater Horizon disaster, however, by the grace of God we did not lose any lives. Simply put, it could have been the worst disaster in the history of North Sea drilling.

For about 30 minutes we had uncontrolled gas and drill pipe flowing out of the well. All it would take for a total loss of about 80 crewmembers and the rig, was a single spark. After successfully evacuating all but 12 volunteers to the Ekofisk platforms Norwegian sector, it then took 30 days to completely get control of the well.

During this time, the casing pressure at well head was 200 percent of the rated burst pressure. That meant that

Capt. William Schubert with his dogs at home in Colorado.

these 12 volunteers could have disappeared in a second. One of my hardest decisions was selecting two volunteers to stand by the anchors to manually release in an emergency as a last-ditch effort to save the rig and crew. They were very brave indeed, since they very well knew they were sacrificing their lives for their fellow crew.

I was only 32 at the time, and in charge of men much more experienced than me. My previous 12 years at sea helped teach me that managing a crisis means that you must rely on the experience of others, and not get hung up in pride even though I was the person in charge. Every one of the 12 volunteers had an important role to play if we were to survive. Looking back, I also believe that picking the right 12 (out of 80) was my first real test of crisis management.

ISSUE 3 / 2020

Many of my colleagues know that I have adopted the management principles of Sir Ernest Shackleton from the book Shackleton’s Way by Margot Morrell and Stephanie Capparell. However, I have also learned sound crisis management from my colleagues over the years and leaders such as (former Department of Transportation Secretary) Norman Mineta. These important people in my life helped me to guide my agency (the Maritime Administration) in the critical days in the aftermath of 9/11.

Some summary “lessons learned:” • The best leaders are servant leaders that put the interests of their subordinates ahead of themselves.

• Adopt what I call the Gene McCormack (former Lykes Lines) principle: “If your employees do some-

thing right – give them the credit.

If something goes wrong, take the blame.”

• As long as it depends on you, promote teamwork and lead by example.

• In the darkest hour of a crisis, have a respectful sense of humor, as it will help loosen tension during a crisis.

• This may not be applicable to all readers, but my personal faith has given me the strength to lead, and not show panic in very serious circumstances. That was certainly true on March 4, 1985.

Lastly, to my colleagues, let’s all work together to grow a new generation of leaders. BBONE Capt. William Schubert is president, International Trade & Transportation Inc., and former U.S. Maritime Administrator, 2001-2005.

Capt. William Schubert with his son Chris in Lake Charles, Louisiana.

“The Lake Charles photo was actually on my last ship and just before I transferred to the offshore oil industry. During the blowout, my son weighed heavily on my mind because I thought I would never see him again.”

LASO WIND FARM TRANSPORT CONTINUES With Protective Measures

LASO continues to work to ensure that the supply chain for wind farms in Morocco, Spain and Madeira (pictured) are maintained and that damage to its customers and society is contained as much as possible. Credit: LASO

Transportes.

www.breakbulk.com BREAKBULK MAGAZINE 31

PROJECT CRISIS IN PAPUA NEW GUINEA The Importance of Planning Well Before Material Moves Multimodally

By John Amos, Breakbulk Americas Advisory Board, Member Emeritus

In the late 1980s, two major engineering, procurement and construction companies had a joint venture to develop a huge iron ore project in the highlands of Papua New Guinea.

It was called the OK Tedi Project and had complex logistics requirements and schedules in one of the most remote areas in the world and extreme weather conditions.

The project scope was to build facilities to mine a mountain of iron ore topped with 1 million ounces of gold.

The joint venture team was committed to teach the local inhabitants skills far beyond their agrarian lifestyle and use wheeled equipment.

Project cargo moved by ship to Australian ports, coastal ships to Port Moresby, PNG, then by barge across the Gulf of Papua and up the Fly River to the river town of Tabubil, and finally 100 kilometers of mountainous construction road to the jobsite at Kiunga.

The logistics plan was set and then the problems started.

A once-a-decade drought struck the area, and the water level in the Fly River went down to the point that the tugs and barges could not navigate it to reach Tabubil. How could this happen?

Project and client management would

32 BREAKBULK MAGAZINE www.breakbulk.com

John Amos surveys a site for an iron ore project in Papua New Guinea. Credit: John Amos.

not budget a logistics study that would have identified a potential drought.

Action needed to be taken immediately to ensure the transportation of project material. At this point the only way to reach the project was by air. There was a marl landing strip at Tabubil that could support aircraft no larger than a Hercules. The project contracted with an Australian company to provide two of the four-engine models to shuttle cargo from Port Moresby to Tabubil.

Priority cargo was scheduled for the flights, and one of the highest was gasoline in large rubber bladders. Construction material moving by truck from Tabubil to Kiunga was often plagued by heavy rains that made movement on the winding and steep unpaved roads inconsistent and often with delays.

Project employees moved between Port Moresby and Tabubil on 20-seat propjet aircraft. Small critical items and food for employees moved on these daily flights. Projects in remote locations place a high priority on spare parts for vehicles and machinery. A good example was parts for the tractors that had to keep the 100-kilometer haul road open every day.

Many obstacles were encountered during the life of the project that required the skills of the joint venture team that didn’t always agree on problem solutions. Dealing with local workers who mostly did not speak English or read was a difficult task, so the focus was on those who did to supervise and teach the others work skills and safety procedures.

This unusual project is a good illustration of how important it is to plan the movement of project material well in advance of the first movement of project cargo. This is extremely important when multiple modes of transportation are utilized, including ocean, barging and a haul road, and encountering frequent poor weather. BBONE John Amos is an international logistics and transportation consultant specializing in issues related to planning, operations and regulatory issues.

His experience encompasses the fields of ocean, air and surface transportation. For more than 45 years he has had international and North American positions in the fields of logistics, procurement and construction management.

ISSUE 3 / 2020

COSCO LOOKS AHEAD

Chen Feng Discusses Restarting China’s Supply Chains

Breakbulk spoke with Chen Feng, general director of marketing and sales center, COSCO Shipping Specialized Carriers, about the company’s response to the Covid-19 pandemic, and the reboot of China’s supply chains.

Q: What is the impact of the pandemic to COSCO? Beyond the short-term issues of understaffing and delays in loading and unloading, and clearing of backlogs once operations began to move again, the outbreak caused cargo owners to stop or reduce production.

There are many export restrictions, which have resulted in voyage cancellations or delays. Although car manufacturers have now resumed work, spare parts supply has not been fully restored, so car transport has been delayed. Overall, production capacity is being increased and workers are working overtime to make up for the slowdown period.

Q: What new measures has COSCO considered or already put in place?

Because the main impact of the pandemic is on trade and ports, there have been very limited responses available to shipping companies. But we are considering new strategies, such as allowing our ships, which are still overseas, to pick up third-country cargo to reduce the risk and losses associated with the outbreak.

Regarding capacity and route planning adjustment, in the past we have paid more attention to serving Chinese customers, relatively speaking.

As we look forward, we will shift our focus to global capacity layout, and pay closer attention to tracking the development of the industry. As we all know, due to the Sino-U.S. China trade friction, production for many goods has been transferred to Southeast Asia and other countries, so we will consider the flow of goods to lay out and adjust capacity.

We will also change the traditional business operation thinking, focusing

COSCO Shipping Specialized Carriers’ Xin Guang Hua semisubmersible was loaded with a 40,335-tonne Appomattox hull in Geoje Island, South Korea.

Credit: COSCO Shipping Specialized Carriers.

on providing customers with integrated logistics services. With the development of the industry, more and more customers want us to be able to provide integrated logistics services, that is, from providing a single “portto-port” service to providing the entire “door-to-door” logistics services. We have made this a strategic priority: to become the world’s leading shipping and engineering logistics service provider. The company has already accumulated some experience in providing door-to-door services, such as in some power plant projects along the Belt and Road.

Q: With new health and safety measures in place, how has COSCO complied and what impact have they had on operations?

COSCO has acted in accordance with international, national and local requirements as it relates to health and safety during this crisis. We have also prioritized timely communication with consignees, shippers and customers to obtain their understanding and support. So far we have not received any complaints, instead we have received several written customer tributes, including thanks for successfully delivering goods in time.

Q: We have heard concerns around the implementation of IMO2020. Can you give us an update on how COSCO has complied with the new regulations?

As a world-class shipping company, we attach great importance to this new regulation. We prepared our fleet to be compliant by the end of last year.

In fact, all our ships use very low sulfur fuel, (VLSFO 0.5 percent) and so far, we have done a good job of procuring it with no interruption in service.

Of course, this leads to an increase in operating costs and we hope that cargo owners can help us to bear some part of the new operating costs.

At present, the relative acceptance by many customers is relatively good.

Many large project cargo owners have expressed understanding and willingness to share a part of the additional costs, but a number of short-term cargo owners are not willing to bear the additional cost, especially during the outbreak because the market is oversupplied with vessels. However, we will continue to support IMO2020 and remain compliant. BBONE Visit COSCO Shipping Specialized Carriers Co. at Breakbulk Asia, Stand F20, and at Breakbulk Europe, Hall 5 5G10-H11 www.breakbulk.com BREAKBULK MAGAZINE 33

SAVVY MANAGERS ANTICIPATE DISTRUPTION Countering Covid-19 Disruptions with Supply Chain Resiliency

Margaret A. Kidd is program director, Supply Chain and Logistics Technology, and instructional assistant professor, Construction Management Department, College of Technology at the University of Houston. She was recently featured with a question-and-answer session on “Countering Covid-19 Disruptions with Supply Chain Resiliency,” in the Greater Houston Partnership’s Houston Report. https://www.houston.org/ news/countering-covid-19-disruptionssupply-chain-resiliency Breakbulk caught up with Kidd to pose some follow-up questions.

Q. How many companies in our industry do you feel have truly resilient supply chains?

Supply chain resiliency is certainly not a new concept or discipline. Given the growth of globalization and the interconnectivity of economies over the last two decades, supply chain and logistics managers have had abundant opportunities to both create and test their models, along with implementation of business continuity plans.

Contextualize this point with best practice responses to Sept. 11, 2001, the Indian Ocean earthquake and tsunami in 2004, the SARS 2003 outbreak, and most recently, Hurricane Harvey 2017.

These are just a few illustrations. Savvy managers are anticipating disruptions; how they respond is the true test of their plan and a resilient supply chain.

Q. Does resilience of the supply chain matter if market conditions mean little freight is moving, and as projects are postponed or cancelled?

There is no question that at the human level the news can be disconcerting at best. All must keep in mind that delays are not permanent. Case in point is China, which has proved resilient in its ability to ramp back up.

While some capital projects will get postponed or cancelled vis-à-vis the price of oil in the short term, in the long term new opportunities will appear that investors will embrace.

34 BREAKBULK MAGAZINE www.breakbulk.com

Margaret A. Kidd

Q. For those companies that are prepared, what should they focus on in the coming months until business resumes?

Clearly if an organization does not have a fine-tuned business continuity plan, the current market conditions will be a wake-up call to develop a best practices response. For companies that have a fine-tuned business continuity plan, this is a time where regular communication between your various stakeholders is imperative. Marco Poisler, chief operating officer, global energy and capital projects, UTC Overseas Inc., shared with me that his company was “helping major shippers with mitigating the risks of force majeure and contagious diseases clauses in their shipping contracts, while dealing with the reality of blank sailings, cancelled flights, equipment imbalances, and absence of normally available qualified supervisors at loadings/discharge to meet construction and project schedules.” At the end of the day, active communication and service level solutions will add value to customer relationships.

Q. In your role at the University of Houston, how are students progressing in the current environment?

The students in the Supply Chain and Logistics Technology Program, College of Technology, University of Houston have all been converted to online learning, just as students across the country have. The University of

Houston uses the Blackboard Learning Management System. To enhance student outcomes, Microsoft TEAMS and ZOOM have been embraced by a large percentage of faculty to increase connectivity with students. It has been very exciting to hear from both our industry advisory board members, as well as industrial stakeholders in regard to participating as special guest speakers during a virtual student classroom. We have leveraged this in our project logistics course.

As the program director for 650 undergraduate students, I have used traditional methods such as email to our students and have conducted a series of virtual town halls via ZOOM conferencing. Our student organization SIDO has leveraged ZOOM conferencing to bring virtual student meetings with industry stakeholders participating as guest speaker.

Q. What message do you have for students or graduates who’ve just entered the market in these uncertain times, with an even more uncertain future?

Job market volatility is a fact of life in a globalized economy. What students need to keep in mind is that we all must be life-long learners if we want to be relevant. This is the perfect storm to sharpen your skill sets to create that competitive resume/application.

Students should consider a certification from organizations such as the Council of Supply Chain Management Professionals (CSCMP), the American Production and Inventory Control Society (APICS), Institute for Supply Management (ISM), or local higher education institution. The Supply Chain and Logistics Technology Program, as well as our Technical Project Management Program offer relevant certifications.

If the current economic turbulence extends beyond a couple of month, this becomes a great opportunity to enroll in a graduate program. Most important is for students and recent graduates to stay positive and continue to expand their network. BBONE ISSUE 3 / 2020

HUBEI POWERS THROUGH CRISIS

‘Advance Consciousness, Remote Awareness’ During Outbreak

Breakbulk spoke with Morgan Meng, deputy director of the department of material, Hubei Electric Power and Design Institute, about the impact of the Covid-19 pandemic on Asia’s shipping and project cargo industry.

Following are his edited comments.

Q: So far, what challenges and impacts has this outbreak posed to your company? Will there be any new adjustments to the regional strategic deployment of the project investment and development?

Our main business is the general contracting for power projects, and the outbreak brought real challenges.

First, because of the plant shutdown, much of the equipment and materials required for our project cannot be produced, accepted and delivered, which caused great difficulties in the construction and installation of at project site proceeding as planned. Some projects are difficult to deliver to the owner as stipulated in the general package contract.

Second, when the epidemic came, there were many projects in the design stage, or bidding, and procurement could not be carried out, or there was equipment unavailable and projects were not in start-up condition.

The inability to ensure progress of projects presented a great challenge.

Third, because of the national plan to contain and control the epidemic, production and instillation that required human resources and construction tools could not be effectively guaranteed.

Q: What countermeasures has your company undertaken to respond positively? From the perspective of eliminating these impacts in the medium to long term, what are the internal response strategies and implementation plans?

To minimize the adverse impact of the outbreak on the company’s normal operation, we took several responsive measures. First of all, we formulated and issued emergency plans for

epidemic prevention and control, putting serious and pragmatic efforts into practice.

We fully grasped in-depth thinking and advanced planning to ensure we have project material and support in place for when work resumes. We divided the current phase of work into three categories: “Affected must be suspended,” “affected can be telecommuting,” and “not affected,” and make rational recommendations for each type of work.

We sought to improve “advance consciousness” and “remote awareness” of work during the outbreak, and ensure the operation of the production and operation management system policies through online telecommuting in a timely manner, and strived to minimize the impact.

For foreign employees, we distinguished the scope of personnel, strictly implemented isolation observation measures, abided by the epidemic prevention and control regulations, strictly fulfilled the procedures for approval, strengthened the health check of overseas project site owners and partners, and fully coordinated and promoted the return to work.

We’ve paid close attention to the government’s demands and assumed the social responsibility of stateowned enterprises.

Q: How do you hope shipowners and freight forwarders will assist you in this transition?

By strengthening awareness of prevention and control, formulating comprehensive prevention and control measures, deepening the implementation of the responsibility for epidemic prevention, and ensuring the health

and safety of the whole work. They can provide in-depth understanding of cargo owner needs, such as during the outbreak of the port, shipment, inspection and quarantine, import and export customs declaration, and timely reminders of port of destination epidemic prevention.

Q: Has the outbreak had an impact on the performance of the signed logistics and transportation contracts? How can legal means be used to reduce risk losses? And what new points of concern will be paid to the upcoming contract, and how will it be reflected in the contract?

There will certainly be an impact, such as in our wind power projects, wind turbines and towers and other large transport.

For international projects, the legal interests of the owners shall be sought and defended in accordance with the force majeure clause, and the understanding and volume of the owners should be sought. In particular, it is important to note that, in the course of the performance of the contract, once force majeure is declared, the parties to the contract shall be notified in a timely manner and provide the corresponding supporting documents, especially in the field of engineering construction. They should strictly abide by the time limit requirements of the force majeure notice, such as FIDIC EPC conditions for 14 days to 28 days at the latest, must be issued to the owner of force notice, and provide proof within a reasonable period of time, otherwise it may be considered a waiver of the right to claim. BBONE

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 35

PROFILE

SEEKING SOLACE IN SHIPS How BBC Chartering Won Over MPV Veteran

BY CARLY FIELDS

H

is resume reads like a Who’s Who of the multipurpose vessel sector. With stints at AAL Shipping, RickmersLine and then Zeaborn, and now BBC Chartering, what Ulrich Ulrichs doesn’t know about MPVs probably isn’t worth knowing.

But before his appointment as chief commercial officer at BBC Chartering – the steppingstone to his current CEO posting – Ulrichs was seriously considering a move out of shipping altogether.

In an exclusive interview, he confides to Breakbulk that he had reached the point of needing to constantly motivate himself in the industry. “It was difficult,” he said. “When I left Rickmers/ Zeaborn I didn’t know if I wanted to do this again in this sector.”

Little wonder that Ulrichs confessed to feeling a “little tired of the market” in his previous position. While he started his career at Rickmers in 2005 in what proved to be shipping’s halcyon days – the bellwether Baltic Dry Index reached its historic peak of 11,067 in 2008 – he has also lived through the pain of the global financial crisis and the sustained challenge of meeting the decidedly downcast new normal of multipurpose ship operation. This tumultuous market ultimately led to Rickmers’ demise, allowing the then-new kid on the block Zeaborn Group to swoop in and swallow it up, taking Ulrichs in too. But 36 BREAKBULK MAGAZINE www.breakbulk.com

Ulrich Ulrichs

when Zeaborn founded a joint venture with Intermarine to start Zeamarine, Ulrichs decided it was time for a new challenge and left the company.

The experience led him to take five months off to truly take stock of his career options, including those outside the shipping sector. He explains that he wanted to think outside of the box.

“During that time, I traveled, met with friends, and sought advice from mentors. I played sports for two hours every day, and spent time thinking about my future. I talked a lot with people; it was an enjoyable time – but there were some really big decisions about my future that were hanging over me throughout,” he said.

HAND OF FATE

In the end, fate may have played a hand with his decision to stay in breakbulk. Ulrichs’ family hail from the Leer area, home to BBC Chartering, so he knew the mentality and the culture of

people from that area.

He’s also no stranger to family-run outfits: the Rickmers family has been in the shipping industry for more than 180 years; BBC Chartering is owned by the Briese Group, headed by naval architect Capt. Roelf Briese. “BBC was kind of a match,” he admits.

Ulrichs said that he had a “good look” at BBC before he made his final choice, and praised the team for being “super supportive and welcoming” of him when he started in May 2019.

With a year under his belt at the company, Ulrichs is able to reflect on the main challenge of the role: the mammoth size of the fleet. BBC has a fleet of more than 150 ships, ranging from 4,325 deadweight tonnes to 56,800 dwt and capable of lifting up to 900 tonnes. According to Drewry, BBC deploys the world’s largest MPV fleet in terms of dwt capacity and number of ships. The company has six ships on order, two to come this year and four ISSUE 3 / 2020

next year. BBC needs an average of six to eight ships every year to maintain its fleet size.

“It’s a much larger fleet than I have managed before,” Ulrichs says.

“It’s huge and in one day you cover the number of topics that would have been covered over a month in previous roles.”

While he admits to putting in long hours, he has found the role interesting. Key to his success in the position has been his willingness to involve staff in the decision-making process. “I ask for the opinions of senior people in the business, then decisions are relatively transparent and acceptance is high. It’s a well-oiled machine,” he says. And while his management style is different to former CEO Svend Andersen, people have, he says, got used to him. Andersen had been with the company since its inception in 1997. “Sometimes I do have to fight my corner,” Ulrichs says.

“But I have good people around me and the support of the BBC family.”

SECRETS OF SUCCESS

But what makes BBC Chartering different to the other carriers that Ulrichs has been involved with? After all, year-on-year, the promised upturn of the market has failed to materialize.

Ulrichs says BBC’s stoicism is down to a combination of factors.

Firstly, the company was not built up overnight; it has been going a long time. “This has provided a strong culture which is very positive and where people help each other.”

Secondly, the company size means that it is truly active in every market.

“So when one trade lane goes up, another goes down. That means we can react and benefit from trade wars, for example.”

Thirdly, it is a family-owned business. “That factor was important to me in my decision to join BBC,” Ulrichs says. “The family is very aware of what’s going on and is very involved in the business.”

Fourthly, the focus is on cargo and putting cargo first. “BBC doesn’t book cargo for a specific ship. We book for the cargo and can be super flexible.” Here, the diversity of the fleet

BBC Emerald, with a lifting capacity of 800 tonnes, carries a cargo of cranes.

CREDIT: BBC CHARTERING.

www.breakbulk.com BREAKBULK MAGAZINE 37

PROFILE

The 2011-built, 9,282 deadweight-tonnes BBC Mont Blanc discharges to a barge on anchorage in Russia CREDIT: BBC CHARTERING.

is a strength with its mix of small and large tonnage. “I think that mix and size has allowed BBC to have a different approach to cargo.”

Ulrichs does, however, acknowledge the “very tough market,” coupled with the challenge of securing funding from shareholders and investors who are aware of the risks and ready to fund until there is an upturn. “Risk is very high in shipping generally – so many people have got it wrong in the past. My duty as a manager is to ensure aware-

ness of the risk and a timeline. Then people can decide if they want to take that risk.” A passion for shipping and knowledge can certainly help, but only if it means that those at the top understand the risk, he adds.

And while margins are undeniably slim for MPV operators, Ulrichs works on the mantra that the margins are still there and it’s entirely possible to make a living on lots of small margins if you avoid making mistakes. Here, he’s in perfect synch with the mentality of staff

PROJECTS BOLSTERED BY WIND BOOM While the Covid-19 pandemic is the black swan that nobody accounted for, there are still projects pushing ahead that promise work for the multipurpose sector, according to Ulrich Ulrichs.

Real projects, he says to Breakbulk, are happening more and more and there is a welcome boom in the wind energy sector.

“There is a bright spot in wind energy related work,” he explains.

“There is a lot of volume and some trade lanes are tight. So, even if we

38 BREAKBULK MAGAZINE www.breakbulk.com

don’t get a contract, we don’t necessarily mind as the ship is still taken out of available supply.”

In terms of the MPV fleet, Ulrichs is confident that the sector will see more scrapping this year to address the aging fleet profile. Add to this the difficulty operators face in securing finance and prospects are improving for the MPV fleet. “The average age of the fleet is getting worse and there are very few newbuildings on order,” he says.

at BBC: “They always have confidence that they can still make a living.” Added to which, there is still room for greater efficiency in operations.

But BBC is not willing to share.

When asked about possible consolidation, Ulrichs answers with an emphatic “no.” While there might be an interest in specific ships, BBC has a certain way of thinking that is unique to it, so finding a perfect match in a partner is a tough job. “To have different systems, different company cultures and different ships that do not suit us do not make sense,” Ulrichs says.

BBC’s new CEO has come a long way from the university student “sent” to Plymouth, UK, to learn English on the advice of his professor. With 20-plus years of multipurpose ship operations under his belt and an international career spanning roles on three continents, Ulrichs appears to have found his calling in BBC in his hometown. BB Carly Fields has reported on the shipping industry for the past 20 years, covering bunkers and broking and much in between.

ISSUE 3 / 2020

the world is waiting for you

Where the Networking Never Stops And New Project Business Is Made

Ask about the Breakbulk Global Event Partners program Exceptional promotional opportunities for exhibitors at 3 or more events

UPCOMING EVENTS

3-4 August 2020 | Shanghai

29 Sept-1 Oct 2020 | Bremen

3-5 Nov 2020 | Houston

9-10 February 2021 | Dubai

www.breakbulk.com/exhibit

www.breakbulk.com BREAKBULK MAGAZINE 39

CARGO LENS

CREDIT: BBC CHARTERING.

GRIND OF STEEL TARIFFS

US Charges Drag Down Breakbulk

BY MALCOLM RAMSEY

A

s the global economy reverberates from unprecedented disruption in the first half of 2020, breakbulk operators handling steel products in the U.S. face a series of additional structural issues as a result of the latest round of import tariffs imposed by the White House.

Originally introduced under Section 232 legislation in 2018, the tariffs were designed to stabilize 40 BREAKBULK MAGAZINE www.breakbulk.com

capacity utilization for domestic producers, but as of the beginning of 2020 had largely failed to boost domestic output. As a result, President Trump announced a renewed round of tariffs on Jan. 24, increasing tariffs on certain derivative steel products by an extra 25 percent, and aiming to drastically reduce the country’s reliance on cheap Chinese steel.

These new charges, aimed primarily at high-content steel products such as steel nails and car bumpers, created further bureaucracy for

breakbulk operators. And while the long-term benefits for the U.S. steel industry still remain uncertain, the impacts for the breakbulk sector are already being felt.

“The tariffs implemented in late January 2020 on steel derivatives and aluminum products will be felt across all parts of the industrial sector in the U.S. as the cost of raw construction materials increase. The U.S. breakbulk industry has suffered a decline ending 2019 and beginning 2020; one would have to believe that the ISSUE 3 / 2020

current tariffs could be a contributing factor,” Jennifer Thornton, vice president, global projects and business development at project carrier BBC Chartering, tells Breakbulk.

The latest round of steel tariffs included an additional 25 percent ad valorem rate of duty on derivative steel articles, with a further 10 percent ad valorem rate for derivative aluminum articles. Exemptions to steel charges were announced for Argentina, Australia, Brazil, Canada, Mexico and South Korea, while only Argentina, Australia, Canada and Mexico were saved from the additional aluminum duties.

“The changes have already been ongoing for a while, and we have seen some carriers that have based some of their trade on steel base cargo struggling or out of business.

As there is still Michael Morland a need for steel on a worldwide AAL Shipping basis, the supply will continue but perhaps from smaller manufacturers and more scattered locations. The longer the trade tensions and tariffs persist, the more likely the purchase patterns are going to be changed indefinitely,” said Michael Morland, general manager of AAL Americas.

industry associations expressing concern.

“Any efforts to delay or reduce the collection of duties on unfairlytraded steel imports or imports that threaten to impair U.S. national and economic security will ultimately hurt U.S. workers and businesses during this unprecedented moment,” the steel associations stated in an open letter, adding, “certain major steelproducing nations continue producing steel despite softening demand that occurred before the pandemic even began,” and highlighting the “critical” importance of domestically sourced steel to U.S. national and economic security.

From a breakbulk perspective the benefits for domestic industry are not so clear-cut. As Morland notes: “Major local producers like Nucor and Bethlehem have limited ability to scale up production based on short-term changes. There will most certainly have been an increase of prices, based on limited availability of domestic steel, but there is no chance that these local producers could pick up the volumes lost in imports.”

Tariffs have had an effect on domestic production, with steel

imports down 10 percent in January 2020 compared with January 2019, according to the American Iron & Steel Institute, or AISI. Local production is up 5 percent to 6 percent year-on-year. But the shift is nowhere near enough to cover the volumetric gap in steel needed. For full year 2019, the AISI reported finished steel imports had plunged 18 percent to 21 million tons. Analysts at Clarkson Research meanwhile noted that Chinese steel production last year recorded its first year-on-year decline since early 2016.

This has meant that the brunt of the tariffs has largely been felt by projects requiring steelwork, and for breakbulk carriers this has been widely related to EPC work in the oil and gas sector, an industry in the U.S. that is now reeling from record declines in oil prices.

“The changes have more been of the nature where U.S. EPCs have shifted production to Southeast Asia, India, Brazil or EU where tariffs have been less. Local production is still too expensive compared with imports to be a viable source, yet specialized steel companies with local production have benefited. I have had several conversations with EPCs and asked them if

As there is still a need for steel on a worldwide basis, the supply will continue but perhaps from smaller manufacturers and more scattered locations.

CREDIT: AAL SHIPPING.

DELAY OF DUTIES

The stringent new steel tariffs had been expected to bite in the first quarter of the year, but the devastating impact of the Covid-19 pandemic has thrown chaos into the mix, as much of the world’s economy entered shutdown mere weeks after the White House announcement.

In late March, the U.S. Customs and Border Protection announced that it would offer “additional days for payment of estimated duties, taxes and fees,” sending uncertainty through the steel sector, with a group of five leading U.S.-based steel www.breakbulk.com BREAKBULK MAGAZINE 41

CARGO LENS

they have been considering domestic vendors, and I have not had a single one confirm that they have made this switch due to price differences,” Morland adds.

MANUFACTURING SHIFT

Another direct outcome of the new tariff environment has been an effort by manufacturers to shift production of largescale components to different regions to avoid severe charges, resulting in fabrication of some major breakbulk items shifting away from China.

“There has been a change in manufacturing location for module manufacturing,” notes Morland.

“There has been a significant dropoff in production and volumes, both in structural steel and raw steel material from China that has been moved elsewhere. This has resulted in different ports being called, and also our service model adapted to suit the new environment.”

Europe has taken up some of the slack, shipping more steel to the U.S. compared with previous years, but this also comes at a price due to the higher production costs in Europe over China.

The U.S. economy is unlikely to bear higher costs in the long term, as the repercussions of its record US$2 trillion Covid-19 package are felt. As yet, not all the impacts are likely to be apparent, given the necessary lead time for many larger items to enter the global supply chain.

“With the situation between China and the U.S. over the past year, we have seen the immediate effects in the container and bulk industries, but when it comes to the heavy-lift industry, I believe we will only see these effects come towards the end of this year due to the lead time of producing such materials,” said Tim Kopfensteiner, chief chartering officer at BBC Chartering.

Despite the supposed boost for U.S. steel producers, markets have so far responded unkindly to the latest round of tariffs, with all leading U.S. steel stocks trading far below the price levels when tariffs were announced. This has in part been led by a fall in China’s steel sector, in the wake of the Covid19 outbreak, indicating the central role the Chinese steel industry now plays as a barometer of the global steel industry and the delicate link between U.S. and Chinese markets.

GLOBAL TENSIONS AT PLAY

This close interplay between the major economies is one reason why the current U.S. tariffs seem unlikely to deliver any concise results in the short term, and uncertainty over the ultimate outcome of these measures is feeding into the breakbulk sector. With the long-term picture clouded by political tensions, potential knock-on effects of a looming global recession, and the U.S. preparing for presidential elections later in the year, breakbulk operators are understandably cautious in predicting any resurgence of activity.

“Geopolitics we feel is something that is very much forgotten in the breakbulk sector, as it has been a very spot driven market over the past few years, but it does play a very important role in the overall industry,” Kopfensteiner said. “It will be a very volatile market” for the rest of the year due to further political jockeying. For the breakbulk industry “we are likely to only feel the effects 12 months later.”

Morland of AAL concurs: “As for the steel tariff forecast, this is anyone’s guess with the current U.S. administration. However, wise money might be on a trade deal being finally struck with China in time to affect the election

CREDIT: AAL SHIPPING.

Modular steel framework transported

by AAL Shipping.

CREDIT: AAL SHIPPING.

42 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2020

CARGO LENS

“Coronavirus will not have helped the Chinese manufacturers in the first quarter of 2020, as labor has been hard to come by.

Resuming business as usual after coronavirus will be the thing to watch, both on the Asian side for shipping, but also on the U.S. and EU sides for receiving.”

CREDIT: BBC CHARTERING.

– Michael Morland, AAL Shipping

results positively for President Trump.

That would be a great win and Trump would build a case for re-election based on that.”

If that is the outcome, Morland predicts that steel production volumes would again start shifting towards China, however this is dependent on projects forecast to go ahead in the U.S. LNG sector.

VOLATILITY THE NEW NORM

At present, U.S. LNG export projects are projected to account for significant breakbulk demand over the next few years, but their development has largely been predicated on record growth of the domestic shale gas industry. As sub-US$30-per-barrel oil prices appear to potentially extend into the medium term, the basis for many of these major LNG projects is beginning to look shaky.

“The project forecast for the U.S. is relatively strong for the next two to three years with LNG developments, but there is not a very strong backlog of projects after that period. If the project steel slows down, this affects the volumes overall and again the breakbulk

and MPV sector thereafter,” Morland says.

This highly volatile situation – where even the biggest projects remain semi-permanently in the balance – is likely to severely dampen demand. As BBC’s Kopfensteiner notes: “As of now, it is difficult to say how this is, or will be, affecting the breakbulk industry at large. We feel the major effects of tariffs are still to be fully seen as with the tariffs ever changing, we are seeing sourcing change month to month, which we feel will be the situation for the next year.” And depending on the election, it could be years to come. Of course, steel will continue to move, but the point of origin will fluctuate.

Given the chaotic markets that have followed the latest round of steel tariffs it is still too early to determine any real effect, but the move towards tightened restrictions and greater trade friction is not positive for any boost in volumes.

“Significant supply chain changes have already been made, and will not be immediately reversed,” Morland says. “Coronavirus will not have helped the Chinese manufacturers either in the first quarter of 2020, as labor has been hard to come by.

Resuming business as usual after coronavirus will be the thing to watch, both on the Asian side for shipping, but also on the U.S. and EU sides for receiving.”

For many breakbulk operators, the impact of steel tariffs is likely to be overshadowed by current supply chain disruptions, as longer-term shifts in production are more reactive and less planned out. For BBC, changes in demand are already leading to adaptations in its global shipping routes as the firm considers new opportunities in the Gulf of Mexico.

“We will continue to focus on our current U.S. partners and their core industries, such as steel,” Thornton of BBC said, but adds that “at the same time, BBC has launched a new trade lane in the Caribbean that includes Trinidad, Guyana, and Suriname to capitalize on changes in the business climate in the region.” 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 43

EMERGING MARKETS

Peru’s former two-time president Alan Garcia.

CREDIT: WIKI-COMMONS.

Martin Vizcarra, Peru’s new president.

CREDIT: WIKI-COMMONS.

BY SIMON WEST

CLEAN SLATE IN PERU President Bids to Restore Business Confidence

P

eru’s former two-time president Alan Garcia was a divisive figure. Just 36 years old when he took office in 1985, the then-leftist leader oversaw a chaotic first five-year term marked by economic crisis and hyperinflation, only to be re-elected for a second term in 2006 on a more right-wing platform.

It was during this second spell in charge that he allegedly began taking kickbacks from disgraced Brazilian constructor Odebrecht in return for lucrative public works contracts, including a new metro system for capital city Lima.

After a lengthy probe, police were sent last April to his home in Lima with a preliminary arrest warrant. But before officers could carry out their orders, Garcia put a gun to his head 44 BREAKBULK MAGAZINE www.breakbulk.com

and pulled the trigger, succumbing to his injuries shortly after.

The ex-leader had maintained his innocence until the end, tweeting just days before his suicide that his accusers had been the real crooks.

“He was a very controversial figure – some people loved him, some people hated him,” said Beatriz De la Vega, energy leader at consultancy firm EY Peru. “In the end he preferred to die rather than being jailed, even though everybody knew he was involved in many corruption cases.”

Garcia’s death was the most shocking turn yet in a continent-wide graft and money-laundering scandal that has blackened the region’s highest echelons of power.

In a 2016 plea deal with the U.S. Justice Department, Odebrecht admitted that for more than a decade it had

dished out almost US$800 million in kickbacks to unscrupulous politicians and officials for infrastructure projects in a dozen Latin American and Caribbean countries.

Marcelo Odebrecht, the former head of the conglomerate, was given a 19-year jail sentence in 2016 for his role in the scheme, although that was reduced to house arrest two years later.

TROUBLE DENTS CONFIDENCE

According to former Odebrecht executives-turned-whistleblowers, in Peru alone millions of dollars swapped hands, with surviving former presidents Pedro Pablo Kuczynski, Ollanta Humala and Alejandro Toledo, and opposition leader Keiko Fujimori, daughter of jailed ex-president Alberto Fujimori, implicated in the racket.

ISSUE 3 / 2020

Several ambitious engineering projects were either abandoned or put on hold, including the Gasoducto Sur Peruano, or GSP, a 1,100-kilometer pipeline network stretching across central and southern Peru. A 30-year concession to build and operate the GSP was awarded in 2014 to a consortium led by Odebrecht, only for the US$7 billion deal to be scrapped three years later after key financing deadlines were missed.

The GSP would have provided abundant natural gas feedstock for several proposed petrochemical plants in southern Peru. Those projects, like the GSP, have been shelved.

The participation of so many highprofile public figures in the scandal has driven home the scale of corruption in Peru, which according to government estimates costs the economy US$10 million every day.

“Since what happened with Odebrecht, people are even more concerned about this issue,” De la Vega said.

In a bid to restore business confidence and salvage the public’s trust in democratic institutions, the country’s new president, Martin Vizcarra, has made tackling graft a centerpiece of his administration.

A tall order perhaps, but the 57-year-old former vice president, who took charge in March 2018 after Kuczynski was forced to resign amid his financial ties to Odebrecht, is making good on his promise and winning popular support for his reforms.

A crucial victory came in December 2018 after Peruvians overwhelmingly backed an anti-corruption referendum that addressed the reelection of lawmakers, financing of political parties and the appointment of judges.

Then, in a move that could directly benefit project cargo, late last year Vizcarra approved new measures aimed at reducing bureaucracy and speeding up the government’s fiveyear national infrastructure plan for competitiveness, or PNIC, launched in September.

The PNIC, designed to reinvigorate the economy and plug Peru’s infrastructure gap, calls for the completion of 52 high-priority projects worth some 100 billion Peruvian soles (about US$29 billion) in the transport and communications, agriculture, sanitation and energy sectors.

The plan will see upgrades at the country’s largest port, Callao, located on the outskirts of Lima, a second and third line for Lima’s metro system and an expansion of the capital’s Jorge Chavez International Airport.

Many of the projects will require project cargo support, such as the

completion of the San Gaban III hydroelectric plant in southern Puno department, the upgrade and modernization of the Huancayo-Huancavelica railway and the construction of SITGAS, the pipeline project slated to replace the shelved GSP. A fresh bidding process for SITGAS is expected to be launched this year.

More than half of the PNIC projects will be built under a publicprivate partnership model, with the remainder state-funded, according to a government filing. Construction at 24 of the 52 projects has already begun, with work at another 25 close to starting. The remaining three projects are still in the design phase.

“This is not a list of good intentions,” said Vizcarra at the launch of the PNIC. “There is certainty and conviction that they will be completed. By 2025, 95 percent of the

INFRASTRUCTURE DRIVE KICKSTARTED

“Today Peru won,” Vizcarra tweeted shortly after the result. “We have a lot of work to do to bring wellbeing to all Peruvians. The task is massive, but we have the strength and commitment of everybody to put Peru first.”

Andina Freight has worked on some of Peru’s largest industrial projects, including last year’s expansion of Southern Copper’s Toquepala mine in southern Tacna department. CREDIT: ANDINA FREIGHT.

www.breakbulk.com BREAKBULK MAGAZINE 45

EMERGING MARKETS

The US$1.5 billion Jorge Chavez International Airport expansion project is being restarted under new measures that reduce red tape in infrastructure projects. CREDIT: JORGE CHAVEZ INTERNATIONAL.

projects included in the PNIC will be finished. We are not talking long term.”

OVERCOMING RED TAPE

In a bid to overcome the bureaucratic obstacles that hamper infrastructure projects in Peru – which, in turn, often spur acts of corruption or fraud – the government published in November an emergency decree listing more than a dozen measures designed to reduce red tape and improve supervision.

“One of the most important measures deals with the freeing up of land,” said Yulia Valdivia, analyst at the Peruvian Economy Institute, or IPE. “For example, the comptroller general’s office warned last year that this was the main cause of delays in the expansion of the Jorge Chavez International Airport.”

The US$1.5 billion project has been repeatedly delayed because of disputes over the government’s delivery of land required for the expansion. The new measures would help bypass this problem by allowing owners of the projects listed in the PNIC to have a more direct role in dealing with interference.

The decree, valid for three 46 BREAKBULK MAGAZINE www.breakbulk.com

years, could help lure much-needed investment to Peru’s crumbling infrastructure network, although for many in the private sector, decades of rampant corruption have left their mark.

“Clearly there is much to do in port infrastructure, loading equipment and road upgrades. Projects continue to rise, but installed capacity remains the same.”

– Renatto Castro, Andina Freight

“The opportunities (in the PNIC) are there, but government corruption slows everything down. Many projects that get awarded are overvalued, and then are never finished or are left half-done,” said Jhonn Trujillo, manager at Lima-based Trust Cargo Consulting.

Renatto Castro, project manager at Andina Freight, a breakbulk specialist that has worked on some

of Peru’s largest industrial projects including last year’s expansion of Southern Copper’s Toquepala mine in southern Tacna department, said curbing corruption is vital for boosting infrastructure spending.

“There is little investment in ports and airports that would allow us to receive high-tonnage equipment more quickly. Although the roads are reasonable, they are not up to international standards, so those involved in logistics face greater challenges when organizing transport and operations throughout the country, especially when it comes to oversized or overweight cargoes.”

PORT LIMITATIONS REMAIN Of Peru’s five main ports, only the heavily congested Callao with its five docks boasts the infrastructure for large-scale projects, although an ongoing modernization project at Salaverry on the northern coast is expected to ease traffic.

“If we have to receive project cargo in other ports, and the ships are gearless or do not have special drafts, we are going to have problems allocating resources, which obviously increases costs,” Castro said.

“Clearly there is much to do in port

ISSUE 3 / 2020

EMERGING MARKETS

Of Peru’s five main ports, only the heavily congested Callao with its five docks boasts the infrastructure for large-scale projects. CREDIT: SHUTTERSTOCK

infrastructure, loading equipment and road upgrades. Projects continue to rise, but installed capacity remains the same.”

Vizcarra will be banking on his anti-corruption crusade to restore some investor confidence, but with no political party of his own, further success will hinge on securing parliamentary support.

The president controversially dissolved Peru’s Congress last September after a long-running standoff with Keiko Fujimori’s hard-line Popular Force party, which had repeatedly blocked his reforms.

The move, dubbed a “coup” by opposition members, but deemed constitutionally legal by the country’s top court, was backed by the public, the police and armed forces.

Vizcarra received a welcome boost in January after Popular Force lost dozens of seats in fresh congressional elections. Fujimori herself is serving a 15-month pre-trial prison sentence amid an ongoing probe into her alleged Odebrecht dealings a decade ago.

“Although fragmented and comprised of an unusual and unpredictable group of parties, this parliament will still likely get behind

President Martin Vizcarra’s anticorruption drive,” U.S.-based security analysis firm Stratfor said in a recent report.

“And the main force blocking that drive for two years – Popular Force – now has much less parliamentary clout. This result could mean the passage of promised anti-corruption legislation, see the country’s Senate reconvene, end parliamentary immunity and produce significant reforms to Peru’s arcane campaign finance system.”

Still, with presidential and congressional elections scheduled for 2021, the new parliament will be short-lived. Vizcarra is constitutionally barred from running for president again, meaning he has little time to push through his reforms.

Stratfor warned that a new government in 2021 could take Peru in a different direction. And as the Covid-19 pandemic unfolds, Vizcarra will have even less time to achieve his goals.

Colombia-based Simon West is a freelance journalist specializing in energy and biofuels news and market movements in the Americas.

PROMISE OF STEADY GROWTH According to the International Monetary Fund, Peru’s gross domestic product was expected to grow from 2.2 percent in 2019 to 3.2 percent this year and 3.7 percent in 2021.

Peru is heavily dependent on mining – the country is the world’s second-largest copper producer and fifth-largest gold producer – so the government will be buoyed by recent estimates that copper output over the next five years could rise by 27 percent and gold production by 12 percent.

The country also has plans to more than double its crude oil output over the next five years to 100,000 barrels per day.

According to state-controlled oil regulator Perupetro, the target would require an investment of US$3.5 billion, a figure that could rise with measures to boost the sector’s competitiveness, such as reforming burdensome regulations.

However, Peru’s economy remains vulnerable to external factors. The U.S.-China trade feud has dented copper exports to China, while low oil prices, which had collapsed before the Covid-19 crisis amid Saudi Arabia’s price war with Russia before reaching an 18-year low at the end of March, could discourage investment in energy projects.

“Sectors like the extractive sector are suffering because of the prices, not only oil and gas but also in mining,” EY Peru’s BeatBeatriz De riz De la Vega la Vega said.

EY Peru “The question is how we will attract investors in this context when everybody is suffering from the economic impact of coronavirus. At this moment it is uncertain, but Peru should continue promoting infrastructure as a potential good investment.” BB

www.breakbulk.com BREAKBULK MAGAZINE 47

EXECUTIVE SUMMARY

INFECTION OF CARGOES

True Picture of Covid-19 Impact

BY JOHAN-PAUL VERSCHUURE, MERDAN HAYDAROV

T

he deep tendrils of Covid-19 have meant that no country and no business sector has escaped the impact of the virus. Certainly, the breakbulk sector has felt its share of pain with shipments delayed and cancelled and companies laying off staff en masse in a desperate bid to be able to make it through to the recovery stage.

While the day-to-day effects in this fast-moving state of affairs are hard to gauge, a helicopter analysis of ship data gives insight into the actual impact on general cargo trade.

Exclusively for Breakbulk, WSP analyzed vessel movements data for general cargo vessels for a set of ports in China and North Europe. Limited

activity for heavy-lift ships precluded them from this analysis.

Because this is an arbitrary grouping of ports, WSP summarized tables using indices to provide a more general view on developments. Analyzing those indices, WSP Senior Consultant Merdan Haydarov explains that volumes for major Chinese ports are expected to drop by 17 percent in the first quarter of 2020 compared with the first quarter of 2019. In comparison, volumes in the European ports dataset are expected to drop by 12 percent in the first quarter of this year.

“Shipping activity in China stabilized in March 2020, and a positive trend is expected to continue, while in Europe the falling demand could delay

the recovery as the pandemic spreads,” Haydarov notes.

However, the majority of vessel calls in Europe were under 10,000 deadweight tonnes, and this segment is expected to be particularly hit by the impact of the pandemic. This is especially true in Germany (down 17 percent in the first quarter of 2020), less so in the Netherlands (down 7 percent in the first quarter), while in Belgium (Antwerp) the number of calls actually increase over the period.

The second quarter will be even more challenging as the nature of the near-global lockdown, as well as the type of general cargoes being transported, have an influence over how volumes develop, said WSP. BB

General Cargo Vessel Calls – Indices (Total DWT, January 2019 =100) Sample Netherlands Sample Belgium Sample Germany Sample China

140 120 100 80 60

Jan Feb 2019 2019

Mar 2019

Apr 2019

May 2019

Jun 2019

Jul 2019

Aug 2019

Sep 2019

Oct 2019

Nov 2019

Dec Jan Feb 2019 2020 2020

Mar* 2020

General Cargo Vessel Calls – Indices (Number of Calls, January 2019 =100) Sample Netherlands Sample Belgium Sample Germany Sample China

180 160 140 120 100 80 60

Jan Feb 2019 2019

Mar 2019

Apr 2019

May 2019

48 BREAKBULK MAGAZINE www.breakbulk.com

Jun 2019

Jul 2019

Aug 2019

Sep 2019

Oct 2019

Nov 2019

Dec Jan Feb 2019 2020 2020

Mar* 2020

ISSUE 3 / 2020

<10k DWT General Cargo Vessel Calls – Indices (Number of Calls, January 2019 = 100) Sample Netherlands Sample Belgium Sample Germany Sample China

200 180 160 140 120 100 80 60

Jan Feb 2019 2019

Mar 2019

Apr 2019

May 2019

Jun 2019

Jul 2019

Aug 2019

Sep 2019

Oct 2019

Nov 2019

Dec Jan Feb 2019 2020 2020

Mar* 2020

10-25k DWT General Cargo Vessel Calls – Indices (Number of Calls, January 2019 = 100) Sample Netherlands Sample Belgium

200

Sample Germany Sample China

150 100 50 0

Jan Feb 2019 2019

Mar 2019

Apr 2019

May 2019

Jun 2019

Jul 2019

Aug 2019

Sep 2019

Oct 2019

Nov 2019

Dec Jan Feb 2019 2020 2020

Mar* 2020

25-50k DWT General Cargo Vessel Calls – Indices (Number of Calls, January 2019 = 100) Sample Netherlands Sample Belgium

200

Sample Germany Sample China

150 100 50 0

Jan Feb 2019 2019

Mar 2019

Apr 2019

May 2019

Jun 2019

Jul 2019

Aug 2019

Sep 2019

Oct 2019

Nov 2019

Dec Jan Feb 2019 2020 2020

Mar* 2020

* Data to March 25, 2020 Summary based on AIS data analysis; sample ports/areas from four countries; data covers period from Jan. 1, 2019 to March 25, 2020; actual vessel call/tonnage of ports will differ from the AIS data; data covers general cargo vessels only (including general cargo with container capacity); and assumption has been used to derive “genuine” port calls by selecting a minimum and maximum duration of a call – from 5 hours to 55 hours – to eliminate idle ships and ships calling for non-cargo related purposes (e.g. ship repair etc.).

www.breakbulk.com BREAKBULK MAGAZINE 49

HEARD AT BREAKBULK MIDDLE EAST

BY CARLY FIELDS

Covid-19 Muddies IMO 2020 Picture Five months on from the entryinto-force of the International Maritime Organization’s regulation restricting the sulfur content of marine fuels, the dust should have settled to give a true picture of global low sulfur fuel availability and price spread.

However, the downward movement of global oil prices since early January, owing to the impact of Covid-19 and Saudi Arabia’s decision to flood the market with more oil during a period of diminishing demand, has made it difficult to make an accurate assessment of the real impact of IMO 2020.

Breakbulk Middle East conference panelist Cyril Varghese, global logistics director at Fluor, said that the market had assumed that freight fluctuations in January and February could be solely attributed to the switch to low-sulfur fuel, but instead results were mixed, primarily due to significantly lower demand due to the impact of Covid-19.

That said, no stakeholders, in

The downward movement of global oil prices since early January, due to Covid-19 and Saudi Arabia’s decision to flood the market with more oil during a period of diminishing demand, has made it difficult to make an accurate assessment of the real impact of IMO 2020.

CREDIT: SHUTTERSTOCK

50 BREAKBULK MAGAZINE www.breakbulk.com

his view, had the excuse of hiding behind the new IMO regulation as the requirements were clearly defined. Now that the legislation is in place, he urged those in the industry to steer away from “mindless gambling and be cognizant of what is happening in this new market.”

Grant Wattman, president and CEO, Agility Project Logistics, added that IMO 2020 seemed to come as a surprise to some in the industry.

“Some stakeholders failed to build IMO 2020 into their models; others had contracts in place that straddled the implementation date.”

Since implementation, Wattman has noted a 10 percent to 15 percent increase in freight costs, and has seen varying levels of surcharges.

“Each carrier differs in their approach and application,” he said.

“We must take the risk on the variability of what surcharge can be passed along in our fixed-price contracts with clients – we take the risk on that pricing spread.” He added that he had witnessed competitors turning a blind eye to the pricing spread, pinning their hopes on renegotiation instead.

In addition to the pricing issues, there are also challenges with ship selection, with a lack of clarity on whether vessels are compliant in every region. “This is placing an exclamation mark on adequate vetting,” Wattman said. In an industry where clients often self-perform some activities, this is raising the question of where risk sits.

“Forwarders are seeing increased costs and stress on working capital. We are managing

Breakbulk Middle East Sessions Topic: IMO 2020: What We Now Know ...

Speaker Videos: Ulrich Ulrichs, CEO, BBC Chartering https://youtu.be/a8Ej3Cb4g-8 Arne Hubregtse, executive board member, Spliethoff Group https://youtu.be/wQuN5Te_zc0 Grant Wattman, CEO, Agility Global Logistics https://youtu.be/zIz9kaaZnBM increased risks and a lack of predictability. But I also recognize that this unpredictability is becoming somewhat of the norm and that’s just how we have to manage the business,” Wattman said.

AAL Shipping Managing Director Kyriacos Panayides explained that his team had spent “endless hours” in planning and in panels discussing IMO 2020, only to find out that it was a comparatively “easy exercise” to do.

While there was initially a “chaotic market” in terms of pricing and availability, Panayides said this had stabilized. The main issue that AAL is now dealing with is quality. “This is still a big question mark in the industry,” he said.

SCRUBBER DECISION RATIONALE

Spliethoff Group was the only carrier in the multipurpose sector to install scrubbers on its fleet. Speaking at the event, Executive Board Member Arne Hubregtse explained the rationale behind that decision.

“We decided to install scrubbers for two reasons: risk management and the environment. We were very well aware of the risks, the investment and the technical challenges.” He added that the group’s decision was also swayed by the consideration ISSUE 3 / 2020

that the process of producing very low-sulfur fuel oil creates more CO2 emissions, whereas scrubbers produce cleaner air, he said.

Spliethoff now has 70 vessels in operation with scrubbers installed.

BBC Chartering decided against fitting scrubbers to its fleet because there were too many unknowns, CEO Ulrich Ulrichs said. Added to which, some ports have opted to only supply very-low-sulfur fuel oil.

Ulrichs explained that initially the operator had thought to hedge its bets with its 160-strong fleet, 80 of which are controlled within the group. But in the end BBC decided against scrubbers because it “needed to be flexible as we use our ships all over the world.” That said,

the six newbuilds that the carrier has on order are specified as “scrubberready.”

Ulrichs said that he was also surprised at the lack of preparation for the entry into force of the IMO legislation, especially given the long lead time to its implementation.

Post implementation, concerns about fuel quality remain. BBC receives about 3,000 stems a year, and by the first week of March it had already experienced two cases of off-spec fuel as a result of blending issues. “There are concerns about viscosity and density and that is quite an exposure and a risk. Even if you have very few cases, if you have a big one it will be very costly,” he said.

BBC has steadfastly refused to sign any contracts that do not include a bunker clause, however the operator is still “far away from covering cost” on spot.

Ulrichs expects the real damage of IMO 2020 to come to light when container carriers publish their financial figures. “I don’t expect them to be pretty,” he said. “Right now, we are in limbo; the final verdict is not out there yet on whether the scrubber was the right way to go.”

Indeed, scrubbers are not off the table for all MPV carriers. Both BBC’s and AAL’s executives confirmed during the session that they might reconsider scrubbers if the spread between the two fuels stays high. BB

The Original and the Best Efficient MODULAR design Adaptable | Compatible | Portable Technical Experts A team of in-house engineers and specialists, with over 200 years combined experience New State of the Art Factory Faster turnaround times, increased storage space and all of your technical experts under one roof Global Distribution Network To find your nearest Distributor or Partner, please visit www.Modulift.com

Innovating the lifting industry

For more information contact + 44 (0) 1202 621 511 sales@modulift.com www.modulift.com

www.breakbulk.com BREAKBULK MAGAZINE 51

HEARD AT BREAKBULK MIDDLE EAST

Industry Faces Crunch Point The “Game Changers” title of a Breakbulk Middle East conference session was eerily prescient. As the event took place in late February, the Covid-19 pandemic had just started to spread beyond its Wuhan origins. As those on the panel discussed the impact of Covid-19, signs were starting to emerge that the virus was truly set to be a global game changer for the breakbulk industry.

Panelist Eliska Mundell, cargo sales manager for Emirates, explained that at the time of the session airlines had already been hard hit. With Emirates airline usually running 26 flights a week out of Hong Kong, the impacts of factory closures hit them hard.

“We have a very big network, and what’s already a difficult market is not looking particularly good,” she said. Mundell did concede that if there was a backlog to move after the crisis passed there could be a welcome boost for breakbulk air freight.

Breakbulk Middle East Sessions Topic: Game Changers in the Breakbulk Supply Chain: Consequences and Implications Speaker Videos:

Dharmendra Gangrade, head of logistics, Larsen Toubro Hydrocarbon Engineering https://youtu.be/iuB6hYy2O5c Eliska Mundell, cargo sales manager, global accounts (MEA), Emirates SkyCargo https://youtu.be/BHLgzHYGKOk Finn Roden, head of sales (Middle East), Höegh Autoliners https://youtu.be/-_9sgvG2kI8 Steffens Behrens, project director – Middle East Project development, deugro Emirates https://youtu.be/0Xs8e1TBjX4

52 BREAKBULK MAGAZINE www.breakbulk.com

As an automobile carrier, Höegh Autoliners also felt the impacts of Covid-19 early on. Finn Roden, head of sales (Middle East), said that forecasts from original equipment manufacturers around Southeast Asia fast became completely skewed because of the movement of parts. “The source of supply for a lot of things might have to change.

This is going to change a lot of things for the ocean supply chain,” Roden said.

Steffan Behrens, country manager for deugro Emirates, reported seeing a scarcity of equipment, and worked hard early on to explain the problems to clients. “On the logistics level our clients understand,” he said. However, on the project level they were not as willing to understand. “I think we will see more and more contracts going into force majeure because there is no clear way to go,” Behrens said.

DIRECT DEALING RISKS

On the subject of contracting directly with asset owners, the panel agreed that there were some benefits.

Roden said that Höegh Autoliners has direct contracts with OEMs around the world, and has found that with certain projects that fit its vessels, there are

benefits to operating directly with the EPC. “We feel we can add a lot of value as a liner/ro-ro carrier by going directly to the EPC.” Mundell said Emirates had been approached directly by engineering, procurement and construction companies to get a better understanding of limitations, but not to contract directly.

“It’s in their benefit to work as a tripartite,” she said. “The EPC gets the clarity that they want and understands the standards.” There are, she added, risks to going direct. “We need freight forwarders’ knowledge and expertise,” Mundell said. “How are all the risks going to be managed?”

Dharmendra Gangrade, head of logistics at L&T Hydrocarbon Engineering, explained that his company experimented with going directly to carriers some years back. As a result of that experiment, the EPC found that the freight forwarder brings many solutions. “Having that flexibility is critical,” he said, adding that he sees the trend of going direct to asset owners coming to an end.

“The risk of going direct is huge.

Why would we increase risk? The freight forwarder does the end-toend job better, whereas the carrier only does the port-to-port job,” he said. BB ISSUE 3 / 2020

‘Saudization’ Welcomed by Project Forwarders As host nation for this year’s G20 Summit and with its bold development plans, the Middle East spotlight is certainly on Saudi Arabia at the moment.

The G20 Summit was due to take place in November 2020, but Saudi Arabia’s Crown Prince Mohammad Bin Salman accepted a proposal from Indian Prime Minister Narendra Modi to hold the G20 Summit online in March, in light of the global disruptions being caused by the Covid-19 pandemic.

Saudi Arabia issued a statement announcing that “G20 leaders will put forward a coordinated set of policies to protect people and safeguard the global economy” at that summit.

In a panel session on the country’s project cargo potential at Breakbulk Middle East, local content requirements in Saudi projects were a talking point. Moataz Hussein, regional manager of the project and energy section at Expeditors, noted that Saudi Aramco is pushing for 75 percent local content, which he saw as an opportunity to enhance the quality of projects.

Sue Donoghue, managing director of DHL Global Forwarding in Saudi Arabia and project director for the company in its industrial projects section, discussed the Saudi government’s concerted effort towards “Saudization” – a nationwide program to replace an overreliance on foreign national workers with male and female Saudi citizen workers.

DHL Global Forwarding has recently opened its own entity in Saudi, and Saudization has been critical. “The focus on bringing women into Saudi and into the workforce is an important factor,” Donoghue said. Also important is appointing Saudi nationals into leadership positions. “The challenge is that as much as it is progressive, regulations can change very quickly. You have to remain flexible and be accepting,” she added.

PROCESS PROBLEMS A BIND

However, not all new Saudi regulation was welcomed. Khaled Al Khaldi,

DHL Global Forwarding has recently opened its own entity in Saudi. / CREDIT: DHL

manager of projects at Saudi Aramco, explained that new requirements on regulations and processes were creating challenges.

“Some of the consignees we are working with are not aware of the changes. That creates a lot of problems,” he said, explaining that if he imports 120 kilos as 120 items, the requirement is for 120 different certificates to cover each item.

In terms of potential project work in Saudi Arabia, the panel talked up the renewables sector: the renewables market in the country in 2018 was 90 megawatts; the vision for 2030 is 60 gigawatts.

While Rafael Vicens, business development director for the MENA region for DSV Panalpina, questioned whether Saudi would be ready to reach 60 GW by that date, Donoghue was more upbeat in her assessment. “They will find a way,” she said. “This is the commitment that they’ve made. Yes, it’s a stretch target, but they are not short of capital to fund projects.”

The emphasis, she added, is to bring Saudi in line with the rest of the world and put it on the world map.

Hussein countered that it would take “some time” to put the investment in to reach those ambitious targets, but there is light at the end of the tunnel.

More immediate project work can be won through the refurbishment and expansions of existing plants and fields, Donoghue added. BB Breakbulk Middle East Sessions Topic: Country in the Spotlight: Saudi Arabia Speaker Videos:

Rafael Vicens, Business Development Director (MENA), DSV Panalpina https://youtu.be/mxgKEIRw-tU Moataz Hussein, Regional Manager – Project & Energy Services (MENA), Expeditors https://youtu.be/nkMAM4PE4Mc

www.breakbulk.com BREAKBULK MAGAZINE 53

HEARD AT BREAKBULK MIDDLE EAST

Talking Diversity in the Middle East Women in breakbulk took to the stage in Dubai at Breakbulk Middle East to share their experiences, and to collectively encourage greater diversity in the industry’s workforce.

Panelist HE Hessa Ahmed Al Malek told the audience that she knew nothing about the maritime sector when she joined six years ago. An architect by trade, she saw an opportunity in the maritime sector in the UAE and asked to be assigned to it. The initial assignment should have been for six months, but six years later she holds the rank of executive director of the UAE Federal Transport Authority – Land & Maritime.

“When I joined the maritime sector, everything was new to me – and the sector was 100 percent male dominated. The power of female is that we think differently to males, we see different angles that they don’t see, and we make it interesting,” she said.

Sue Donoghue, managing director – DHL Global Forwarding in Saudi Arabia and project director for DHL Global Forwarding in industrial projects, noted that there are more opportunities open to women in

Breakbulk Middle East Sessions Women in Breakbulk Breakfast The speed networking and panel discussion was supported

by WISTA Arabia, AWIMA and Women in Maritime Recap Video: https://youtu.be/-ZQerQsDxSA Speaker Video: Sue Donoghue, managing director; project director, DHL Global Forwarding – Kingdom of Saudi Arabia; DHL Global Forwarding – Industrial Projects https://youtu.be/ayENaNog1KY

breakbulk today – but “you have to take them.” Donoghue praised her management team in the region who supported her to succeed.

Jasmin Fichte, managing partner of Fichte & Co and president of WISTA Arabia UAE, encouraged more women in breakbulk to speak up to bosses.

The attitude of waiting to be heard or seen “does not work.”

“Ladies have an attitude that if I work hard my boss will see me – why should he? Find your network, find your mentor and go for it,” she said.

Breakbulk Middle East partnered with WISTA Arabia and the Arab Women in Maritime Association (AWIMA) for the Women in Breakbulk session at the event. BB

Rail Will Be an Important Middle East Mode Planned rail connections throughout the UAE and across borders into the wider Middle East region will offer an important extra mode for breakbulk and project cargo movers.

Speaking at Breakbulk Middle East, Kim Larsen, vice president commercial and business development at Abu Dhabi Ports, explained that building rail infrastructure is a “very important step forward for the country.”

It provides a complementary service to those already offered by ports in the region, and will open up the hinterland for UAE ports, he said.

“This is a step in the right direction.”

Abu Dhabi Ports, or ADP, has signed an agreement with Etihad 54 BREAKBULK MAGAZINE www.breakbulk.com

Rail, the developer and operator of the UAE’s national railway, to connect ADP’s Khalifa Port with the national railway network. Rail terminal capacity at Khalifa Port is expected to be the largest of its kind within the UAE, accommodating 2.4 million containers per year.

“For the UAE it is crucial that there is a connecting point between inland logistics and transshipment opportunities from the region,” he said. “We are moving more towards end-to-end solutions for customers for all cargo types.”

Meanwhile, while oil is still the prime cargo source in the Middle East region, ports are preparing for a shift in cargo priorities as countries

reduce their dependency on oil incomes. Erwin Mortelmans, commercial director for Port of Duqm, said he did not expect traditional industries to disappear overnight, but he did expect the future to “look completely different.” BB Breakbulk Middle East Sessions Topic: Innovation Sustains Success Today and Tomorrow at Abu Dhabi Ports Speaker Video: Kim Larsen VP Commercial & Business Development, Abu Dhabi Ports https://youtu.be/IjEy7kwynoM

ISSUE 3 / 2020

Experience Breakbulk Middle East 2020 Again February’s event drew 3,444 attendees and 103 exhibitors from 1663 companies from 72 countries.

Experience Breakbulk MIddle East 2020 again with this special recap video. If you didn’t attend, see what you’ve been missing.

Recap video: https://youtu.be/zIsDSs37KUw

All in a Day’s Project Work Dealing with sudden change, mitigating risks, applying contingency plans – it’s all in a day’s work for a project cargo planner.

Finding solutions is what project experts do best, says Rafael Vicens, business development director for the MENA region at DSV Panalpina.

“Being a project guy, I love risk,” Vicens tells Breakbulk. For a recent shipment threatened by Covid-19 related delays, he explained that first the contingency plan was applied.

In the move, eight shipments were planned from China when the situation rapidly deteriorated. So, in the third shipment DSV Panalpina increased the cargo tally by 50 percent, effectively

bringing forward a shipment to avoid it being canceled in what became the height of the lockdown in China.

After the lockdown in China, DSV Panalpina worked with the client to find alternative suppliers in the UAE which would allow the job to proceed.

“It’s thinking outside the box and brainstorming,” Vicens said. “You win the project if you provide the best technical solution. Yes, 90 percent is the price, but if you provide the best technical solution the client will pay more for that added value.”

Looking at opportunities in the wider Middle East and North Africa region, Vicens said the industry should be ready for more projects in Qatar

and Algeria. Qatar’s return to the Gulf Cooperation Council and the anticipated removal of sanctions this year should put Qatar on a good footing.

He described Algeria as the “next country to watch.”

Oman and Saudi Arabia are, he added, really good for projects. “Saudi is the jewel of the Middle East crown with US$36 billion investment over the next three years: renewables, oil and gas, solar, mining – everything is there.”

He said that Iraq is promising for projects if you can steer the right course, and that Kuwait is a small, but steady market for projects. Egypt, meanwhile, is the “jewel of North Africa,” Vicens said. BB

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.

www.horizonautologistics.com

www.breakbulk.com BREAKBULK MAGAZINE 55

BACK PAGE ONSHORE AND OFFSHORE WIND ENERGY INSTALLATIONS 2018-2019

New global wind power installations topped 60 gigawatts in 2019, a 19 percent increase from 2018, according to the Global Wind Energy Council. All regions increased new installations except for Latin America and Africa/Middle East.

INSTALLATIONS

Total onshore (MW) Americas USA

Canada Brazil

Mexico

NEW TOTAL NEW TOTAL 2018 2018 2019 2019 11,891 134,843 13,427 148,072 7,588 96,488

9,143 105,436

566 12,816

597 13,413

1,939 14,707

220

Kenya South Africa

Other Africa Asia-Pacific China

India

Australia

970

3,605

204

5,728

944

312 338 0

2,085

24,468

255,937

278

2,115

Other Asia

Europe

0 338

2,085

28,094

284,024

682

54 5,362 837 6,199

50 1,239

261 3,652 274 3,921

2020

Total MW 76,060

1,229

191

2021

Total MW 71,602

1,420

32 228 160 388 0 427

0 427

568 1,215 322 1,538 140

1,702

123

1,822

9,016 171,084 11,741 182,652

Sweden

717 7,216 1,588 8,804

1,563 15,307 1,336 16,643 589

13,001

629

13,617

Other Europe

3,248

75,258

6,424

81,619

Total offshore (MW)

4,348 22,997 6,145 29,136

United Kingdom

1,312

Turkey

Total MW 60,351

2,191 35,129 2,377 37,506

2,402 52,932 1,078 53,913

United Kingdom

2019

2,798

Germany France

Offshore

20,200 205,804 23,760 229,564

127

Thailand

6,673

0

South Korea

Philippines

Asia ex China

3,807

380 1,190 262 1,452

400 1,189

Vietnam

Latin America

204 1,619 526 2,145

Pakistan Japan

Africa, Middle East

745 15,452

Other Americas Egypt

China Europe North America Pacific

929 4,935 1,281 6,215

445 673 931 1,604

Africa, Middle East

GWEC Market Intelligence expects more than 355 gigawatts of new wind capacity will be added by 2024, or an average of nearly 71 GW annually.

46,345 567,592 54,206 621,421

Argentina Chile

NEW INSTALLATION OUTLOOK BY REGION 2020-2024

2022

Total MW 67,701

497 7,370 686 8,056

Europe

Germany Belgium

Denmark

Netherland Other Europe Asia-Pacific

China South Korea Other Asia

Americas USA

2,658 18,280 3,627 21,903 7,963

1,764

9,723

969 6,382 1,111 7,493

2023

Total MW 66,220

309 1,186 370 1,556 61 1,329 374 1,703 0 1,118 7

302

0 1,118 8

310

1,690

4,687

2,518

7,204

35

73

0

73

1,655 4,443 2,395 6,838 0

171

123

292

2024

Total MW 73,425

0 30 0 30 0 30 0 30

Source: 2019 Global Wind Report, GWEC Market Intelligence, March 2020, https://gwec.net/global-wind-report-2019/ 56 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2020