CONVERSATION

CONVERSATION

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

BECHTEL AWARDED NATRIUM REACTOR CONTRACT

Nuclear specialist TerraPower has selected engineering firm Bechtel as its construction partner for development of the Natrium reactor demonstration project.

The advanced sodium fast reactor will be coupled with a molten salt energy storage system, and was awarded US$160 million in initial funding from the U.S. Department of Energy, or DoE, under the Advanced Reactor Demonstration Program.

“Natrium fulfils the industry vision of what a true advanced reactor should be – safer, simpler, easier and less costly to construct, less expensive to operate, and able to provide energy that is competitive with fossil fuels and complementary to solar and wind power,” said Barbara Rusinko, president of Bechtel’s nuclear, security and environmental global business unit.

The construction of the demonstrator system will require the transport of a number of unique outsized components, and the partners aim to deploy two “first-of-a-kind advanced reactor designs” in the next five to seven years.

An artist’s rendering of the Natrium reactor demonstration project. CREDIT: TERRAPOWER

The project is under development by TerraPower and technology codeveloper GE Hitachi Nuclear Energy, as well as specialists from PacifiCorp, Energy Northwest and Duke Energy.

CNCO LAUNCHES SWIRE PROJECTS

Breakbulk shipping line the China Navigation Co. has launched its new project cargo business, introducing Swire Projects to provide specialist shipping services to the energy, resource and infrastructure sectors.

The new business will work closely with other subsidiaries of the Swire group to develop an independent global strategy in the multipurpose and heavy-lift segment.

“Working closely with Swire Bulk, a leader in bulk transport and logistics solutions, global project parceling services can be offered to the sector particularly for wind cargo components,

Namir Khanbabi

CNCo tubulars and heavy civil infrastructure material,” CNCo said in a statement.

CNCo said Namir Khanbabi would head the new business, bringing extensive industry experience to the role. Most recently Khanbabi held the position of regional director at Zeamarine, and previously was chartering and operations director at AAL Shipping.

Khanbabi will be assisted by Matthias Kremser, as global head of chartering, and Nicki Schumacher, as head of Europe, both based in Hamburg. In addition, Rufus FrereSmith will serve as regional general manager, and lead the Americas team based in Vancouver and Houston.

Earlier this year CNCo said it would separate out its dry bulk shipping activities, establishing Swire Bulk as a standalone firm.

Dangers of Indispensability

Knowing When to Say No

BY MARGARET VAUGHAN

In the coming months, as companies reopen offices, a reassessment will occur. I’m not talking about upper management’s reassessment of assets and resources; that, for the most part, has already been done or is in continuum. I speak, rather, of our own reevaluation of our workspace, our coworkers, and our tenure.

The twin blows of the Covid-19 virus and the precipitous drop in oil prices have hit the breakbulk community hard. While there are still projects ongoing and others beginning, a significant number have either been scaled back, postponed, or mothballed entirely. The resources (read: people) needed for those projects have, quite naturally, become unnecessary and have either been furloughed or dismissed. The assessment is about our own situation; how long will I be kept on, or for those released into an uncertain job market, where do I go from here?

In either case there may be a common reaction and that is to become indispensable. Because of the scale-down in personnel, those remaining employees may decide to take on other tasks in addition to their own, to assume more responsibility for the project’s success, to become the “go-to person.” In other words, to be seen as indispensable to both the project and to the company, thus ensuring future selection for future work. I am all for multitasking and cross training. However, being indispensable has one major drawback. Being indispensable means you are unpromotable.

Think about it. Because you want/need to maintain your employment, you have taken on the work of several positions which you will perform to the very best of your abilities. You’ll be seen as versatile, flexible and proficient in several areas. The company will also overlook you for any other positions or promotions. Why? Because you are too valuable where you are, plus you are saving the company quite a bit of money by having one person working the desks of two or three others. For your part, you know you are valued and that your position in the company is secure and they won’t get rid of you. You also know that it’s not right that other people, not nearly as competent as you, are being promoted ahead of you. What you don’t know is why. The answer is that by virtue of your self-created indispensability you have made yourself unlikely to be promoted.

During times like these, it’s important that everyone pitches in and does whatever they can to help the company succeed. If the company fails, everyone is out of a job so you do whatever you can. But as soon as the crisis has passed, you need to speak up and tell the company to unload from you the burden of the additional workload you shouldered during that time. They need to know that as the company’s work increased, so has your workload and you – as good as you are – cannot continue to perform as well as you have. You will be seen as valued, maybe even perhaps invaluable. And promotable. BB

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

Remaining Relevant

Will the Pandemic Hit the Breakbulk Talent Pipeline?

Spanish sociologist Manuel Castells said in The Information Age: Economy, Society and Culture, Volume I, The Rise of the Network Society, that “the global economy is now characterized by the almost instantaneous flow and exchange of information, capital and cultural communication. These flows order and condition both consumption and production. The networks themselves reflect and create distinctive cultures. Both they and the traffic they carry are largely outside national regulation.”

There is no question that our current global economy and breakbulk community have been presented enormous challenges in a Covid19 world, but within those challenges there lay many opportunities for those willing to adapt, collaborate and leverage a networked society. This includes the graduate talent pipeline for breakbulk.

As industry and academia moved in March 2020 from a brick-and-mortar model to working from home, new models for collaboration were established. The ubiquitous Zoom or Microsoft Teams meeting became the connector for work, school and life in general. Those who could adapt quickly to harness this technology for chatting, meeting, calling and collaborating were able to keep the momentum and sense of purposefulness of both individual and group goals moving in a forward trajectory.

Dating back to the mid-1800s, Charles Darwin reminds us of the importance of adaptability and collaboration. Darwin said: “In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed. It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

The transformation of how we work or attend college has been compressed in time and space. I would posture that students preparing for a career in breakbulk must use their time expeditiously to adapt to the current environment and must expand their collaborative circles to keep the graduate pipeline intact.

We live in a networked society, which is one where we operate globally in scale, along with the ability to communicate and share information electronically. There exists an opportunity to not only optimize our network, but to expand it during a pandemic, such as Covid-19. Borrowing from social network analysis – which focuses on ties among for example people, groups of people, organizations and countries – “these ties form networks (W. de Nooy, A. Mrvar, V. Batagelj (2005) Exploratory Network Analysis).” It is incumbent on both breakbulk stakeholders and college students to use strategies, such as social media, virtual events and virtual internships, to maintain and expand connectivity to again keep the graduate pipeline intact.

What the current pipeline of students do now will determine how they are positioned for opportunities in breakbulk. Understanding life is not linear, college students should use the current challenges in the global economy to fine-tune their skill sets and adapt to new world realities. Focus perhaps on taking a globally recognized certification, learning another language, mastering new software, enrolling in graduate school and on expanding your network. BB

Margaret A. Kidd is program director for the Supply Chain & Logistics Technology department’s Bachelor’s and Master’s degrees at the College of Technology, University of Houston. She is also leading the Chartered Institute of Logistics and Transport’s (UK) expansion to U.S. universities and colleges.

BY MARGARET A. KIDD

COVER STORY

Breakbulk’s Editorial Advisory Board of Industry Leaders Offer Their Perspectives

2020 has been a watershed year for the industry. Top breakbulk executives share their thoughts on the Covid-19 response and where we go from here as the new year dawns.

AGREE: STATEMENT 1: The breakbulk and project cargo industry is underserved by sector-specific digitalization tools.

Murray Cooper: “A Breakbulk Process Management Platform would add value to the execution of EPC (engineering, procurement and construction), renewables, mining, resources, infrastructure and capital projects sector.”

John Amos: “The industry by its nature is slow to adapt to digitization tools.”

Dennis Mottola: “Unfortunately, too few sector-specific digitalization tools have thus far been developed for managing breakbulk and project cargo work processes and data. However, I also believe that project cargo shippers have been slow to demand and adopt digitalization solutions.”

Margaret Vaughan: “Most tools available are geared toward ‘big box’ transportation models. Breakbulk cargo is not ‘routine’ enough, so technology has lagged.”

Dharmendra Gangrade: “Digitalization is still at a nascent stage in the project cargo industry compared with its peers in EPCs or heavy engineering goods, even though the processes and stakeholders are almost the same. This is mainly due to a strong belief among stakeholders that transaction/execution through relationships is more productive than tech-driven processes. I disagree with that, in fact I believe that transaction/execution with the support of digitalization builds strong relationships based on transparency.”

Jake Swanson: “The challenge for the project industry is the upfront and implementation costs for these types of tools. Projects are under intense pressure to meet budgets, and new technology development or implementation does not usually factor in. Both EPCs and logistics service providers need to be focused on technology development and innovation at the corporate level and find ways to invest and allocate resources to sector-specific digitalization tools.”

Samuel Holmes: “Most project logistics service providers (LSPs) utilize proprietary software or specific tools that are developed in-house. In general, the project cargo industry has been very slow to adapt to new technologies. This is partly due to LSPs and their investors not wanting to undertake the cost of investment because the ROI (return on investment) might not be attractive. A neutral party is needed to breach the technology gap. We are already seeing some progress in this direction. The technology needed to automate/ digitalize the entire project logistics operation from planning to execution for a one-off shipment with single origin to project shipments with various dimensions/ weight/origins already exists in other sectors. To provide a 21st century project logistics service for a modern business requires LSPs to recruit front-end and backend software engineers with Node JS/Angular/React Native and UI/UX skills to develop a robust and scalable web-based and mobile enterprise application.”

Ulrich Ulrichs: “The sector is overall too small, specialized and diverse to be ‘attractive’ for digitalization tools’ providers, and hence a lot of companies have to rely on tools developed in-house.”

NEUTRAL:

Johan-Paul Verschuure: “I agree that digitization has not been sufficiently adopted in the sector and neither is it available, but it’s also up to the sector itself to take the initiative. There are good initiatives in other cargo segments which can serve as inspiration for the breakbulk sector to come up with applications developed by the sector itself.”

DISAGREE:

Dennis Devlin: “There are plenty of technology and sector-specific digitalization tools available. The key question is whether and to what extent project owners and EPCs want to use the available technology and/or develop new tools. The appetite seems weak. For example, even when project materials package and item-level bar coding or RFID tags are used at origin, as has been done for many years, seldom are such systems (or the wealth of associated data) used for job-site (or off job-site) materials management, warehousing and storage. And in some cases, different IT tools are used. EPCs all support digitalization tools in theory, and many are members of the Construction Industry Institute, where such matters are discussed in detail in an open format. But in practice most don’t even use the available IT tools fully, much less spend time and effort to reduce their internal costs (and those the EPCs pass on to project owners) by properly implementing these tools.”

Grant Wattman: “While I believe we require more robust tools, I do believe there are tools. We cannot wait for ‘specific’ breakbulk or project cargo applications. We need to utilize the tools available in the breakbulk and project cargo business.”

OUR EXPERT PANEL

John Amos is an international logistics and transportation consultant specializing in issues related to planning, operations and regulatory issues.

Noelle Burke is vice president of project management at Power Agility, having previously held senior roles at GE.

Murray Cooper is director of corporate governance at LV Shipping & Transport, having previously held senior management positions at McDermott.

Dennis Devlin is senior director of special project logistics at North America Maersk, having previously worked in senior positions with DB Schenker, Panalpina and BDP International.

Dharmendra Gangrade is the head of logistics at L&T Hydrocarbon Engineering, part of EPC Larsen and Toubro.

Samuel Holmes is logistics and export compliance coordinator at Wood Group and has worked on small and large capital projects in the onshore and offshore energy services sectors.

Anders Maul is commercial director of energy and projects at Blue Water Shipping, a global provider of logistics services in modern supply chain management.

Dennis Mottola is a global logistics consultant who has served his entire career in the supply chain and global logistics discipline.

Roger Strevens is vice president for global sustainability for Wallenius Wilhelmsen, a global shipping and logistics provider.

Jake Swanson is global head for the EPC project sector at DGF Industrial Projects for DHL Industrial Projects.

Ulrich Ulrichs is CEO of multipurpose ship operator BBC Chartering.

Margaret J. Vaughan has more than 30 years’ experience in all facets of supply chain management, most recently as manager of transportation and logistics/export compliance at Wood Group.

Johan-Paul Verschuure is a maritime entrepreneur and project director at Rebel, focusing on the development of business cases and delivering projects in the port and maritime sector.

Frans Waals is a senior port and shipping consultant at marine information and intelligence provider Dynamar.

Grant Wattman is president and founder at Jade Management Group and has more than 46 years’ worth of industry experience in leadership roles, most recently as president and CEO of Agility Project Logistics.

AGREE: STATEMENT 2: The industry is flexible enough to adapt to the post-Covid operating environment.

Anders Maul: “For almost as long as one can remember, we work in an ever-changing and volatile industry. It’s a major challenge, but history shows that we, as an industry, can overcome various crises.”

John Amos: “The industry has changed and adapted to many challenges since its initial growth in the late 1960s. The main challenges have been the growth of the market, need for larger vessels to accommodate the size and weight of cargo, recessions, availability of financing, and environmental considerations. New projects are already in the bidding stage.”

Murray Cooper: “The industry must adapt to the new normal.”

Dennis Mottola: “I believe the industry has adapted well to the Covid operating environment and is flexible enough to adapt to whatever the postCovid operating environment requires.”

Margaret Vaughan: “The coronavirus is no different than any setback the industry has faced.”

Grant Wattman: “The industry is healthy and strong. There will be a thinning of those not forward looking, taking excessive risk with pricing and contract terms they accept, and working capital challenges. The market will reshape stronger.”

Johan-Paul Vershuure:

“The breakbulk sector and maritime sector in general has always been able to adjust to any new set of circumstances. It will require good cooperation between all parties in the sector, including governments setting regulations. The one that does that the quickest and the best will benefit from this current situation.”

Frans Waals: “Breakbulk is a flexible industry. Adapting to difficult and changing circumstances is second nature to it.”

Jake Swanson: “The project sector by nature is resilient and flexible. We are problem solvers and solution drivers. In most cases that I have seen, companies have been able to adapt to our current circumstances and find a way to press forward, stay in touch with project teams and continue to keep cargo moving.”

Samuel Holmes: “Adaptability is an inherent nature of the project cargo sector. We operate in a very dynamic business environment. It was not surprising that project logistics companies and the industry as a whole were quickly able to adapt and support local governments with various relief efforts. The same adjustment will be made after the storm (Covid-19) is over.”

NEUTRAL:

Noelle Burke: “I think the companies that refuse to recognize that the world has changed will eventually be gone. And the companies that are proactive in changing their company/ execution strategy to adapt to our new world will not only survive, but thrive. The need for shipping breakbulk cargo will never just disappear. It’s how we react to the parameters we’re working in which will determine who will survive. There will NEED to be flexibility to adapt, or I don’t foresee companies around long term.”

Proud GPLN Member in LithuaniaSince 2014

Est. 2004

AGREE: STATEMENT 3 Achieving sustainability targets is less important in the current climate.

John Amos: “During the current climate, which has more factors than the pandemic, the industry has struggled to stay in business. Bankruptcies, mergers and insufficient cargo has resulted in many companies having difficulty in ‘staying afloat.’ ”

Dharmendra Gangrade: “Survival has become the first priority, over ensuring sustainability targets.”

Ulrich Ulrichs: “The shipping industry and especially the multipurpose vessel/project segment has been in crisis mode for years, and carriers have been struggling to survive; many have disappeared. The industry segment has been undervalued and ‘underpaid’ for years, and therefore has had to focus on short-term issues and ‘survival’ rather than sustainability or the climate. Carriers need to be paid more ‘fairly,’ deliver better margins to shareholders in order to invest in new technologies, systems and assets to set and achieve new sustainability and environmental targets.”

DISAGREE:

Anders Maul: “As an industry we must constantly strive to contribute. One climate doesn’t rule out the other climate.”

Dennis Devlin: “Achieving sustainability targets is and will remain vital.”

Murray Cooper: “Supply chain sustainability is extremely important during the Covid-19 period of uncertainty.”

Margaret Vaughan: “Achieving sustainability is neither less nor more important in the current climate. It is a goal that needs to be reached. Schedules must be maintained or the goal will never be achieved because there will always be some setback that must be overcome.”

The most attractive attributes for projects in 2021 (one being the most important)

Answers displayed as mean figure of total rankings

Market/Industry Stability Multinational Sustainable Government Funded Favorable Payment Terms Green Credentials National

0 1 2 3 4 5 6

Roger Strevens: “Industry leaders realize their stakeholders’ views on sustainability targets are at least as important as their own. Those stakeholders, who include customers, investors and regulators, are all increasing their focus and expectations on sustainability. For some it has to do with addressing the climate imperative, while for others performance on sustainability – especially now – is a surefire indicator of good corporate health and resilience.”

Grant Wattman: “All targets and plans may need to be modified because of our current business climate. I see no rationale for moving sustainability lower in the priority than it currently holds.”

Johan-Paul Verschuure: “Disagree, but not all targets can be forced upon the industry in the short term given the business climate at the moment. The sustainability focus may even offer an opportunity for the industry, where clients of the sector are increasingly looking at sustainability to differentiate themselves and where public bodies and regulators also seem to be moving towards more focus on sustainability. Disregarding these trends in the short term will make business more difficult in the longer term.”

Samuel Holmes: “All supply chain partners and stakeholders including project logistics companies are working towards sustainable initiatives to protect the environment. I think it is becoming more important than ever for companies to strive and achieve sustainability targets. It is good for the environment and good for the company image.”

STATEMENT 4 The breakbulk and project cargo industry is not taking enough responsibility for the climate.

AGREE:

Frans Waals: “The breakbulk and project cargo industry has neither the scale nor the funds to effectively carry out climate policies. Also, there is no ordering new ships, which is necessary for advancing technical developments.”

Murray Cooper: “An integrated approach focusing on collaboration with all the stakeholders is required to co-create success.”

Roger Strevens: “Although there are notable exceptions among project cargo carriers, the comparison with other segments of the shipping industry still tends to be unfavorable. There are few carriers that are pioneering sustainable innovations, or who are even willing to be vocal on the subject. There’s an interesting contrast to be made with the trend among project cargo shippers, who are becoming more sophisticated and demanding on climate and sustainability issues.”

Sustainability is just one component in the decision-making of industry leaders. CREDIT: SHUTTERSTOCK

DISAGREE:

Dennis Devlin: “The project cargo industry supports the transport and logistics of whatever major projects are being built. Increasingly, this means offshore wind, which is clearly, overall, good for the environment. In any case, those of us who support the transport of project cargoes in whatever capacity have nothing whatsoever to do with the decisions as to what sorts of projects (green or not-so-green) are being built.”

Margaret Vaughan: “I personally feel that the greatest risk to our climate, and the No. 1 emitter of CO2 , is people. Overpopulation is the main cause of climatological issues, in my opinion, and the earth has a strange way of taking care of herself in that respect.”

Grant Wattman: “The industry is taking responsibility across the portfolio of participants. Sustainability is a component in the decision-making of industry leaders.”

Dharmendra Gangrade: “The breakbulk industry is a very, very small contributor to climate change, and I feel the competitive environment and compliance to IMO2020 are sufficient enough to make a positive impact on climate change.”

STATEMENT 5 Remote working in the breakbulk and project cargo industry is not maintainable long term. AGREE:

Roger Strevens: “While true, it is not a point that applies to the breakbulk and project segment only; the whole industry is in the same boat, so to speak. While (video) calls are an effective means for conveying information and even resolving some problems, there is no substitute for face-to-face interaction when it comes to building trust and new relationships. At the same time, it seems likely that increased remote working and reduced travel will prove to be enduring effects in the post Covid-19 era.”

Frans Waals: “The breakbulk and project cargo industry is not considered very suitable for remote working.”

Samuel Holmes: “I agreed that it is not maintainable in the long term because companies will fall back to the old ways of doing business postCovid-19. Covid-19 has proven remote work in the project cargo industry is possible. A change in mindset will be necessary to convince industry leaders that individuals can work from anywhere, as long as they have access to internet and their company’s shared folder. I think it is also time to reevaluate office space utilization – that is reducing the amount of real estate office buildings, and allowing employees to visit physical office space every other week. This will reduce overall cost on real estate and provide more flexibility for employees.”

Ulrich Ulrichs: “It is still a ‘small’ and people’s business segment and personal contacts and relationships will still be very important in the future.”

NEUTRAL:

John Amos: “A degree of remote working has always been a part of the project cargo industry. It is always changing, as projects come and go and employees often work alone and remotely. It is necessary to work in the office at least part of the time to be knowledgeable of company developments, information and activities.”

DISAGREE:

Dennis Devlin: “The world has learned that working remotely is actually very effective. In the long term, when the pandemic subsides or an effective vaccine is developed, it’s highly likely that many businesses, including the project cargo industry, will continue to work remotely to a certain extent to gain some of the benefits everyone has seen: less time commuting; more time working. People will meet, and will go to offices, but less frequently than before.”

Murray Cooper: “Remote working and getting to the site of the logistics action is essential to the success of all breakbulk shipments.”

Noelle Burke: “With modern video technology and software applications in essence meetings are still ‘face to face.’ What I think will happen is there will be more pressure for companies to provide ‘world-class execution’ versus sustaining business relationships. I also think we’ll see companies weaned out that haven’t invested in technology and the discipline of utilizing those technologies to their fullest capacity.”

Margaret Vaughan: “I agree that for some functions remote working is unfeasible. However, mankind has a strange way of developing new and creative ways of making things work.”

Dennis Mottola: “Although not ideal in some cases, I believe it is maintainable long term for those jobs that can be performed remotely. The industry has adapted well to working remotely thus far through the pandemic. I believe this demonstrated adaptability has businesses already considering trade-offs for how they will work in the future from the office vs remotely.”

Grant Wattman: “While I do not see 100 percent of staff working

remotely, this experiment has proven there are capabilities and skill sets that can be as effective remote. I see a hybrid model where remote engagement becomes a matter of routine.”

Dharmendra Gangrade: “We need to be realistic that other than physical activities/movements all can be performed remotely with no negative impact. We, as an EPC, manage many of our projects at multiple geographies simultaneously without any hitch. Key to success is the right, experienced and trustworthy service provider who acts as your extended arm to ensure operations are successful.”

Jake Swanson: “I have always felt that with a laptop and cellphone I could be dangerous. The challenge will be training the next generation, as I feel it is important to work in close contact for developing experience. Also, business development will need to adapt if client visits and personal contact will be limited. However, overall, I believe that project teams can still collaborate and function effectively while working remotely.”

Project cargo movers need to adapt to meet the challenges of the coming year. CREDIT: GAC

QUESTION: What is Margaret Vaughan: “Much will the outlook depend on outside factors such as: who for projects in 2021 will win the U.S. presidential elections, and what challenges what will trade with China look like, are on the horizon? will there be an escalation in tension

Johan-Paul Vershuure: “Public there be an escalation in tension in the sector initiatives need to be acceler- Middle East, and who wins the Super ated to balance the sector. The public Bowl – AFC (bear market), or old NFC sector can give a push in investments (bull market).” in the sector which have been lagging, such as in infrastructure in many Noelle Burke: “While we are countries or in projects pre- seeing financing approved for paring economies for the big projects, we are seenext century.” ing them slide to the

Dharmendra “I believe that we will right. The issue is now the supply Gangrade: “Most see a good amount of chain is pressed of the ongoing project work is being delayed by projects coming back to life in 2021 as we adjust with enough labor to meet deadlines.” six to eight months, and start to see a return Ulrich Ulrichs: and companies are delaying the to normalcy.” “General breakbulk/project announcement of – Jake Swanson cargoes will partly new projects due to move to other segoverall degrowth in GDP ments like container and in the major economies of the ro-ro (roll-on, roll-off), but world. Companies want to hold volumes and revenues will be comon to or slow down their cash outflow pensated by increasing wind energy to meet their existing cash flow. This related volumes.” will lead to a lower number of projbetween the U.S. and China, will ects, leading to decline in workforce.” Dennis Devlin: “Project owners in oil and gas, mining, LNG, petro-

Grant Wattman: “Capital markets chemicals, power generation including are tight, construction schedules are traditional, wind and solar power as sliding due to Covid/CDC distancing well as other industries are all reducing and other requirements that reduce their capital budgets, and many projsite labor footprint, demand globally ects will be delayed or cancelled. There is slowing and other factors will push will of course still be work, but the major capex out further.” industry will temporarily decline.”

Project owners across all the sectors are reducing capital budgets. CREDIT: SHUTTERSTOCK

Jake Swanson: “There are quite a lot of projects that have been put on delayed status. I believe that we will see a good amount of projects coming back to life in 2021 as we adjust and start to see a return to normalcy.”

QUESTION: Will geopolitics play a greater or lesser role on project cargo trade in 2021?

Greater 58%

Same level

35%

Lesser 7%

Samuel Holmes: “Geopolitics is always a major risk factor. Four potential issues that will drive the impact of geopolitics on the project cargo trade are: U.S. election – who is in the White House as the continuing trade war with China depends

on U.S. election results; UK-EU relations; Mozambique’s insurgent crisis; and tensions in the Middle East.”

Johan-Paul Verschuure: “In a slow growth or even shrinking economic background, geopolitics is often a point of attention. In the current situation, this topic will be here to stay for the next few years.”

Dharmendra Gangrade: “U.S.China trade ties are at all-time lows, and this started even before Covid-19 hit the world. Many major developed countries and global companies have announced or are exploring shifting or switching base from China to reduce their dependence on a rigid low-cost supply chain to build a resilient supply chain to ensure uninterrupted supplies.”

Ulrich Ulrichs: “The outcome of the U.S. elections, Brexit, Russia, China-related issues and general trade sanctions will have a bigger impact on project cargo trades than before.”

QUESTION: Are you expecting more public or private projects in 2021?

Private 40%

Public 60%

Samuel Holmes: “Investors are uncertain with Covid-19 and the decline in oil prices. Therefore, expect more government-funded projects to help boost the global economy. There will of course be some private projects – especially in renewables and mining. For oil and gas projects, I don’t expect major activities for 2021.”

Dharmendra Gangrade: “Governments of many countries across the world have come forward with strong stimulus packages (estimated

“I expect more government-funded projects to help boost the global economy.” – Samuel Holmes

at US$17 trillion to US$18 trillion) to fight back recessions which will surely support growth.”

Margaret Vaughan: “China will be leading the way on public projects. The virus has stretched the budgets of most governments so the majority of projects in 2021 are going to be privately funded.”

QUESTION: Is the industry delivering on diversity objectives?

Samuel Homes: “I do think the current crisis we are facing will not improve the situation. Women are still very much underrepresented in the industry. Same can be said for individuals aged under 35. It is a crisis that needs immediate real action by all industry stakeholders. ECMC’s (U.S. Exporters Competitive Maritime Council’s) Education Committee, WILL (Women in Logistics Leadership), (founded by Diana Davila of UTC), and Breakbulk have been working to attract a diversified generation of logistics professionals that is more representative of the global environment we work in.”

Grant Wattman: “I believe the industry has done well with diversity. My question is ‘has the industry defined its diversity objective?’”

Dennis Mottola: “Not sure the industry has any stated or even implied diversity objectives, although I believe the breakbulk and project cargo industry is already diverse.”

Murray Cooper: “Diversity is essential in order to successfully work through the various business and community cultural differences.” BB

Participants are active and former members to Breakbulk’s Editorial Advisory Board.

REGIONAL REVIEW

UNPRECEDENTED UNCERTAINTY

US Ports Seek Federal Funds to Stay Afloat

BY PAUL SCOTT ABBOTT

U.S. ports, including those moving project and breakbulk cargoes, require billions of dollars of federal funding to overcome Covid-19-related impacts and to ensure sustained operations, but discordant partisan politics appear to be standing in the way on both fronts.

Indeed, the viral pandemic and the economic plummet it has prompted are woven into a troubling tapestry that, if not aflame, is perilously frayed. Tenuous threads also include a nationwide social justice uprising with occasional violence, raging wildfires, a devastating hurricane striking Louisiana and Texas, and a host of actions by President Donald Trump, such as threats to “decouple” the U.S. economy from that of China.

It all adds up to unprecedented uncertainty. And for leadership of key maritime transportation industry bodies, as well as major breakbulk and project cargo ports, the cries are becoming increasingly vocal for much-needed stability which currently stalled legislative measures might bring.

By early September’s Labor Day weekend, with the Nov. 3 presidential election less than two months away, the U.S. still did not have control of its deadliest health crisis since the 1918 Spanish flu pandemic and was struggling to recover from its worst economic collapse since the Great Depression struck in 1929. The U.S. coronavirus death toll passed 200,000, with reported cases surpassing 7 million, while the nation’s economy was barely chipping away at offsetting its record 31.7 percent annualized contraction of the second quarter and an unparalleled loss of 22 million jobs.

LEGISLATION IN LIMBO

Amid politicking for the November election, key legislation of particular interest to U.S. ports remained in limbo.

Remaining without passage were a second round of pandemic stimulus funding and H.R. 7515, the Maritime Transportation System Emergency Relief Act of 2020, or MTSERA, and

the companion S. 4395. H.R. 7515 was promptly adopted as an amendment to H.R. 6395, the William M. “Mac” Thornberry National Defense Authorization Act for Fiscal Year 2021, which passed the House on July 21, moving it to the Senate for consideration. However, Trump has warned of a veto of H.R. 6395 because of a provision boding to remove the names of Confederate Civil War commanders from 10 major military installations – base names Trump wants to keep in place.

Christopher J. Connor, CEO of the American Association of Port Authorities, called MTSERA “hugely significant for the port industry,” noting that it would give Congress a permanent mechanism via the U.S. Department of Transportation’s Maritime Administration to appropriate emergency relief funds for America’s maritime system, including ports, in the event of emergencies and disasters ranging from hurricanes to health pandemics.

U.S. ports, which as of last year had been responsible for US$5.4 trillion in annual economic activity, face an estimated decline of between 20 percent and 30 percent in total annual receipts in 2020, according to Connor.

“Since the onset of the coronavirus crisis, legislators have repeatedly told AAPA that aid to America’s port system was hampered by the lack of a mechanism for distribution,” Connor said. “The MTSERA legislation would resolve that once and for all.”

Lauren Brand, president of the National Association of Waterfront Employers, or NAWE, also has high hopes for MTSERA. She was among those who testified at a May 29 hearing of a House subcommittee out of which MTSERA ultimately emerged. “We believe this is historic Lauren Brand legislation as it is the first to proNAWE vide assistance

A reactor destined for a plant in Donaldsville, Louisiana, is discharged at the Port of New Orleans, which, like many other U.S. ports, is seeing a significant decline in breakbulk cargo volumes. CREDIT: PORT OF NEW ORLEANS

to both public and private maritime industry entities for 11 operational cost categories for declared disasters,” Brand told Breakbulk. “Our nation’s ports and terminals have been buffeted by hurricanes, closed by earthquakes, hit by tornadoes, and it will keep happening. Until MTSERA, there has been no federal program that private terminal operators can turn to for assistance in time of disaster.

“The genius of this proposed bill is that it will address future needs as well as this awful pandemic,” she continued. “Our cargo terminal operators have seen cargo declines up to 32 percent and our cruise terminal businesses plummeted to zero. A decline in revenues at the exact time operating costs skyrocket is a difficult business scenario to sustain.”

Brand said operating cost increases include cleaning, sanitizing, personal protective equipment and other safeguards for workers, adjusting terminal operations for recommended social distancing and more. Debt service demands do not stop even if work on a project has been halted, she noted.

‘ONE-TWO PUNCH’ NEEDED

That said, Brand defined emergency relief as a short-term solution to an immediate problem requiring streamlined administrative requirements to get funds out the door. Just as vital, she said, is long-term infrastructure funding for port facilities and intermodal connections.

“Running programs one year at a time costs more in the long run, as it focuses on regional versus systemwide impacts and diminishes the efficiency of the government staff charged with running the program under the voluminous federal regulatory process,” said Brand, who served 11 years at MARAD, including as associate administrator for ports and waterways, before taking the helm at NAWE in late 2019.

“This,” she said, “is the onetwo punch needed to win the fight to improve the U.S. transportation system overall: Immediate relief for declared disasters to get facilities back up and running strong, then help them invest for the long term to handle our nation’s freight needs for the future.”

Brand said each year for the past 10 years has seen only a tiny share of requests to MARAD for Port Infrastructure Development Program funding gaining approval under the present competitive grants framework. In a typical year, requests may

top US$1 billion, but only US$50 million to US$200 million in grants are awarded.

She also cautioned that federal awards, whether part of a stimulus package or via port infrastructure grants, are subject to a long administrative cycle. Stimulus funds might be available within six months of bill passage, while infrastructure grants could take a year.

“If eligible applicants know what to expect, they can work within these parameters,” Brand said. “But one element that often falls victim to grant timetables is the estimated cost of projects. A project’s cost estimate must be based on the most current material costs available and must include an adequate contingency. I have seen where estimates for a project were completed a year before a grant application was submitted, and once the grant funds were ready to be spent, 24 more months had gone by. Cost estimates that were three years old limited the project, requiring re-engineering, reduction of project scope and reduction of equipment purchases to meet the available budget.”

Wind energy components, including blades, are moving at a record pace through the Port of Brownsville, where officials are almost apologetic about sustained cargo gains. CREDIT: PORT OF BROWNSVILLE

RELIEF FUNDING URGED

Back on July 23, AAPA was joined by 69 co-signatories from U.S. ports and related entities on letters to the White House, U.S. Treasury Secretary Steven Mnuchin and House leadership urging inclusion of US$1.5 billion in emergency relief funding for ports in a second round of Covidrelated legislation, to follow the initial US$2.2 trillion Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, signed into law by Trump on March 27.

The letters also called for an

BROWNSVILLE BUCKS TRENDS AT US-MEXICO BORDER

The Port of Brownsville’s senior director of marketing and business development, Steve Tyndal, is almost apologetic when he talks about how well the Texas port just north of the U.S.-Mexico border is faring.

“We’ve been very careful to not speak too publicly about the current success of the port,” Tyndal told Breakbulk. “We know we’re having a great year, and we know other ports are suffering. We want to be humble.”

The Brownsville port’s unaudited total operating revenues through June were up 73 percent compared with a year earlier, reaching nearly US$20.4 million for the six-month period. Total cargo tonnage for the first half was up 13 percent, to 5.24 million tonnes.

Tyndal is quick to credit a port commission supportive of infrastructure development, appropriately targeted marketing and a concerted diversification strategy, but the landlord port’s location as a primary gateway to and from Mexico is the undeniable difference-maker. Plus, unlike many U.S. ports, Brownsville does not rely at all upon cruises and its containerized cargo business is just emerging.

The Port of Brownsville is having “a spectacular year” handling oversize units for wind energy farms, with 20 such projects this year, compared with seven or eight in 2019, Tyndal said.

Brownsville remains the leading U.S. port for shipping steel into Mexico, and, driven by new mill development in Mexico, that volume is anticipated to double within four years, according to Tyndal.

The port has further diversified with the shipbuilding operations of Keppel AmFELS, making 2,525-20-foot-equivalent-unit-capacity vessels for deployment in Jones Act trade by Pasha Hawaii. That means even more jobs plus shipments of equipment and materials.

Additional gains are anticipated as a compressed natural gas terminal is advancing and as three massive liquefied natural gas projects, representing a total capital investment of US$38.75 billion, come to fruition on port property. The LNG endeavors are temporarily on hold, but are expected to resume once the price of oil goes back up enough to make LNG more attractive.

amendment to the CARES Act to give specific authority to state governors to provide such funds to ports. Currently, port requests for CARES Act funds have been very limited, with one such applicant being the Port Authority of New York and New Jersey, which, in addition to seaport facilities, has airports, bridges and tunnels under its aegis. The bistate authority seeks US$3 billion to offset estimated revenue losses.

As of the Labor Day weekend, those cries for federal port funding had gone unheeded, although on Sept. 3, the Thursday preceding the holiday weekend, U.S. Transportation Secretary Elaine L. Chao unveiled the first-ever National Freight Strategic Plan. But the plan did not include any funding specifics.

Support for the “one-two punch” approach backed by AAPA, NAWE Doug Wheeler and a host of ports Florida Ports Council is shared by Doug Wheeler, president and CEO of the

COVID-RELATED LABOR SHORTAGE BITES

At the Washington state Port of However, as the scope of the panVancouver USA – the leading handler demic became evident during the of wind energy cargoes on the U.S. first quarter of 2020, the decision was West Coast – a lack of a sufficient made by the Pacific Maritime AssociaInternational Longshore and Ware- tion and ILWU to not allow for travel house Union labor supply has been between ports on the U.S. West Coast the biggest blow caused by Covid- in an effort to mitigate the spread of 19. the virus.

“The primary impact of the “The Port of Vancouver USA found Covid-19 pandemic has been the itself in a challenging position as availability of labor from our part- energy infrastructure cargoes reached ners at the ILWU,” Alex Strogen, unprecedented levels, straining the the port’s chief commercial officer, local labor supply and requiring the told Breakbulk. Also, wildfires have port to open additional staging areas displaced many workers and their as cargo velocity slowed,” Strogen said. families. Fortunately, he said, the port was

Historically, dockworkers would in an enviable position in that it had travel between U.S. West Coast ports ample laydown area to meet customer to supplement labor supplies when a needs with one of the largest waterside surge of business exceeded ability to staging areas on the West Coast, at 85 be handled by local workers. acres.

A shipment of wind blades, destined for delivery to Canada, is stored in a laydown area at the Port of Vancouver USA, along the Columbia River in Washington state. CREDIT: PORT OF VANCOUVER USA Florida Ports Council, who said the Covid-related termination of cruises, along with a slowdown in cargo traffic, including in shipments of steel and automobiles, has led to the loss of an estimated 169,000 jobs in Florida and a US$23 billion hit to Florida’s economy.

“The immediate relief is what is needed first and foremost, but the need is two-pronged,” Wheeler told Breakbulk, citing importance of port funding in ongoing appropriations as well. He has written to Senate leaders seeking US$1.5 billion in immediate emergency aid to U.S. seaports plus another US$2 billion to be made available to other eligible maritime businesses.

“Congress must pass legislation to provide the maritime sector the same protections and relief given to other industries during Covid-19, and close a huge gap in current federal emergency assistance that has left links in the maritime supply chain isolated and unable to access other assistance programs available to other industries,” he said.

“I don’t think I’m going to try to guess what Congress is thinking,” Wheeler said. “You’ve got to be really careful about allowing this to stop projects that are needed for the supply chain.”

U.S. GULF PORTS HIT

Among U.S. ports taking a hit due to the pandemic are major breakbulk facilities in the Gulf of Mexico region.

Port Houston reported year-overyear drops in total cargo tonnage of 7 percent in June and 6 percent in July, with declines in handling of steel, automobiles and breakbulk cargo as a whole. But port officials have said they will not be deterred from proceeding with Houston Ship Channel expansion and wharf and yard infrastructure enhancements.

Meanwhile, at the Port of New Orleans, breakbulk volumes through July were down 27 percent from a year ago, according to Jessica Ragusa, the Mississippi River port’s communications manager, who said the drop has been driven primarily by reductions in steel imports and a slowdown in the oil and gas market. On the plus side, wind power components are among goods enjoying increased importation.

“Like other U.S. ports handling breakbulk, the Port of New Orleans’ breakbulk tonnage has been severely

In Southeast Texas, project cargo for ExxonMobil moves through the Port of Beaumont, where officials remain optimistic about immediate and longer-term federal funding. CREDIT: PORT OF BEAUMONT

impacted by tariffs, Covid and weakened demand associated with Covid, such as a reduction in North American manufacturing in the automobile industry and the current market dynamics in the oil and gas industry,” Ragusa said.

“Despite the downturn in breakbulk cargo, the port continues to invest in maintenance and upgrades to our breakbulk facilities,” she said. “The port invested approximately US$15 million between 2018 and 2019 in breakbulk wharves alone.

“It is critical,” Ragusa said, “for Port NOLA to continue to move forward with vital infrastructure projects to maintain a state of readiness to lead the nation’s economic recovery.”

STORM ADDS TO WOES

As if maritime and energy-related facilities along the Gulf didn’t already have enough concerns, Hurricane Laura made landfall in Southwest Louisiana on Aug. 26, with winds reaching more than 130 miles an hour and causing extensive flooding.

While ports of New Orleans and Houston, respectively to the east and west of Laura’s path, were minimally impacted, the Port of Lake Charles, Louisiana, was out of commission for a week, and some Southwest Louisiana liquefied natural gas and chemical plants, including Sempra Energy’s Cameron LNG terminal in Hackberry, were looking at extended shutdowns.

In Southeast Texas, the ports of Port Arthur and Beaumont, both of which see substantial breakbulk and project cargo activity, each got power back within a week.

“The pandemic has not had a significant impact on the Port of Beaumont as of yet, but we have seen large industrial projects put a pause on their development efforts in recent months,” said Sadé Chick, the Port of Beaumont’s director of corporate affairs. “We understand this could result in a slowdown in the future, but are optimistic that project and breakbulk cargoes will bounce back as economic recovery efforts continue.”

The Port of Beaumont, which was seeing a 13.5 percent year-over-year increase in cargo volume through August, is planning to proceed with all 19 projects under its recently approved US$248.8 million capital improvement program, with 13 of those undertakings under way, Chick said.

She pointed to advocacy efforts of AAPA and Southeast Texas representatives in U.S. Congress, commenting, “The recovery packages that focus on infrastructure improvements are a win for the maritime industry, but not necessarily a savior. The savior comes in the form of the Port Infrastructure Development Program, which is specific to ports and has made a noticeable impact on every region it has touched. “Billions of dollars are needed to modernize port facilities nationwide to remain competitive, and this program is working toward that goal,” Chick added. “Unfortunately, even though port activity supports 26 percent of the GDP, roadways are typically given priority when it comes to funding, and seaports historically receive only a small fraction of the funds they are eligible for.”

AAPA’s Connor put it this way: “Policymakers must not overlook our nation’s ports in their time of need. The relief we’re seeking isn’t about replacing lost carrier, cargo and cruise passenger revenue. It’s about ensuring that ports are able to keep pace with the accelerating costs of protecting their workers while keeping their workforce employed. It’s about ensuring bond and other debt instrument payments aren’t missed. Ultimately, it’s about maintaining a state of readiness so ports can significantly aid in the nation’s eventual economic recovery.” BB

A professional journalist for nearly 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late 1980s.

EMERGING MARKETS

NuScale has invested more than US$1 billion in technology development and licensing of its small modular reactor. CREDIT: NUSCALE

MODULARIZED N u CLEAR

History in the Making at NuScale | BY LORI MUSSER

Modularized power plant components are giving stick-built developments a run for their money.

Labor, construction costs, equipment rentals, site facilities and supplies – all may be reduced with prefabricated elements, which, proponents say, can offset increased engineering, transportation and structural costs. The result can be better power-generation solutions, completed more quickly. However, in the U.S. in the last few decades, nuclear energy has been mired in controversy, largely left out of the clean energy investment game and the modularization trend.

That changed in late August when Oregon-based NuScale Power garnered international attention as its small modular reactor received design approval from the U.S. Nuclear Regulatory Commission. The NRC completed the six-phase (technical) review, which is the last and final phase of the Design Certification Application, or DCA, for the company’s small modular reactor, or SMR, with the issuance of the Final Safety Evaluation Report.

“With this final phase of NuScale’s DCA now complete, customers can proceed with plans to develop Nu-Scale power plants with the understanding that the NRC has approved the safety aspects of the NuScale design,” said Scott Bailey, vice president of supply chain for NuScale.

The initial concept for the SMR technology was developed from 2000 to 2003 at Oregon State University, with starter funding provided by the U.S. Department of Energy. NuScale has been working to commercialize it since 2007.

Bailey said: “To date, NuScale has invested over US$1 billion in our technology development and licensing, which includes federal support from the U.S. Department of Energy of over US$300 million in cost-shared funding.”

The energy department’s investment undoubtedly reflects the economic and national security significance of successfully bringing the first U.S. small modular reactor to market. “The zerocarbon energy of the future is no longer a distant dream,” Bailey said.

The NRC go-ahead is a milestone. The U.S. Energy Information Administration reports that the average age of U.S. commercial power reactors runs about 40 years. Aside from the Tennessee Watts Bar Unit 2, which began operation in June 2016, the next-youngest operating reactor is Watts Bar Unit 1, which entered service in May 1996.

CUSTOMERS TO PROCEED

With NuScale’s design now deemed safe, commercialization can move forward. The technology is expected to have international appeal. NuScale has about 550 patents granted or pending in nearly 20 countries, according to Bailey.

Some entities are already interested in converting non-nuclear plant sites, Bailey said. Customers now going ahead with plans to develop NuScale plants won’t go it alone. Prospective modularized nuclear plant owners require a great deal of support in planning, licensing and developing new facilities.

Engineering, procurement and construction companies that have offered modular construction options to clients in power generation now have a new solution to offer. Fluor Corp. is already on board: in 2011, it became majority shareholder in NuScale.

NuScale’s SMR-generated power is considered clean energy. It is carbonfree, and requires a far smaller land footprint than wind, sun or hydropower generation, according to company literature.

As currently conceived, a NuScale plant would be scalable up to a dozen 60 MWe (electric power megawatts) modules capable of powering roughly 540,000 homes in the U.S.

Bailey said a NuScale plant can provide reliable power for mission-critical facilities such as hospitals, military bases and data centers; support hydrogen production for fuel cell vehicles, industrial processes, or energy storage; and provide energy for oil and chemical refining to reduce the carbon footprint of certain refining activities using fossil fuels by more than 30 percent.

Because the NuScale plants don’t require incoming power, they may be suitable for remote sites, connecting out to a grid, in a sort of microgrid situation.

A NuScale plant can also extensively “load follow” to complement intermittent power generation from wind, solar and hydropower. Three ways to change power output from a NuScale facility include: • Turbine bypass, which, as the name implies, bypasses turbine steam to the condenser over a period of seconds/ minutes/hours.

• Power maneuverability, which allows reactor power to adjust over a period. • Dispatchable modules, which takes one or more reactors offline for a period of, say, a day or more. The operational flexibility of the plant can balance power supply on the grid, regardless of the time of day, season or weather.

WORKING WITH WEATHER VAGARIES

The technology offers resilience for hurricane- or other disaster-prone areas. According to NuScale’s built-forresilience webpage, following a loss of offsite power event, a NuScale SMR can be “black-started” from cold conditions and continue to power an entire plant without the plant being connected to the grid. This is referred to as operating in Island Mode. The NuScale plant can provide power to the main grid in 60 MWe increments as soon as the grid is restored.

But when asked if the technology could in any way be used for temporary disaster-recovery efforts, Bailey said: “This is not a throw it-in-the-back-ofthe-truck generator. It is not portable, but it is extremely robust.”

The SMRs can do more than send power out to the grid, Bailey added. When Jose Reyes, co-founder and chief technology officer of NuScale, introduced the NuScale Diverse Energy Platform back in 2015, he highlighted the SMR technology as a nuclear “plugand-play” solution that provides reliable, flexible power to diverse applications. “Our SMRs facilitate decarbonization across non-electrical applications, including water desalination, district heating, hydrogen production, and oil refining, as well as serving electricity customers that require flexible, safe power with renewable load-following capability,” Bailey said.

Some of NuScale’s cogeneration research collaborations have delivered impressive results. A 6-Module NuScale plant could produce about 240 tons per day of carbon-free hydrogen for an ammonia plant, and an 8-Module NuScale plant could produce 60 million gallons per day of clean water plus about 400 MWe to the grid – enough electricity and clean water for a city of 300,000 people.

ROLLOUT

As of August 2020, NuScale had signed agreements with entities in the U.S., Canada, Romania, the Czech Republic, and Jordan. It has similar agreements in other locales in the works.

Factory fabrication Low carbon, secure electricity

Housed in a 12 module reactor building NuScale Power ModuleTM including containment and reactor vessel

To the plant site

Shipped by truck, rail or barge

NuScale life cycle to energy production. CREDIT: NUSCALE

By the end of this decade, a NuScale 12-module power plant will become part of the Carbon Free Power Project, which is an initiative of the Utah Associated Municipal Power Systems public power consortium. The first module of the 720 MWe plant is planned for operation as early as mid-2029. All 12 modules are expected to be operating by 2030.

MODULARIZED COMPONENTS

The NuScale Power Module, or NPM, NuScale’s flagship small modular reactor, will be fabricated in a factory, shipped by truck, rail or barge to the plant site, and housed in a reactor building. The module’s main components are a reactor vessel, steam generators, and pressurizer, contained in an integral package. The main components range in size from 8 tons up to 195 tons and limiting dimensions range up to close to 19 feet. The components are small enough to be factory built for easy transport and installation.

To utilize the best and most efficient mode of transport, NuScale is reaching out to a cross-section of supply chain experts to facilitate future transportation and logistics.

“We are beginning the transportation and assembly process. We’re several years away from moving things, but have already begun to engage the transportation industry to optimize the final design to incorporate transportation standards. We call it Design for Manufacturing Assembly and Transport, or DFMAT,” Bailey said. Seeking out transportation companies for input on

design is expected to make it easier to manufacture, assemble and transport.

“Involving the suppliers and those that have to assemble the components puts us one step in front,” Bailey said.

He anticipates using barges as much as possible, but that won’t always be possible. The company’s first project is in Idaho – 500-600 miles from the nearest port of access. “So trucks will be important and necessary,” Bailey said.

While most components will be made in the U.S., Bailey said NuScale is also working with fabricators in Canada and South Korea.

WHERE NO ONE HAS GONE BEFORE

“We are ‘The little engine that could,’ ” Bailey said. “In spite of those that thought this could not be done, we have persevered. Taking an idea that was born at a university almost 20 years ago, starting a company with the single purpose of deploying this technology, and we are now on the verge of making it real through our first deployment in the United States.”

NuScale’s technology is new, and the movement of its reactor components will be new business for the transportation and logistics industry, but the process of loading, carrying and offloading the components may not be the biggest challenge for heavy haulers.

Because there are several large NuScale Power Module components that need to arrive on site with schedule precision, and there may be as many as 12 modules per plant, there will be dozens of large shipments per 12-unit power plant. “It will be like building

NuScale plants are suitable for remote sites because they don’t require incoming power. CREDIT: NUSCALE

12 separate power plants on one site, each with its own steam turbine, etc. And, weather may be a consideration. Shipments will span about two years or more, meaning the winter months will need to be addressed.

“Tracking and transportation management with multiple subcomponents coming from multiple places will be extraordinarily important to us. There must be a well-choreographed transportation plan,” Bailey said.

While NuScale will provide the SMRs, Fluor, as lead investor and EPC constructor, will supply the rest of the plant and have even greater transportation needs, handling essentials such as the steam power plant and equipment, according to Bailey.

“Visibility and firm delivery dates are critical. Components need to come in a predictable manner. We are really relying on the transportation industry to help us find ways to do it faster, better, cheaper,” Bailey said, citing, for example, the need for customized cradles. He said he will seek creativity to continually optimize the cost and schedule.

NuScale’s philosophy embodies creativity, reinventing things in better ways, pushing to make things more efficient. Bailey said the company’s employees have a calling to make the world a better place, preserving natural resources for future generations. Modularized nuclear is NuScale’s pathway. BB

Based in the U.S., Lori Musser is a veteran shipping industry writer.

ENERGY UPDATE

MOVING ENERGY PARTS

High Uncertainty as Oil, Gas Industry Transitions | BY NEERAJ NADURDIKAR

The oil and gas industry is in a state of transition. Within the last year, many of the industry’s leaders have unveiled ambitious plans to significantly reduce greenhouse gas, or GHGs, emissions – particularly CO2 and methane – from their energy activities.

As in many facets of business and life these days, however, the oil and gas industry is gripped by uncertainty about the direction the energy transition is headed. It remains too early to tell which of the most promising sustainable energy transition models – biofuels based or natural-gas centric or wind and solar power centric – will gain traction in the industrial, transportation, residential and commercial sectors.

Uncertainly is never a friend of business, but lower oil prices and changes in energy demand – as well as carbon pricing and government policies, particularly at some local and regional levels – are pushing the industry to accelerate its shift to sustainable energy. The Covid-19 pandemic, having reduced fossil fuels demand over the last several months, has actually sped up sustainability initiatives.

To sustain themselves throughout this transition, oil and gas companies are rebalancing their capital projects portfolios, prioritizing cleaner and GHG mitigation opportunities over their traditional revenue generating asset development opportunities. This is a tricky balance, as those traditional projects are often the source of large cash flows that fund the new energy projects.

Some companies have been looking to create synergies between their upstream and downstream petrochemicals businesses to streamline their organizations and operations. Other companies, meanwhile, have scaled back or divested their downstream businesses altogether to concentrate on shaping the evolving energy sector.

What does this all mean for project cargo and breakbulk industry leaders? It means project shipping demand changes are coming in fast, if they have not already arrived.

Even though many oil and gas companies are enduring significant cuts to their capital expenditure accounts, these same companies, in addition to diverting significant amounts of capital for the development of cleaner energy generation systems, are deploying carbon capture, utilization, and storage, or CCUS, technologies. An uptick in the construction of CCUS projects can be expected over the next few years. These projects are known to entail movement of large kits necessitating the breakbulk and cargo transport services that the oil and gas sector has needed in the past.

Still, peering through the fog of uncertainty the oil and gas industry finds itself in, it is possible to discern some important features of the ongoing energy transition. Shipping leaders should consider how the following trends and observations could alter the breakbulk cargo market.

A SHIFT TO LIGHTER PROJECTS

No matter what type of energy transition we see, it appears that the energy sector will be moving from heavy industrial to much lighter industrial type projects. Demand for shipping very large pieces of kit engineered and specially fabricated for onshore and offshore oil and gas assets can be expected to decline.

Making up for this decline in heavy industrial shipping should be demand for smaller pieces of project equipment that can be installed modularly. Think about the differences between transporting very large and awkwardly shaped process columns for an oil refinery versus moving several identical wind turbines for a wind power farm.

How might this reshape the breakbulk sector? It is likely many smaller vessels, and perhaps even container ships, could be used to move cargo for new energy projects. As a result, prices will be driven downward and competition among shippers will increase. Operators of vessels capable of moving hundreds of tons may have to uncover efficiencies to compete with smaller ships hired to move much less weight. As the oil and gas industry increases spending on new energy projects requiring lighter equipment and more modular components, shipping company leaders need to be asking questions such as: what sort of breakbulk cargo provider do we want to be, and are we going to be a multipurpose vessel provider offering lowest-cost transport, or are we going to be a specialty provider for heavy industrial project transport. After all, even in the most aggressive transition scenarios offered up by the International Energy Agency – the 1.5 degrees Celsius pathway – fossil fuels will still play a good-sized role and, with the natural decline of 3 percent to 5 percent for the existing reserves, someone will still have to be exploring for and developing fossil fuels.

BREAKBULK SUSTAINABILITY COSTS

A second observation is how breakbulk providers will respond to the potential for reduced cash flows while sustainability costs are increasing. Indeed, the new energy and breakbulk industries – and their suppliers – are tackling their own sets of similar and unique GHG emissions reduction mandates. Specific to the shipping sector, IMO2020 regulations mean that marine vessels have to hurry up to adapt to very-low-sulfur diesel fuel emission requirements.

The conversion to low-sulfur fuels is critical for the environment and also expensive for ship owners to absorb when cash flow is reduced. Further, while Scope 3 emissions are not used in oil and gas (energy company) calculations, eventually they may become important. This means the breakbulk industry may find itself addressing environmental, social and governance issues all over again while cash flow remains lower.

A third area breakbulk leaders must consider as the oil and gas industry transitions to a new energy industry involves smaller supply chains. The heavy industrial projects discussed in this article often entail movement of large pieces of equipment over long distances, from locations in Asia to the U.S. Gulf Coast, from Europe to West Africa, and so on. New energy models portent the creation of much more regionalized supply chains.

Biofuel production plants, after the technologies are perfected, could be located in many world locations. By contrast, limitations exist on where oil can be produced and refineries can operate. With improvements in battery storage capabilities, electrical energy demands could be met more regionally or locally. Breakbulk leaders should monitor the creation of energy value chains as they evolve. What do the connecting energy value chains look like? Will batteries as energy delivery systems replace midstream oil and gas pipelines?

Further, wider energy outlook considerations exist. Vessel operators should weigh whether their fleets are prepared to support global markets and sectors powered by natural gas-driven electricity or liquid biofuels. Each may require different kinds of projects and different kinds of shipping needs. Hopefully, the project cargo and breakbulk industry can turn to meet the energy sector’s transport requirements more nimbly than the vessels they pilot.

With shareholders, governments and the public mounting pressure on oil and gas companies to become cleaner energy providers sooner rather than later, the industry’s transformation is both a social mandate and business imperative. Energy systems, and with it the energy industry, are transitioning. As is always the case, as customers’ needs change, providers will be forced to adjust. A few of the previously highlighted areas will affect change. It is important to recognize the energy transition has gone from a moderately paced run to a near sprint. Breakbulk operator leaders must decide how their industry will keep up. BB

Neeraj Nandurdikar is IPA’s energy practice director.

Biofuel production plants can be located in many world locations, opening the scope for supporting project cargo moves. CREDIT: SHUTTERSTOCK

PROFILE

NEW FAIRWAY

SAL Tie-up Next Chapter for Intermarine | BY LORI MUSSER

With a very fresh “Part brings to the table 40 years in the COMMON GROUND AND of the SAL Heavy industry, including a prior stint at NEW TERRITORY Lift Group” logo and Intermarine. Intermarine is expected to operate hyperlink splashed on He is also former CEO of BBC as an independent brand within the its online masthead, Intermarine is Chartering, and in that capac- SAL group. SAL’s announcement said: setting out on a new path. ity, on the occasion of BBC’s 20th “Intermarine will tie its Americas liner

The company has reimagined anniversary in 2017, predicted: service to SAL’s global heavy-lift trade itself several times over the years, “Consolidation is ongoing and I dare and in combination bring to market and was just nicely settling in as to say that it will continue to be the the most comprehensive maritime an independent company with a determining theme in our industry breakbulk and heavy lift solution in singular focus on the Americas also in the coming years.” Andersen the Americas. market with a 25-year industry said the consolidation driver was “The Americas are about to see a veteran at the helm, Richard Seeg. that the “economic environment and unique project, breakbulk, and heavyThen SAL acquired a major stake in the markets are plagued by overca- lift shipping setup unfold. Intermarine Intermarine, and brought along a pacity, which makes it an economic and SAL Heavy Lift have for decades whole new set of opportunities for necessity to consolidate activities been synonymous with shipping excelboth companies, according to SAL’s to create more effective and power- lence, yet they have served different announcement in early October. ful players. Those should be able to market segments and regions.”

This investment is part and parcel survive and constructively shape the For SAL, the benefits may lie in of a wave of consolidation that has future of the segment.” a larger “footprint in the Americas” been washing through the industry. Three years later, the consolida- with more access, services and a new

Svend Andersen is the new CEO tion movement continues. It appears pool of customers. The announcement and shareholder of Intermarine. He Andersen was right. mentioned more “vessels being able to

operate not only in and out of South America, but also into offsite river deltas, where SAL would otherwise have had limited access.”

For Intermarine, there will be access to SAL’s heavy-lift fleet – the world’s largest in the more than 900 tonne SWL sector. Presumably, there will be efficient connections for Americas’ cargo that goes global.

Industry consolidation typically brings opportunities and challenges. While industry analysts are busy working out prospects related to the new venture, it is likely that both Intermarine and SAL Heavy Lift will find some cost-cutting and productivity gains.

In the Oct. 5, 2020 media release Richard Seeg, now Intermarine president, said: “Having SAL as an organization behind the activities of Intermarine brings with it a wide range of commercial opportunities. Richard Seeg SAL holds one of the most Intermarine comprehensive sales networks globally, and they also bring vessels, world-class engineering capabilities and other resources that are extremely valuable to the commercial setup of Intermarine.”

OPPORTUNITY FOR CUSTOMERS

Drew K. Roberts is head of specialized transport for deugro (USA), Inc. He said, “From our perspective as a freight forwarder currently heavily involved in South America, this new combined effort between SAL Heavy Lift and Intermarine potentially opens up a more diversified service offering and flexibility within that particular market. The new collaboration from heavy hitters SAL and Intermarine is expected to bring forth some new healthy competition through sailing options and highly capable vessels to and from this region.”

From a more globalized service perspective, there may also be benefits. Roberts added: “The effects of this partnership approaching the worldwide market remains to be seen and we will be keeping an eye on how this may affect the market as a whole. It is likely too early to tell, but it is our thought that the combination of the two companies could create a more capable service offering overall that we can rely on to help meet our client’s needs.”

Early in 2020, Intermarine’s Americas Liner Service became a standalone regional carrier covering the Caribbean, North, Central and South America. Intermarine, as agent for Industrial Maritime Carriers LLC, assumed a new structure after Zeamarine – the Zeaborn Ship Management and Intermarine joint venture – divested its Americas business at the beginning of the year.

Seeg said that from the outset, Intermarine has been customerdriven, “founded 30 years ago, with a focus on fulfilling customer needs in the breakbulk/project arena, instead of simply trying to fill ships.”

That foundational philosophy is still in play, and while the company had refocused its operations on the breakbulk/project cargo business of the Americas when it became independent, it now has, under the SAL Heavy Lift Group banner, the opportunity to extend its global reach.

Global connections to and from the Americas could be well-supported by another important differentiator at Intermarine: “We maintain a regular liner schedule, while providing the flexibility and level of service that our customers require,” Seeg said to Breakbulk.

Intermarine Americas LLC has been operating five to 10 multipurpose vessels on short- and long-term charter within the Americas. Its fleet of geared ‘tweendeck vessels have a lift capacity of up to 400 tonnes. Cargo capacity ranges up to 11,326 cubic meters.

The company has been running weekly trips from its load center in Houston to the Caribbean/North Coast South Americas, to its main ports in Trinidad, Guyana, Suriname, Colombia, Mexico and other destinations in the region. There are also monthly sailings to Brazil/Argentina and regular voyages to the West Coast of South America.

In addition to operating multipurpose carriers and offering technical services such as customized method statements for safe and efficient loads, Intermarine was recently appointed by United Heavy Lift to promote its commercial maritime business for cargoes controlled in North America.

MARKET PROSPECTS

Seeg said the word “uncertainty” is overused, and indicated Intermarine’s key business strength is about helping customers adjust. He said: “Our customers are struggling with their needs and the needs of their customers constantly changing as everyone tries to move forward in this market. We regularly see our customers fixing cargoes with us to one destination, and then having to change to another destination, or having the readiness slip back, or move up to become critically urgent.

“We view our relationship with our customers as a partnership, and not just a client/vendor relationship. Through regular and open communication, we work with our customers to find the best option – in terms of service and price – to work through their constantly changing requirements.”

Intermarine, SAL Heavy Lift and their global transportation competitors face a plethora of obstacles in the current heavy-lift, project cargo and breakbulk markets, but this new venture may prove to be a boon. There is industry-wide concern for stagnating demand for multipurpose carriers, related in large part to the impact of Covid-19 and lingering low oil prices on investment, but more diverse geographies and other variables that steer the global multipurpose sector allow room for some enthusiasm.

Seeg, for one, is optimistic for the future: “The core of Intermarine’s business is oil and gas, mining, and the power sectors. While oil and gas and commodity prices are down now,

and that is affecting cargo moves, the population on our planet continues to grow. There will always be a need for raw materials, and Intermarine plays a vital role in the supply chain that supports these industries.”

A few weeks before the announcement about the SAL investment, Seeg said the task at hand, for Intermarine, was: “to work with our customers to meet their needs as their needs develop and change. The market today is different than it was 12 months ago, and it will be different again in 12 months. We must be quick and remain flexible.” The new relationship with SAL Heavy Lift might just be the “flexibility” Seeg meant.

VALUE MEETS CHANGE

As Seeg sees it, Intermarine’s flexibility has saved the day many a time for customers. Flexibility helps the company act on opportunities as they develop. In one example, while visiting a customer in Korea, the customer realized that a competitor’s vessel was suddenly delayed, but the move was urgent. “I was able to pull our teams together to find a solution on the spot – putting in a vessel two days later to load the client’s cargo and get the cargo moving,” Seeg said.

Intermarine’s flexibility has helped the company act on opportunities as they develop. CREDIT: INTERMARINE

Seeg stressed the importance of being equipped to quickly find solutions and make decisions, and the importance of being in the right place and talking to the right people. “The market will continue to change and evolve, and we must be able to adapt and evolve with it,” he said.

“Intermarine has evolved over the years … as our markets and our customers have evolved. Over the past 30 years, we expanded into areas where we could provide value to our customers, and also reduced our activities in areas where we could no longer add value as markets and customers changed,” Seeg said, adding: “The challenges we face today will also present opportunities, and we will adapt and expand our services as these opportunities present themselves.”

One opportunity comes from the nature of the cargo itself. For example, Seeg said, in the last two decades, “we have seen heavy-lifts get heavier. In fact, I can recall when a 50-tonne piece was considered a heavy-lift.”

Other opportunities come from the cargo origin points: “Twenty years ago, there was a push away from local suppliers, with many of our customers stretching their supply chain and sourcing all manner of goods from Asia. These days we see a move toward regional sourcing and fabrication.”

To guide a multipurpose carrier in 2020, communication is key: “In order to be successful as a company, we need to make sure that we all understand the task at hand and that we are all moving in the same direction. Management needs to hear from our sales, technical, operational, and support teams regarding the market and our customers’ views on the market. Only by working together can we continue to make good decisions,” Seeg said.

Andersen summarized the future of Intermarine under the SAL Heavy Lift Group venture in an early October media release: “The joining of Intermarine with the SAL organization is a perfect matching of two companies which share the same basic set of values and business philosophy yet with a different fleet of vessels, resources and outreach. In combination, it makes an unmatched setup in cross-Atlantic trading and intra-Americas heavy lift shipping. I have invested in this venture, as I see great prospects in bringing the Intermarine brand and business onwards under the helm and support by SAL Heavy Lift as a top brand in the heavy lift shipping industry.” BB

Based in the U.S., Lori Musser is a veteran shipping industry writer.

REGIONAL REVIEW

SHIFTING SANDS IN THE GULF Crisis Brings GCC Recruitment Challenges into Focus

BY SIMON WEST

The energy-based, projectdriven economies of the Middle East have been hit hard by the twin shocks of Covid-19 and record-low oil prices.

The rocky road to recovery starts now, and although too early to fully understand the long-term impact on jobs, the crisis has brought changing employment patterns in the Gulf Cooperation Council countries into sharp focus.

Well before Covid-19 struck, the reputation of the Gulf Cooperation Council, or GCC, states – Saudi Arabia, Qatar, Oman, Kuwait, Bahrain and the United Arab Emirates – as high-paying, tax-free hotspots was on the wane.

Since the last economic downturn five years ago, professionals in the region have seen their salaries frozen and generous benefit packages cut as cost-conscious companies tightened their belts to stay competitive. Workforces have been trimmed, executive jobs have been localized and valueadded tax has been introduced.

The party, it seemed, was already coming to an end.

“Salaries and day rates have not returned to the previous highs, and given the current instability, this will probably remain the case,” said James O’Neill, Oman country manager for UK-based oil, gas and energy recruitment firm Petroplan.

Fears though that declining compensation packages would trigger a mass expat exodus may have been premature, particularly in states such as the UAE, Qatar and Bahrain, where non-nationals make up the bulk of the labor force.

In much of the region, lower rents and living costs have offset stagnant earnings, while foreign workers are still exempt from paying income tax.

According to O’Neill, the Middle East remains a desirable destination for expat professionals. But given the cutback in perks such as housing, healthcare cover and education allowances for children, the type of candidate choosing to move to the GCC is changing.

“It is partly true to say that the expat workforce is getting younger, and our experience shows that more

deugro has found that salary expectations from nationals can be unrealistic in the region. CREDIT: deugro

In the UAE, an in-country value program was launched two years ago by ADNOC to encourage more local engagement in the sector. CREDIT: SHUTTERSTOCK

people are coming to work in the Middle East on a single status basis with the family remaining in their home country,” O’Neill said.

LOCAL CONTENT CHALLENGES

Candidate profiles are also evolving due to a region-wide localization drive that may intensify as part of post-pandemic economic stimulus plans.

Throughout the GCC, states have put into place initiatives designed to boost local content in the private sector, forcing industries such as breakbulk and project cargo to pay closer attention to the staff they hire and the contractors they do business with.

Some countries have been more demanding than others.

Saudi Arabia’s sweeping Saudization program, for example, grades firms according to the number of Saudi nationals in their ranks, while in the UAE, an in-country value program launched two years ago by the Abu Dhabi National Oil Co., or ADNOC, aims to spur opportunities for local suppliers and expand the private sector’s role in developing the local economy.

“You get incentives if you hire a local Emirati in Abu Dhabi, but it is not that you need to actually hire Emiratis,” said Steffen Behrens, UAE country manager at specialized logistics firm deugro. “In Saudi Arabia, and in Oman it is the same, you are being forced in certain positions to hire locals otherwise you will not actually get the license, or you will not be able to bid for certain contracts and projects.”

Companies looking to recruit locally – either to cover a departing expat or to comply with local content rules – face a number of challenges.

Despite government efforts to boost the desirability of private sector employment, many nationals in the GCC still opt for a career in the public sector, where jobs can be more secure, wages more competitive and working weeks shorter.

Salary expectations for nationals are often unrealistic, while skills shortages in many industries mean some companies struggle to replace expat talent.

“We were lately looking for a senior position in our UAE organization and we really looked into the market as to what was available, to actually find somebody suitable and maybe even consider an Emirati,” Behrens said.

“But the result of that was no. First of all we were not able to find somebody that met the kind of criteria we were looking for. And secondly the issue was that even if we had somebody that was able to present the kind of CV we were looking for, the salary expectation was just not as per our budget and not as per what we would traditionally be paying for such a position. So after a couple of weeks we basically ruled out hiring a national.

“In Oman and Saudi Arabia you will find locals with a decent salary expectation but usually not trained very well. Hence you need to invest a lot of time to get them up to speed in a specific job field such as project logistics.”

TRAINING NEEDS TO THE FORE

To address this, and ready the local workforce for private sector careers, GCC countries are investing heavily in education and training, often as part of broader structural reforms focused on long-term economic sustainability.

The Abu Dhabi Economic Vision 2030 for example, an ambitious plan designed to wean the city off oil and gas, calls for an overhaul of its education system to ensure graduates are better prepared for careers in construction, manufacturing and other productive sectors. As it stands, nationals in Abu Dhabi make up just 11 percent of the workforce, according to city government figures.

In Qatar and Kuwait, similar programs to improve education

FOCUS ON SURVIVAL

Plans to address changing employment dynamics in the Middle East will likely get moved to the back burner while breakbulk and project cargo companies chart a course out of the current economic crisis.

The prognosis remains grim: GCC states are expected to see a 7.1 percent drop in GDP this year, the International Monetary Fund said in a July report, with the global slump in oil demand slashing export receipts and widening budget deficits.

On the ground, supply chains have been disrupted and mobility restricted.

GDP is forecast to swing back into the black next year, the IMF said, but lengthy lockdowns to contain the virus have taken their toll on industrial activity. According to Steffen Behrens, UAE country manager at specialized logistics firm deugro, major engineering, procurement and construction projects in the region have either been put on ice or canceled.

“If I look back at the budget discussions we had last year, the outlook for this year was actually quite positive, with a number of projects in the pipeline. Unfortunately, that has just not materialized.”

“The problem we are having right now – and this is very specific for the project logistics industry – is that we standards have been launched, while governments throughout the Gulf are facilitating study periods abroad or at international universities with satellite campuses in the region.

Companies in the sector are also doing their part to ensure local employees are equipped with the right skills and training to thrive in careers in breakbulk and project cargo logistics.

Belgium-based heavy-lift specialist Sarens – with its Middle East headquarters in Bahrain, the GCC’s smallest state with a population of 1.6 million, of which more than half are non-nationals – has invested heavily in engineering, HR and finance.

According to Philippe Verdeure, Sarens’ managing director for projects in the Asia-Pacific and Middle

are running into a gap. And even if now they start awarding, let us say at the end of the year … there is nothing that is going to move until June. That is the biggest risk for the region.”

Another major risk for countries such as the UAE and Qatar with their high non-national populations is staff redundancies: as contracts have dried up, companies have been forced to slash jobs to save costs.

Tens of thousands of blue-collar migrant workers, many of them from the Indian Subcontinent, have either returned to their own countries or have been left in limbo – no job and no way to pay for flights home.

Expat executives who have been laid off also face an uncertain future. Those made redundant in the UAE for example, where residency is linked to employment, have little choice but to find another job or leave the country.

And as non-nationals across the board pack their bags and pull up stakes, populations shrink, and economies suffer.

“Nobody knows as yet how many expats had to leave or will leave in the near future. The industry has been hit and many good people have been let go,” a Dubai-based legal source told Breakbulk. “Once trade picks up again it will take some time to replace experienced people.” East region, this has allowed the company to maintain a high localization content that gives it pole position on many projects.

“Particularly in Bahrain, we’re extremely pleased with the quality of education and the skills of the local talents we hire,” Verdeure said. “A certain amount of foreign supervision and guidance, however, is always required. But we do expect that amount to be thinning with time.”

Verdeure also put to flight fears that as recruitment dynamics in the region evolve, the industry may not appeal to local jobseekers.

“Breakbulk and heavy-lifting will always be attractive to a certain portion of the engineering and technical crowd, for sure. Merely for the fact that what we do is unique and often a once-in-a-lifetime operation.”

Still, some organizations are responding to these shifting sands by increasing their level of outsourcing to so-called high-value centers in Asia and Latin America, where skilled manpower for certain positions can be found at a much lower cost.

And as labor markets come under severe pressure from Covid-19, the strategy is likely to rise in the short to mid-term. “Basically all the design work and the drawings, the material takeoffs, the quantities, the follow-ups – all these things happen through the outsourced entity,” said Mandar Apte, Mandar Apte project manager at oil and gas Technip FMC services company TechnipFMC.

“But essential work such as the specifications, the progress reporting, the project management – these kind of things mainly happen from the GCC. Of course it depends on company to company. What is outsourced and what is not is eventually a balance between what the client wants and what the contractor can do. But the trend is that more and more work is being outsourced,” Apte said.

Sarens project cargo work in the Middle East has included work on Expo 2020 in Dubai, slated to open in October, but put back until October 2021 due to the pandemic, and stadiums for the 2022 World Cup in Qatar. CREDIT: SARENS

STILL SHOWING RESILIENCE

Project cargo professionals speaking to Breakbulk all underlined the GCC’s resilience, as well as its exciting potential for industrial development over the next decade.

Although hydrocarbon contracts are still likely to dominate, economic transformation plans aimed at attracting foreign investment and diversifying economies away from oil and gas, such as Saudi Arabia’s Vision 2030, are expected to spark billions of dollars of spending in energy, transport infrastructure, mining and other sectors.

In renewables, regional activity is heating up: installed solar and wind capacity could rise 18-fold over the next five years to more than 57 gigawatts, or GW, according to a recent report by U.S.-based market research firm Frost and Sullivan. The expansion will call for US$182 billion of investments, the report said.

Some exciting developments are already underway. The 2-GW Al Dhafra solar energy plant in Abu Dhabi will be the largest single-site photovoltaic project in the world, with operations slated to begin in early 2022, while Saudi Arabia’s first ever utility-scale wind farm, the 400-megawatt Dumat Al Jandal project, located 900 kilometers north of Riyadh in northern Al-Jawf, is also expected to come online in 2022. The facility is being developed by a consortium led by France-based EDF Renewables and UAE green energy firm Masdar.

Events such as Expo 2020 in Dubai, slated to open in October, but put back until October 2021 due to the pandemic, and the 2022 World Cup in Qatar, which is seeing seven new stadiums built from scratch, are also major sources of special project contracts.

“I see things picking up, albeit at a slow pace. But at least it is not a full stop, it is not completely stagnant, things are starting,” TechnipFMC’s Apte said. And when the economy finally recovers, breakbulk and project cargo companies will want to be sure to have the best and brightest talent at their disposal. BB

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

MARKET SPOTLIGHT

BY SIMON WEST SAUDI’S PROJECT COMMITMENT

GCC Country Still Expects Grand Development

Saudi Arabia’s grand plan to open up its crude-dependent economy over the next decade is forging ahead, despite a deep recession caused by the double blow of Covid-19 and the oil price collapse.

Saudi Vision 2030, unveiled by Crown Prince Mohammed bin Salman four years ago, is seeking to diversify the nation away from oil and usher in a new era of economic sustainability. The government’s National Industrial Development and Logistics Program, launched last year, is leading the charge to boost the GDP contribution of industry, mining, logistics and energy to 1.2 trillion Saudi riyals, or about US$320 billion, by 2030.

Billions of dollars of investments have been slated for new industrial projects, with breakbulk and project cargo movers already in the thick of the action.

Moataz Hussein, regional project and energy manager for logistics and freight forwarding firm Expeditors, said the current crisis is unlikely to knock long-term Saudi construction plans off course.

“It might still have its effect on pushing back some of the projects or at least pushing back the deadlines a bit, but at the end of the day I think all the plans in place are going to go forward,” Hussein said. “Once the pandemic is over I expect Saudi Arabia will go full throttle on the direction of that Vision 2030.”

Running parallel to the economic shake-up is a nationwide policy designed to boost the role of male and female Saudi nationals in the private sector, dubbed Saudization.

More far-reaching than other local content initiatives in Gulf Cooperation Council, or GCC, countries, Saudization in one form or another has been around since at least the 1980s, but the policy gained momentum following the oil price crash six years ago and the launch of Vision 2030.

A focus on upping private-sector opportunities for Saudi citizens – and reducing an over-reliance on foreign workers – is seen as a surefire way to tackle local unemployment, which in this year’s first quarter stood at 11.8 percent.

In line with the economic reforms, authorities are hoping that the Saudization drive will create 1.6 million new jobs across a range of industries by 2030, reducing unemployment to 7 percent over the same period.

“The Saudi government has a long-standing goal to bring its large native population into the private sector so that its economy can effectively function when peak oil demand takes hold and the Saudi government is no longer able to provide a generous welfare state for its citizens through public jobs and direct subsidies,” said Ryan Bohl, Middle East and North Africa analyst at U.S.-based consultancy Stratfor.

Saudization hiring policies affect breakbulk and project cargo companies operating in the Kingdom. CREDIT: SHUTTERSTOCK

MEETING REGULATIONS

Saudization hiring policies, which affect breakbulk and project cargo companies operating in the Kingdom, are regulated by Nitaqat, a system that gauges the number of Saudi employees in a firm’s workforce against the number of non-nationals.

Companies are given colored ratings based on their compliance with the labor ministry’s local content targets – which vary from industry to industry – with red the lowest, then low green, medium green, high green and finally platinum.

A government decree in August for example ruled that 20 percent of all private sector engineering jobs from 2021 must be given to Saudi nationals. The quota applies to private firms with five or more employees in engineering professions, and aims to create at least 7,000 new positions.

The majority of businesses operating in Saudi Arabia are ranked in “safe color zones,” according to the labor ministry, but those that pay scant attention to Nitaqat targets inevitably face problems.

“Red being the lowest rating, companies in this zone face challenges in terms of ease of doing business,” said Rafael Vicens, head of global projects and industry solutions, Middle East and Africa, for Germany-based logistics specialist DB Schenker. “If you are in the green or the platinum zone, you will get easier access to government permits, for example, to move cargo on the roads. One has the facility to hire expats, therefore their visa procurement process is easier.”

Operators in the red zone may also have trouble opening new branch facilities with the labor office, changing the occupations of their foreign employees and securing pre-qualification for government contracts.

According to Vicens, multinational project logistics firms typically employ Saudi nationals to manage functions such as accounting, sales and administrative roles, which require strong local knowledge. Expats on the other hand are either hired as skilled labor or in executive positions.

Companies operating elsewhere in the GCC, such as the United Arab Emirates, Qatar and Bahrain, where non-nationals make up the bulk of the labor force, often encounter skills shortages for many professions. Either education systems are not up to scratch, or poor training leaves candidates unprepared for private sector careers.

Not so in Saudi Arabia, Hussein said.

“Saudi is not short at all with the local talent. When project logistics look to hire the right people, the right talents are there in the market, people who have the skills, the knowledge and the qualifications to meet the positions. And I think Saudi Arabia’s Vision 2030 is just making sure to open the doors and giving this local talent an opportunity.”

LOCAL CONTENT LAWS

The success of the policy, from a Saudi standpoint at least, is yet to be seen. Unemployment in the country remains high and is likely to worsen amid the Covid-19 crisis, while many executive positions continue to be held by expats. Deeper structural reforms to Saudi Arabia’s subsidy-laden political economy may be needed to achieve long-term employment goals, Stratfor’s Bohl said.

A much-lauded result of the localization drive, however, has been the rise in female employment, especially in industries traditionally dominated by men. The Saudization of the private jobs sector has gone hand in hand with the easing of long-standing social restrictions, such as the right to travel abroad without needing permission from a male guardian, or the government’s headline-grabbing decision two years ago to quash a decades-old law banning women from driving.

And as boundaries disappear, more female workers are joining the sector’s ranks.

King Abdullah Port, a privately owned terminal located on the Red Sea coast and a big handler of Saudi-bound project cargo, said it had broken the gender employment mold by hiring only women to staff its control rooms.

“More than 80 Saudi women work in control rooms, management, IT and engineering, the last being one of the final frontiers for Saudi women,” a representative at King Abdullah Port told Breakbulk. “The vast majority of women hail from the surrounding area, a section of Saudi Arabia that for years has offered little in the way of employment beyond the petroleum facilities located there.”

While Saudization has focused on boosting opportunities for its citizens, the policy is unlikely to close the door when it comes to project cargo involvement from other nations, with the success of Vision 2030 hinging on the kingdom’s ability to lure overseas

investment and know-how to expand the private sector into an engine for growth.

“The Saudization program has helped and continues to help bring more employment opportunities for local nationals,” said Haider Hussain, a Dubai-based partner at immigration law firm Fragomen. “The labor ministry has been in pursuit to balance that nationalization effort along with ensuring that the foreign expertise also continues to enter the Saudi workforce.”

And as the country’s efforts to reform the economy ramp up in line with its Vision 2030, that expertise will be called on to help the buildout of new industries.

RENEWABLES DRIVE CONTINUES

Although crude still accounts for about two-thirds of government budget revenues, and state-owned oil producer Aramco remains one of

King Abdullah Port broke the gender mold by hiring only women to staff its control rooms. CREDIT: KING ABDULLAH PORT

“Cities are getting built from scratch, so opportunities are going to be there.” – Moataz Hussein, Expeditors

the world’s most profitable companies, pressure to diversify the nation’s domestic energy mix is building, with the focus on expanding renewable capacity.

According to the government, Saudi Arabia is targeting 60 gigawatts, or GW, of installed green energy capacity by 2030, of which 40 GW would come from PV solar plants, 2.6 GW from concentrated solar power, 16 GW from wind turbines and the remainder from other renewable sources.

Development of a sustainable sector, which could intensify amid the fallout from Covid-19 and the low oil price environment, is expected to create up to 750,000 jobs over the next decade, the U.S.-Saudi Business Council said.

Although solar dominates, the expansion of wind power, of more interest to breakbulk movers, is starting to shape up.

Saudi Arabia’s first-ever utilityscale wind farm, the 400-megawatt, or MW, Dumat Al Jandal project in northern Al-Jawf region, is slated to start commercial operations in 2022. Once completed, the facility, developed by a consortium led by France’s EDF Renewables and the UAE’s Masdar, will be the largest wind project in the Gulf.

In June, a first batch of 20 Vestas V150-4.2 MW wind turbines arrived at Saudi’s Duba Port on the Red Sea coast, marking a milestone for the project.

According to Saudi shipping company Faisal M. Higgi and Associates, which acted as the port agency for vessels delivering the turbines, additional cargo for the project is expected to arrive at Duba by the end of the year.

Managing Director Abdulaziz Higgi told Breakbulk that multinational heavy-lift and logistics specialists were needed to support the buildout of new industrial sectors in Saudi Arabia. “Such global companies could be considered as a kind of school and education place for Saudis to get experience and knowledge about such projects in the forthcoming years,” Higgi said.

The country also has plans for offshore wind development.

Last year, Italy’s Saipem and Abu Dhabi-based renewables investor Plambeck Emirates signed a memorandum of understanding to build a 500-MW floating wind farm off the coast of Saudi Arabia. Further details on the project, including location, have not yet been disclosed.

PROJECTS ABOUND

Aside from renewables, exciting opportunities that point to a steady stream of contracts over the next decade include an expansion of the Two Holy Mosques, a US$800 billion plan to double the size of capital city Riyadh and the development of socalled smart cities such as Neom on the Red Sea Coast.

Meaning “New Future,” the US$500 billion Neom project was first announced in 2017, and when completed will include towns, ports, enterprise zones, sports stadiums and tourist destinations. The city, scheduled for completion in 2025, will be built on 5G technology and powered by renewable energy, and will eventually be home to 1 million people, according to the project’s official website.

“Cities are getting built from scratch, so opportunities are going to be there,” Expeditors’ Hussein said. “I expect in the next period to hear about more and more projects in Neom that companies like us, as project logistics and service providers, will surely be able to add value to. Because it is not only about the city itself, but also each city like that will require a lot of support industries to be around it, such as port facilities, solar parks and desalination plants.”

Like everywhere though, supply chains throughout the region have been severely hit by the pandemic, causing project delays and bottlenecks. The crisis has pushed Saudi Arabia into recession, with the International Monetary Fund predicting the economy will shrink 6.8 percent this year.

Aramco, too, is feeling the strain: the world’s largest oil exporter reported in August that its second quarter profits had sunk by 73 percent as a result of lower sales. The crisis has forced the producer to cut its capital expenditure plans this year and next.

Jobs markets have also been thrown into chaos, with the extent of the pandemic’s longer-term consequences yet to be revealed.

According to Fragomen’s Hussain, lockdown restrictions have slashed mobility and cross-border travel, forcing local businesses to temporarily adapt their hiring plans and to focus more on the local Saudi workforce to ensure companies keep ticking over.

“It will be interesting to see whether businesses will continue with the same strategy once Saudi Arabia opens its doors to the world again,” Hussain said. BB

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

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CASE STUDY

BY PAUL SCOTT ABBOTT NEXT STOP MARS

Emirati Mission Conquers Pandemic-related Hurdles

Before embarking on a 306-million-mile (492-million-kilometer), 200-day trek to Martian orbit, 30 tonnes of spacecraft and associated equipment had to complete journeys by air, land and sea from Colorado to Dubai to a remote Japanese island launch site – a process intensified by a pandemicimpacted Earth.

Between February and April, the Hope orbiter craft – the centerpiece of the United Arab Emirates Space Agency’s Emirates Mars Mission – traversed the globe along with related spacebound cargo on flights totaling nearly 13,000 miles (21,000 kilometers) in addition to moves by road and water.

“The realization that we had to run against the Covid clock was where things got complicated,” Omar Al Shehhi, assembly, integration and testing lead for the UAE agency’s Emirates Mars Mission, told Breakbulk.

Adjustments to initial plans, Al Shehhi said, were necessary to meet the narrow July 2020 launch window – related to the once-every-two-years ideal alignment of Earth and Mars – so as to have the uncrewed Hope orbiter circling Mars before the 50-year anniversary in December 2021 of the independence of the United Arab Emirates.

Of course, when UAE leaders announced the intended mission in 2014, they could not have predicted that Earth would be grappling with a global health crisis in the year of the launch. What they did already know was that having all the equipment in place for liftoff was complex anyway, as the highly sensitive spacecraft was to be fabricated in the western U.S. and undergo preparations in the UAE before being launched from Japan’s Tanegashima Space Center.

PROCESS INTENSIFIES

“The transport process of spacecraft in general is very complicated because of the nature of the craft and its instruments and their sensitivity to temperature, humidity, dust and movement,” Al Shehhi said. “What was supposed to be routine turned out to be mission-critical.

“With added issues triggered by the Covid-19 pandemic, the team plan to manage the process had to be doubled, tag-teaming with quarantine requirements necessitating team members be in place for 14 days,” he continued. “As a result, the launch team had to travel three weeks earlier than the aircraft – several weeks before the probe’s scheduled transfer date.”

Al Shehhi, a former Emirates Airlines avionics engineer, was among eight Emirati space engineers who were in place in Japan earlier than originally scheduled and who kept daily logs of their temperatures as part of efforts to ensure safety of themselves and the launch site. Plans to bring along some of the engineers’ children to enjoy the liftoff had to be shelved due to pandemic concerns.

True to original plans, an Antonov AN-124 heavy-lift cargo aircraft, operated by Ulyanovsk, Russia-based Volga-Dnepr Airlines, was used for the longest legs of the spacecraft’s earthly travels.

The Hope spacecraft undergoes shock testing in a cleanroom at the Laboratory for Atmospheric and Space Physics at the University of Colorado Boulder as it is readied for transport to the United Arab Emirates and its Japanese island launch site. CREDIT: UNITED ARAB EMIRATES SPACE AGENCY

After assembly and completion of environmental and shock tests and other preparations at the Laboratory for Atmospheric and Space Physics at the University of Colorado Boulder, a shipment of five units with a total weight of 30 tonnes was ready Feb. 8 for the 21-hour flight to the UAE, including a fueling stopover at Keflavik, Iceland.

‘MOBILE CLEANROOM’

While some of the cargo flew in standard 20-foot-long shipping containers, the sensitive Hope probe – also known as the EMM Observatory – was enveloped in specialty packaging, according to Brian Pramann, Emirates Mars Mission assembly integration and test manager at the University of Colorado facility. (Other U.S. entities engaged in the endeavor have included Arizona State University and the University of California, Berkeley.)

“The container was essentially a mobile cleanroom with custom temperature and humidity control, active particulate and nonvolatile air filtration, continuous gaseous nitrogen purging, shock isolation, and active temperature, humidity and acceleration monitoring equipment,” Pramann said.

All satellite and associated equipment was lifted via mobile boom crane onto open-bed, extra-wide

Emirates Mars Mission engineers discuss the Hope probe in a cleanroom at Mohammed bin Rashid Space Center before the craft’s placement in a customized container for air shipment to Japan. CREDIT: UNITED ARAB EMIRATES SPACE AGENCY

Expert crew members complete loading of the containerized Hope Mars probe onto a Volga-Dnepr Airlines AN-124 cargo plane at Al Maktoum International Airport in preparation for flight to Japan. CREDIT: UNITED ARAB EMIRATES SPACE AGENCY

trucking equipment for the 43-mile (69-kilometer) over-the-road trip to Denver International Airport. There the cargo was loaded onto a Volga-Dnepr AN-124 plane for the 7,900-mile (12,714-kilometer) flight to Al Maktoum International Airport, south of Dubai, and moved 42 miles (68 kilometers) by specialized truck to Mohammed bin Rashid Space Center in Dubai.

Following two months of further testing and preparations at the UAE space center, the spacecraft was ready for another flight, this time for a journey of some 5,000 miles (8,047 kilometers) to Chubu Centrair International Airport, on an artificial island south of Nagoya, in central Japan.

Again, according to Al Shehhi, the Hope probe took flight within “a miniature portable cleanroom,” with both temperature and humidity kept within a fixed range and a nitrogen purge system protecting delicate instruments from dust. Other mechanical and electrical equipment shipped with the Hope craft included ground handling and operations systems.

VIBRATIONS AVERTED

The over-the-road trip to the airport, which would normally take 45 minutes, instead took two hours, Al Shehhi said, with low-speed travel required “to reduce the vibrations generated from bumps in the road.”

The Hope craft and related cargoes once again were loaded onto a VolgaDnepr AN-124 airplane, accompanied by a team of Emirati engineers monitoring the shipment’s safety. A flight route presenting the least likelihood of turbulence was selected to minimize vibrations that could impact the hypersensitive equipment. The handoff between the Dubai engineers who accompanied the shipment and the team that had gone ahead to Japan was accomplished without face-to-face contact to reduce the chance of Covid-19 infection spread.

Finally, a team led by Al Shehhi oversaw the unloading of the cargo from the aircraft, its short transport to the island airport’s quay, its 44-hour trip by sea freighter to Shimama Port on Tanegashima Island in far southern Japan and its 12-mile (19-kilometer) over-the-road move to Tanegashima Space Center, run by the Japan Aerospace Exploration Agency, or JAXA. The team waited until nightfall for that last little leg “to travel along quieter roads,” Al Shehhi said.

Overall, the trip from the UAE space center to the Japanese launch site spanned 83 working hours from April 20 to 24, according to Al Shehhi.

On July 19, the Hope probe, perched atop a two-stage Mitsubishi H2A launch platform, lifted off from the Japanese space center, carrying Arab world aspirations and scientific experiments for studying the Martian atmosphere throughout two years of planned orbit around the Red Planet, which it is on target to reach in February, well ahead of the Dec. 2 celebration of the half-century anniversary of the establishment of the independent United Arab Emirates. BB

A professional journalist for nearly 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late 1980s.

The Hope orbiter, atop an H2A rocket, launches July 19 on the Emirates Mars Mission from Tanegashima Space Center, on a southern Japan island. CREDIT: UNITED ARAB EMIRATES SPACE AGENCY

LOGISTICS PERSPECTIVE

BY NAMRATA NADKARNI CRISIS CONTINUITY

Covid-19 Choke Points Force Gear Shift

The past six months have in some scheduled supplies,” recalls seen a radically changed Paula Lacruz Rodriguez, of Spanish landscape for the heavy- civil engineering company Ferrolift and project cargo vial. “In specific cases, there were industry. The Covid-19 pandemic also delays due to problems with created bottlenecks not only in terms transport companies and customs of equipment and supplies but also clearance. Additionally, there were with employees. Factories and work- also problems with subcontractors, sites shut down around the globe as again due to workers’ confinement countries closed their borders to any and positive cases of Covid-19.” aspect of trade that required human- Although the situation has largely to-human contact, creating shortages resolved itself, the company has of supplies and bringing many proj- adapted its operations policies to ects to a standstill. increase the delivery times allotted to

While steps were taken to the supply of critical items, and has largely address the health and safety also sourced alternative suppliers for requirements to keep businesses many of its materials. This strategy functioning, these required compa- is likely to pay off in coming months, nies to be flexible and think outside as many countries report second the box as many of the contingency waves of the virus. measures that would ordinarily have been put in place were not applicable LINGERING IMPACT to this particular scenario. The hiccups in sourcing and

“During the first months of the transporting materials have varied pandemic, mainly as a consequence from country to country and across of the stoppage of the activity of cer- industries – and in some cases, tain suppliers due to the confinement engineering, procurement and conof their personnel, there were delays struction companies have reported that clients have made the decision to hold off on their projects. “We are noticing that a significant number of projects are being postponed and a small percentage cancelled,” Kleopatra Kyrimi, group marketing and communications manager for heavy-lift and engineering transport firm Sarens’ Spanish arm, told Breakbulk.

She added that Sarens experienced a slowdown in many of the regions that it operates in, but these were largely related to puttingsafety measures in place to manage Covid19 and were resolved reasonably quickly. “Construction work did not stop completely in any of the countries we operate in,” Kyrimi said, pointing out that the company adopted a diversification approach to insulate it from the worst of the economic effects of the pandemic.

“For us, diversification of the business is key, offering us alternatives when we encounter slowdowns in certain sectors of our work,” she said. The company also implemented

Top: Sarens notes that a significant number of projects have been postponed and a small percentage canceled. CREDIT: SARENS

stringent safety measures to manage its risk and took steps to reduce its exposure to factors such as slowdowns and supply bottlenecks.

Perhaps the biggest impact of the Covid-19 pandemic is the vulnerabilities it has exposed in the supply chain, which continues to fluctuate in response to a large number of factors including local outbreaks of the virus, statuses of borders, access to supplies, market sentiment and more. “Everyone has pressed the pause button while they are waiting to see how this pans out,” said Richard Jones, global sales manager at project freight forwarder Bertling LogisRichard Jones tics. Jones said the real conBertling Logistics cern was rate fluctuation for transport, rather than personnel capacity.

“Some people are saying that the rates will go through the roof and others are saying that they are about to crash. We may see that prices have jumped up US$500 overnight, or that a service we have been using suddenly no longer exists. You can’t make guarantees to clients like you used to be able to make as all availability is subject to Covid-19 and quarantine,” he said.

Jones believes that the new operating environment also presents opportunities for those companies that have the ability to adapt to change quickly, not just to the challenges of the pandemic, but also to meet client needs, which may evolve as the current situation continues.

“To survive this we need to be collaborative,” he said. “Customers are going to want to work with forwarders that are able to come up with solutions, so it will not be about the cheapest price. Rather, the market will be relationship and trust driven.”

The uncertainty, combined with a change in the global sentiment towards a more nationalistic outlook, will reshape global trade, the supply chain and sustainability in the coming years,” he added, particularly in the UK, where the impact of the pandemic will intersect with Brexit to create new challenges for freight forwarders.

INFRASTRUCTURE OUTLOOK

However, Jones’ long-term outlook for the project cargo and EPC sectors remains positive. “The global prospects are good as we transition to a carbon-free economy and invest in infrastructure and IT, digitalization and process efficiency,” he said, adding that the pandemic has revealed areas in the supply chain that will need urgent investment and may see government and private sector investment in the near future.

Jones’ view is echoed by Sarens’ Kyrimi, who said that the very nature of critical infrastructure work allows engineering companies to be relatively insulated from economic recessions.

“Despite the crisis, city infrastructures, sustainable energy projects, and other work will still be priorities in the 2020-2021 market, as they involve structures and goods that are still necessary for society to function even if lockdowns are necessary,” Kyrimi said. “We have observed, in fact, that certain city projects during the lockdowns progressed, taking advantage of the reduced circulation that allowed for faster and more comfortable executions.

“Mega projects in the nuclear sector and other wind projects, for instance, did not stop as they are considered matters of respective national importance, and stopping them would make no sense as that would generate financial penalties for the clients that would throw the projects off budget.”

Breakbulk ports also continued with “business as usual.” The port of

Associated British Ports’ Port of Ipswich completed a heavy-lift operation of a 178-tonne transformer, as part of a National Grid infrastructure project, in early June. CREDIT: ABP

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Production and international cargo movements have declined rapidly since the start of the pandemic. CREDIT: AAL Shipping

Ipswich, which is managed by Associated British Ports, has seen consistent cargo throughput of various agricultural and infrastructure materials, welcoming 115 vessels carrying 400,000 tonnes of cargo in the first three months since the start of the first UK lockdown on March 23, 2020. It also successfully completed a heavy-lift operation involving a 178-tonne transformer, as part of a National Grid infrastructure project, in early June.

ROCKY GLOBAL RECOVERY

Although critical infrastructure projects continue apace and carriers are still securing work, the wider project cargo industry is unlikely to see a quick return to pre-pandemic operating levels. “Our fleet is fully employed,

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albeit at reduced freight rates,” explained Valentin Gherciu, global operations manager at AAL Shipping, observing that the business and public upheaval caused by the pandemic has resulted in a sharp decline in appetite for investment and project greenlighting.

“The triage of services we currently provide of tailor-made tramp solutions, scheduled liner and semi-liner services offer the market choice and seamless connectivity worldwide. The issue that we face as a carrier is that no two regions are responding the same way to current market challenges, and their trading patterns and cargo flows are subject to change at any time.

“As forecast, production and international cargo movements have declined rapidly since the start of the outbreak,” Gherciu continued. “Initially, the slowdown of imports and exports took hold in China, then Korea and Japan – in all cases resulting in the forced reduction of shipments, delayed project cargo readiness and in many cases cargo bookings cancellations. Within the carrier sector too, there is no appetite for immediate fleet expansion and [there are] vessel charterers with distressed ships sitting idle worldwide and unemployed.”

He saw the rapid virus contagion worldwide as impacting major long-haul trade lanes and causing a “geo-shifting” affect. While China is slowly recovering, cargo demand has dropped from trading partners in Oceania, Middle East, Europe and the U.S.

Gherciu said that the past few months have exposed weaknesses in the supply chain ranging from freezing of receivables from Chinese accounts to severe liquidity issues around the globe. “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,” he said.

Gherciu is a strong advocate for the creation and use of fiscal policy instruments to spur the economy into recovery. “The most important measure that can be implemented at this time within any market is fiscal government support for corporate business and capital injection into economies. This is necessary to stimulate trade and cargo movement,” he said, adding that the maritime sector in particular will require this support to maintain trade levels and prevent companies from collapsing under financial duress.

“More than at any other time in our history, we need to stay alert and flexible and focus on those trade lanes and services model structures that allow us to mitigate risk and, at the same time, provide the range of added value services that our customers need,” Gherciu concluded. BB

Namrata Nadkarni is a Londonbased freelance journalist with 17 years of experience covering maritime, offshore, ports and the logistics sector.

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LOGISTICS PERSPECTIVE

Companies like deugro have managed to keep cargo moving over the last six months by working together with all our partners in the project logistics supply chain. CREDIT: deugro

ADDED FLEX

Executive Vice President Tim Killen gives his views on how deugro group has adjusted to meet the challenges of the pandemic

Q: Has your company experienced any sourcing issues or bottlenecks on projects this year, and do you anticipate any coming up in the near future?

A: We have all faced unprecedented challenges due to the impact of Covid-19 and the global economic fallout, which has been felt throughout the global project logistics industry.

Every mode of transportation has been affected and has experienced disruptions and volatility, including longer transit times and higher rates. Some routes were completely unavailable due to ports and borders closures, which also led to a regional imbalance of equipment. Initially, as the pandemic began to arrive in Europe, there was an increasing trend to shift critical project equipment from ocean to air transportation where possible. The air freight market was hugely affected for an extended period of time due to the fact that about 80 percent of passenger aircrafts were grounded. There was substantial shortage of belly aircraft capacities, which in turn led to much longer lead times and substantially increased freight costs — up to five times higher than usually expected.

Nevertheless, early in 2020 we saw positive forecasts for the global project market, and deugro started the year with a strong project pipeline covering a diverse range of industries. For those projects already in execution, we needed to focus on ensuring that we could design and deliver solutions to both the operational and the business continuity challenges we face.

Q: Have these been resolved, or have you found a way to work around them?

A: Moving project cargo during the global Covid-19 pandemic has been more challenging than ever, requiring our technical specialists to provide the utmost focus on safety, security, vendor management, schedule, and commercials to provide end-to-end delivery for our clients. This has been a mammoth effort, but we have successfully managed to keep cargo moving over the last six months by working together with all our partners in the project logistics supply chain to ensure we can manage safety, schedule and commercial challenges together. Working hard to identify and predict risk, then taking the correct, decisive actions to help mitigate as much of the impact of the current situation as we can to deliver success and safety.

For example, in the air freight market, the past months have been extremely busy and interesting for us. The landscape of pricing and aircraft availability was changing quickly, and we were working day and night to keep our finger on the pulse of the rapidly changing situation. deugro has created transfer routing solutions, for example from Far East via Europe to Latin America, to compensate for temporary suspensions of several carriers and/or to reduce costs compared with the limited available routings from the origin markets.

The air freight market remains critically important, to support the urgent movement of cargo while many regular supply chains are disrupted. Especially, for ongoing oil and gas projects, we see increasing demand for air cargo as an expedited solution to close the gap caused by Covid-19 disruptions that affected production schedules and traditional transport routes. We might see similar dynamics when some of the projects that have been delayed or put on hold return to active stages.

Q: What changes to your procurement and operational policies have you implemented as a result of the pandemic?

A: deugro continues to focus on the safety and security of our employees, clients and partners, to follow our own high-quality standard, yet Covid-19 has severely impacted logistics supply chains globally. The deugro organization continues to maintain business operations, fulfill urgent demands, and manage the operational and commercial challenge faced against an environment of uncertainty and significant business disruption across the globe.

We have concentrated our efforts on managing supply disruptions from our top tier suppliers, while initiating new short-term sourcing processes to meet the demands faced due to supply constraints and commercial volatility. We are now proactively looking at the medium-term supply base, driving cost savings, commitment and security of supply by working intelligently and collaboratively with our partners to build a stronger and more resilient businesses for the future.

Q: Are you seeing any trends among your customers as a direct result of the pandemic and has it affected the way in which they interact with you?

A: We are likely to see a significant effect on capital investment decisions in new projects, across multiple industries and being delayed or canceled. Going forward, the project landscape will be different; investors and operators will take a much more cautious approach in their commercial spending and risk taking.

For most logistics companies it will be very difficult to plan and predict what the business environment will look like in 2021 and beyond. Most companies must deal with many uncertainties, as most industries remain fickle until such time the global pandemic is manageable. At the same time, we see a lot of geopolitical unstableness which adds to already challenging times.

As we experienced following the 2014-2015 oil crisis, there were opportunities for smaller and lowerrisk projects with independent developers to secure positive investment decisions. It was when these projects moved forward that it provided the project cargo industry opportunities, while also assisting to raise confidence in the market at the same time. As the oil and gas industry may continue to be heavily impacted by low demand and lower commodity rates, industries supporting a lower carbon future, such as power, renewables, infrastructure and mining, will likely gain investment momentum and growth in the post-Covid-19 world.

With a focus on renewable energies we see increasing activities in the Far East and the Americas, especially in the offshore industry. The power industry today is a mature market for freight forwarders to operate in, however there are still areas where added value can be provided. By investing time, energy and experience to understand client needs and the challenges of industry verticals, project freight forwarders can provide solution-focused, safe and cost-effective expertise in project logistics. It is the role of the freight forwarder to manage the challenges in logistics along the supply chain by detailed engineering studies, operational planning, and risk analysis from beginning to end of the project life cycle. deugro provides a fully integrated, highly technical, safe

“The power industry today is a mature market for freight forwarders to operate in, however there are still areas where added value can be provided.” – Tim Killen, deugro

and secure project solution to clients’ cargo while maintaining control and visibility every step of the way.

Q: Have you seen a slowdown in any types of orders or projects compared with others?

A: In the oil and gas sector, Covid19 has caused substantial economic slowdown globally. In combination with the oil production war between Russia and Saudi Arabia, this has led to the oil price hitting US$25 dollars per barrel, the lowest it has been for more than two decades. We hear from multiple clients in the oil and gas industry that many large projects are being delayed, cancelled or put on hold.

We are seeing a clearly visible trend in oil projects, which appear to have been hit harder and have not just suffered a temporary demand shock. Many energy producers have adjusted their long-term oil price outlook, writing off huge amounts of their exploration and production assets.

At the same time, we at deugro group are seeing a steady flow of positive news from our clients regarding liquid natural gas (LNG) and chemical projects. Our unparalleled track record with shore-based and floating LNG projects keeps us busy. Our strategic efforts to pursue projects in Africa seem to be very welcome by our clients. BB

Namrata Nadkarni assisted with the interview.

SHIPPING TRENDS

Collection of ice samples north of Svalbard, which is being done in order to achieve a better understanding of ice types in Norway’s area of responsibility.

CREDIT: KYSTVERKET

COLD FRONT

Arctic Still a Forbidden Frontier | BY CARLY FIELDS

Conquering Earth’s final frontier of the Arctic has been an icy ambition of shipping for decades. Talk of the vast potential to save money and time passaging the Arctic’s Northern Sea Route has held varying degrees of attention since the route was first conquered by Adolf Erik Nordenskiöld’s Vega expedition back in the 1800s.

The world has evolved much since that early Arctic exploration voyage, but there is still a long way to go before the region is “conquered” by shipping. There remain myriad challenges to safe ship operation in the far north and a post-Covid reassertion of sustainability, coupled with heavy pressure on the finances of both shippers and operators may suppress modern day Arctic exploration.

Calls from U.S.-based non-profit environmental advocacy group Ocean Conservancy may set a tone for Arctic shipping in the 2020s. Through the launch of an Arctic Corporate Shipping Pledge, the group has appealed to shippers to seriously consider their Arctic ambitions. The Pledge asks shippers to either avoid Arctic transshipment routes altogether or to promote precautionary Arctic shipping practices. Hapag-Lloyd, Kuehne+Nagel, CMA CGM and MSC have all signed up.

Andreas Kjøl, senior advisor at the Norwegian Coastal Administration, known as Kystverket, said that to totally ban Arctic traffic would be extremely difficult for Arctic States, including for Norway, which relies on Arctic trades for tourism and fishing activities. For him, greater regulation is a more effective route to safer shipping in the region: “We have not come to the stage where we would recommend stopping,” he said, “but our aim is to regulate more, monitor more and give better services to operators and captains for decision support.”

As a multipurpose vessel operator, SAL is acutely aware of the challenges in this delicate environment and remains committed to environmentally sustainable shipping. Whether the Covid crisis and increased sustainability movements will dent interest in Arctic waters shipments remains to be seen. But with or without Covid, SAL Managing Director Peter Sandberg said, sustainability and protection of the environment are central to the future of the shipping industry. Increased regulations – with an emphasis on the environment – could even increase the attractiveness of the Northern Sea Route in future, he said, as more environmentally friendly and technology-enabled ships enter the fleet.

REGULATING ARCTIC TRADE

When it comes to regulations governing Arctic trades, the Polar Code is the sector’s bible. The Code entered into force on Jan. 1, 2017 and covers the full range of design, construction, equipment, operational, training, search and rescue, and environmental protection matters relevant to ships operating in the inhospitable waters surrounding the two poles.

The Guideline for Arctic Marine Risk Assessment was added to the polar ship operations’ arsenal this year. The work program for the Guideline was initiated by Kystverket under the aegis of the Arctic Council’s Emergency Prevention, Preparedness and Response Working Group, or EPPR. The project proposal was submitted in 2017 with the project starting in earnest in 2018 and launched in April this year.

The Guideline is a web-based tool for conducting Arctic marine risk assessments. It contains best practice methods and data sources for conducting regional and area-wide risk

assessments concerned with ship traffic and merchant marine operations in the Arctic. The guideline aims to improve and ease the process of conducting Arctic-specific risk assessments by creating a common ground and incorporating unique Arctic risk factors. It was developed in cooperation by the EPPR, Kystverket, and classification society DNV GL.

Marine risk assessments were, until now, conducted based on information on generic conditions and risk factors found in waters around the world. But the unforgiving Arctic environment demands specificity.

“Operating in Arctic waters includes risks unlike other regions in the world, such as sea ice, rapidly changing weather conditions and vast distances to emergency response resources,” Jens Peter Holst-Andersen, chair of EPPR, said on the launch of the Guideline. “EPPR identified the need for a common approach to marine risk assessments in the Arctic after screening existing methods used in general marine risk assessments. We concluded that the methodologies, tools and data cover a variety of needs and purposes, but that specific Arctic risk influencing factors were rarely addressed.”

While the IMO’s Polar Code was clearly designed with the ship operator in mind, the Guideline was primarily developed for national and regional authorities. However, it does give a useful understanding of the general risk situation of operating in the Arctic and it also contains information which is relevant to safe ship operations in Polar waters.

Kystverket’s Kjøl said that there is always room for improvement when it comes to regulating safe operations in Arctic waters. New technologies, he added, are helping to make Arctic transits safer, such as improved broadband coverage, better communications, and the recent launch of highly elliptical orbit satellites to ensure continuous coverage above 75 degrees North. “These will give the possibility of high resolution and more frequent updates of ice and weather information that are crucial in those areas.”

COUNTING ON CREW

SAL’s Sandberg said that while the Guideline and the Polar Code certainly facilitate safe ship operations in Arctic waters, nothing compares to having an experienced master and crew.

“Firstly, you need a suitable icestrengthened vessel and then the people,” he said. “It requires knowledge to read the ice and its behavior, and not only the ice itself, but also about icing and other weather phenomenon which are typical in the Arctic, as well as suitable communication tools. These conditions have an impact on a ship’s equipment such as radar, antennas and so on.” SAL has its own “Winter manual” which is distributed to its fleet.

For Sandberg the biggest risk is an inexperienced crew with an unsuitable vessel in the wrong place at the wrong time. “This would lead to disaster, not only for the vessel, its crew and owner, but for the delicate environment as well.” SAL’s three newest P1-type ships are E3 iceclassed, equivalent to Finnish/Swedish ice class 1A. They join six PK 116 type MPVs with the same ice class in the operator’s fleet. SAL sees Peter Sandberg ice class notation as “added value” SAL for its newest ships. Sandberg explained that ice-classed vessels give flexibility to “operate in a bigger market area during wintertime and open opportunities for business.” He added that SAL is considering ice class notations for future orders because they allow operations in Arctic waters even during winter season.

Esper Boel is team leader for Agency and Projects at Royal Arctic Line, or RAL, a Greenlandic government-owned

POPULATION AND MINERAL GROWTH

Royal Arctic Line is looking ahead Boel is also excited about the rare to a surge in project cargo and break- earth mining project Kvanefjeld in the bulk cargoes to support planned south of the country. The large-scale growth of Greenland’s capital city rare earth project has the potential to Nuuk. become the most significant western

The government’s strategy for world producer of rare earths with Nuuk is targeting 30,000 inhabitants more than 1 billion tonnes of mineral by 2030; the current population is resources delineated in the project about 18,000. area to-date.

Esper Boel, team leader for Agency To keep up with current and and Projects at Royal Arctic Line, said expected demand, RAL has implethat there will be a massive need for mented a vessel-sharing agreement housing and related infrastructure for with Eimskip, Iceland’s oldest shipping that growth, project work that RAL will company. be intimately involved with.

Population growth aspirations for Nuuk will provide steady project work for RAL. CREDIT: RAL

SAL’s Svenja moves project cargo in icy waters around Rauma in Finland. CREDIT: SAL

company with roots dating back to 1774. RAL sees itself as a lifeline service to Greenland, and with that comes an obligation to carry all kinds of transports, small, big, light or heavy. That it understands ship operations in Polar waters is an understatement. RAL’s breadand-butter work is carrying big cranes, building material, machinery and more to and around Greenland. Once a year it also sends a vessel to the Antarctic with provisions. It has noted that ice shelves there are getting much higher, meaning that it is becoming more difficult to operate with a crane.

Boel described RAL as “world champions of operating in the Arctic.”

“We do not take risks and we prepare well,” he said. Some of the more remote destinations require RAL to carry barges and trucks as cargo to be able to load the real cargo to shore. RAL also has to work smartly within the very short summer with its 24-hour sunlight to enable project work to proceed as planned.

Boel raised concerns about the challenges of Arctic water for inexperienced ship operators. He noted that a regular voyage to the east coast of Greenland this year to bring provisions to the Danish Arctic Command had to break through 70 kilometers of a broad band of ice to reach its destination.

He is particularly worried about the patchwork charting of depths in Polar waters. “We have big challenges with this,” he said. “Last year, RAL was involved in possible oil exploration on the east coast of Greenland, but we found that the information on water depths and currents was very poor.” The project is on hold and RAL has asked for more accurate charting for when the project is revisited. Boel said that new technology such as satellite mapping

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should allow for easier and more accurate charting of Arctic waters.

Sandberg sees the Northern Sea Route as a viable option for full loads from Asia to northern Europe or for very time sensitive cargoes, although that does depend on the ice situation at the time of shipment.

TRAFFIC CONCERNS

Kjøl is concerned about rising traffic in Arctic waters. This year has seen the second-lowest ice extent, allowing more operators into Arctic waters, bringing increased risks with them. Kystverket contacted the operators of four vessels this year to inform them that it saw risks connected with their planned voyages.

“We contacted the cargo owner to get the schedule, and then we contacted each of the ship operators and suggested that they avoid routes close to the coast so that we could have a better response time in case something happened,” Kjøl said.

As a coastal Arctic state, Norway is looking to establish, through the IMO, recommended routes in its waters to make it easier to track and monitor Arctic traffic. These routes will take into account infrastructure, communications, seabed mapping, ice reporting, restrictions and more. Crucially, these will also allow the administration to narrow down the areas for search and rescue.

“This could also be in cooperation with other Arctic Council States, including Greenland,” Kjøl said.

In the future, Kystverket also plans to develop its reporting system for traffic, or it may choose to extend its ship reporting system to cover international Arctic waters. Trine Beate Solevågseide, international coordinator in the Maritime Safety Department at Kystverket, and program administrator for the Guideline, stressed the differentiation between national and international waters in the Arctic. “It

is limited what we can do in international waters,” she said.

A possible follow-on project to the Guideline will see Norway and the Arctic Council develop the Guideline with a focus on risk treatments and mitigations to further enhance the system. “Our main goal is to get people to use it and to give more support for ship operators.” This project is at a preliminary stage and still needs EPPR approval and funding.

If passaging through the Arctic was easy, offering the route as standard for breakbulk and project cargo would be a no-brainer. But there remain many challenges to overcome, and while regulatory progress is helping to clear the snow from the path, a cold wind still blows against Arctic transits. BB

Carly Fields has reported on the shipping industry for the past 20 years, covering bunkers and broking and much in between.

CATCHING A FUGITIVE

Controlling Dust in Port Operations

Significant atmospheric dust arises from the mechanical disturbance of granular material exposed to the air. Dust generated from these open sources is termed “fugitive” because it is not discharged to the atmosphere in a confined flow stream.

Today’s ports and terminals are under an ever-mounting burden to comply with air and water quality regulations when handling bulk materials such as cement, fly ash, coal, pet coke and other bulk materials. Fugitive dust escaping from dry bulk operations can also be an expensive annoyance to neighboring commodities that can be contaminated by these operations.

Cargo handling and movement to and from storage areas may cause runoff, spills or leakage of elements, which could possibly include toxic substances, biohazardous organic matter, or oily compounds.

Dry bulk operations can cause substantial damage to water quality – and therefore also to marine life and local ecosystems. These consequences may include bacterial and viral contamination of commercial fish and shellfish, depletion of oxygen in water, and bioaccumulation of certain toxins in fish.

Dust dispersal on land may cover vegetation and change local habitat conditions. If toxic or harmful substances are included in dust emissions, the health of working port employees and neighboring residential communities are threatened.

The potential health effects of particle pollution are related to the makeup and size of the particles. The smallest particles pose the

Capt. Georges LaRoche. CREDIT: PAGE MACRAE ENGINEERING

greatest health problems because they can be inhaled deeply into the lungs. The health effects of inhaling particle pollution include respiratory distress and increased severity of lung and heart disease, according to a New Hampshire Department of Health Services 2019 report. Fugitive dust can also reduce visibility, which can result in driving or work-site accidents.

Increasingly stricter regulations, air monitoring and public pressure has made it much harder to complete handling operations of dusty cargoes such as cement, coal and grain. Several port terminals around North America are experiencing a growing number of costly delays due to fugitive dust issues during the processes.

The introduction of new goods and valuable cargoes is a key component to the sustainability and growth of any port. With the major push to renew decaying public and private infrastructure in North America, and construction of new infrastructure, new cargoes such as cement and fly ash have become a valued addition to any port operations. The problem, however, is that many ports lack the equipment and infrastructure to handle such products while staying within the regulatory parameters. To date, pneumatic and “enclosed screw” systems have been the “go to” equipment, but the high cost and maintenance along with sporadic contracts has made this type of equipment almost obsolete in the North American market with its special characteristics.

So, what are the most commonly used and upcoming solutions for fugitive dust emissions in the ports? In North America, the most common method of dust suppression during the processes has been to use “misting,” tarping and warehouse storage of the materials. Problems occur with these methods, as misting or watering down of the cargo can often not only damage cargo but produce toxic runoff into the water system.

Globally, some companies have tried new solutions, and an innovative and well-established company In New Zealand, has addressed fugitive dust in several ports around Australasia, Taiwan, South America, and now North America. In New Zealand and Australia, regulations tightened years ago so that only absolute minimal fugitive dust emissions are tolerated in most ports in both countries, where several have air monitoring stations. Page Macrae Engineering Ltd., a family owned company founded in 1955, recognized this issue years ago and set in motion the creation and production of Dust Suppressing Hoppers and Crane Grabs (unique patented grab seal), especially designed to minimize or eliminate any leakage of fine, dusty cargoes

during handling. They are now the leading producer and supplier of Port Dust Suppression equipment in the world, as well as many other types of cargo-handling equipment, including automated container loading systems and remote release log lifters.

Port of Newcastle – Hopper Grab Solution

The Port of Newcastle is the largest port on Australia’s east coast. In 2018, Page Macrae Engineering supplied two new Enviro-Max 50e eco-hoppers and mechanical chain grabs to the Port of Newcastle to be used for the unloading of a variety of products including phosphate, fertilizer and animal feed, therefore enabling the company to meet environmental compliance requirements.

“Page Macrae Engineering is committed to environmental protection and the principles of sustainable development,” said Peter Swan, General Manager, Sales and Marketing, Page Macrae Engineering.

The time to address the issues of particulate matter dispersion in both air and water is here, and these challenges are being addressed on many fronts. Where fugitive dust has not yet reached the priority level of carbon and other gaseous emissions in ports, the problems that do derive from the larger particles produced by fugitive dust are clear and evident.

Capt. Georges LaRoche holds a Masters license and spent 30 years sailing internationally and on the Great Lakes. He lives in Ottawa, Canada and now works with Page Macrae Engineering. n

Above: Enviro-Max50e Lima, Peru. Below: Adelaide, Australia Enviro-Max50e Adelaide - Linx 1.

HEARD AT BREAKBULK EUROPE DIGITAL SPECIAL

Carriers Find Themselves in a Spot

Navigating Beyond Covid-19, Market Downturns

BY GARY BURROWS

Breakbulk asked industry ocean carriers for three words to describe the current ocean transport market. The results were as mixed up as the current operating environment.

During a Breakbulk365 webinar session, which was part of Breakbulk Europe’s Digital Special event, BBC Chartering’s Ulrich Ulrichs simply gave the answer of: “spot.”

Other panelist went with four words. “Living in interesting times,” responded SAL Heavy Lift’s Jens Baumgarten. “Uniquely unprecedented and unpredictable,” said Felix Schoeller of AAL Shipping, while Dominik Stehle of United Heavy Lift, answered, “Uncertainty is never positive.”

Ben Collins of MSC kept it to three words: “Challenging, demanding, uncertain.”

The carrier executives agreed that the double-whammy of the Covid-19 pandemic’s impact on the global economy, coupled with depressed commodity prices, particularly oil and gas, have placed the breakbulk and project cargo spot market under severe pressure. And carriers’ required compliance with the International Maritime Organization’s 2020 low-sulfur fuel requirements served to exacerbate the market.

“The black swan Covid-19 arrived and suddenly the bunker discussion was not a big topic anymore,” said Ulrichs, CEO of BBC Chartering.

“The last couple of years have been tough, and I personally don’t see the light at the end of the tunnel,” said Stehle, chief commercial officer for UHL. On top of the external economic pressures, he said the multipurpose vessel fleet’s continued overcapacity is a “self-inflicted problem for the carrier community.”

“The market will only correct itself when new environmental rules are imposed and financial sources dry out,” he said. “Companies that create value will always sustain, and companies that can easily be replaced by another player will die.”

Cost control is first and foremost among carriers, “and it will remain that way for a long time to come,” as the heavily asset-based industry navigates forward, Stehle added. “Whoever does not understand that will be forced out of business.”

OPPORTUNITIES

Schoeller, general manager, AAL Shipping, viewed the market circumstances as an opportunity to support clients as they face disrupted supply chains, by being responsive and flexible.

Baumgarten, SAL Heavy Lift’s commercial director, agreed, noting that while some markets struggle, opportunities have developed among renewable projects, as well as some rebounding in Asia, Africa and the U.S.

Reacting to the evolving pandemic response, Ulrichs said, “comparatively, our industry has done reasonably well. Most carriers adapted and found new solutions.” It has forced carriers to be “super flexible” to adapt to changing circumstances.

The market downturn also affords carriers the opportunity to look at their processes, systems and cost structures “to be efficient and lean and mean for the future,” Ulrichs said.

The evolving circumstances of the last six months has challenged the planning of shippers, receivers and carriers, and Collins, MSC’s global project cargo manager, said the carri-

Clockwise from top left: BBC’s Ulrich Ulrichs; MSC’s Ben Collins; Breakbulk’s Leslie Meredith; UHL’s Dominik Stehle; AAL Shipping’s Felix Schoeller; and SAL Heavy Lift’s Jens Baumgarten. CREDIT: HYVE GROUP

er’s “thin-line management structure” has enabled it to be flexible and fluid.

While some carrier executives pointed to uptakes in some markets, Stehle said that even with rebounds in commodity pricing and solving Covid-19, the heavy-lift segment is still vulnerable to trade policies of big economies like the U.S. and China, with tariffs greatly impacting how materials are procured and sourced now and in the future.

There is already evidence of shifts to alternative sourcing, including near-shoring, but that is not possible in all markets, such as Europe and the U.S., “because the work force is simply too expensive,” Stehle said. “It always comes down to the bottomline price.”

Ulrichs added Russia and some Middle Eastern countries to the trade complexities. However, “the customer will find some way to source their product, and one day it comes from Europe or South America, then you have to be flexible and follow the cargo and adapt to the requirements of clients,” he said.

Schoeller said that despite some trade downturns, carriers should be resilient when serving their customers’ markets. “It’s prudent to look at trade routes and make smart decisions; not shift too quickly … because our customers rely on us.”

“It’s a spot-driven market,” added MSC’s Collins. “Carriers that have the best flexibility stand a better chance of taking what project cargo is out there. For the long term, we’ll have to see how it shakes out.”

CAPACITY CONCERNS

Ulrichs said that the MPV fleet requires further scrapping, and he is hopeful an increase in oil prices will revive oil and gas projects. “We need the oil prices to rise, then I think some of the older ships will get inefficient and disappear. There has been some scrapping activity, but I think the fleet will be at least stable if not shrink on the heavy-lift project carrier side.”

When asked at the webinar’s conclusion where the tipping point would be for oil prices to bring meaningful revival, responses fell within the US$70 to US$100 range to jumpstart projects, and also to raise bunker prices to help cull the market.

Most carriers concluded that there was little in the way of further mergers and acquisitions among carriers – or partnering with other industry verticals in order to expand the carriers’ range of product offerings.

“The time for speculative investments is over,” Stehle said. “Our strategy going forward is to only invest in assets we know that we can make money with … anything else does not make sense, because it’s so volatile you simply can’t afford anything.”

While assets change hands during mergers and acquisitions, that doesn’t remove capacity from the market, most of the carriers agreed.

However SAL’s Baumgarten did not believe that the industry has seen the end of mergers and acquisitions. “The industry is still not healthy at all, on both sides … not only the shipping sector, but the freight forwarding sector and the client side … we will see more changes in the future.”

As if foreshadowing, SAL Heavy Lift on Oct. 5 said that it had acquired a “major stake” in Americas heavy-lift carrier Intermarine, which will operate as an independent brand.

MSC has grown its fleet without mergers and acquisitions, which Collins criticized for bringing limited benefit and a great expense to be honest. Staffing and costs tend to bloat. Further, the acquisitions often fail to retain the new business assumed as part of the acquisition. “Many of the clients and forwarders feel a bit nervous to trust cargo to companies that recently acquired others,” he added.

UHL has entered into a partnership with Ocean 7 in Asia, but Stehle said that’s merely a “cost-sharing agreement.”

Ulrichs is reluctant to consider hooking up with other companies to extend the value chain beyond its core competencies. “If we were to try to expand beyond ocean transportation … we would get issues with a lot of our clients. We would be competing with them.”

He said BBC will stay close to clients, watching their plans for coming years and their requirements. “If we have beautiful ships that nobody wants, it doesn’t help much.”

BBC Chartering adapts to the market with its diverse range of vessels, both owned and chartered. “But we need to be alert and very sharp to adjust, because you don’t charter and build ships overnight and you don’t get rid of ships overnight.”

Environmental regulations over the next 30 years should also impact the MPV fleet, Stehle said. “I’m hoping that it will drive older tonnage to the scrap yard.”

As vessels extend beyond an efficient life cycle, newbuildings will begin, but that is dependent upon the growth and development of alternative fuels – and the ability to source them on a global scale, carriers said.

Collins said MSC is “investing quite heavily in a biomass trial from Rotterdam.” However, “even if the trial proves successful … it needs to be available on a global scale to be able to support the industry. It can’t just be a few ports here and there.”

Developing the next generation of MPV vessels, as well as niche ships is challenging for such a small carrier segment, Ulrichs said. “We can let others try … and learn from them. If the big container guys have something that works, we can adopt that later because we are too small to stem these kinds of investments. We can be a little bit smarter as we go.” BB

View the webinar at: https:// breakbulk.com/Articles/carriers-findthemselves-in-a-spot

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Sustaining Through Covid-19

Focus on Sustainability More Vital than Ever

Despite the dramatic impact of the together in a collaborative way. Covid-19 pandemic, the drive towards However it has strengthened us in a sustainability must remain a core few areas. We became an essential function within the logistics industry, service, we feed communities, deliver agreed panelists of a Breakbulk365 medical supplies and we need to keep webinar on Sept. 30. our people safe.”

Sophie Punte, executive director, “For us, it’s most important to Smart Freight Center, said the pan- stay resilient and create good soludemic’s impact has three dimensions: tions,” said Uwe von Bargen, director economic, environmental and social. for environmental and sustainability

“From seafarers to truck drivers and issues, bremenports. “We need to farmers, Covid affected so many peo- widen our view of topics, and what we ple in society in so many ways,” she need for the future resilience of our said during the webinar, which was part society … collaboration is necessary of the virtual Breakbulk Europe event. at local, regional and international

If anything, the Covid crisis “is in a levels.” way a preview of what will happen in Paul Holthus, founding president the world if we’re not making it more and CEO, World Ocean Council, modsustainable,” she added. erator of the panel said, in his opening

Roger Strevens, vice president remarks: “The logistics sector for a lot – global sustainability, Wallenius Wil- of people isn’t something that comes helmsen, acknowledged that “it’s really to mind immediately when thinking apparent to us that this is a challenge about direct ocean users. It’s that part bigger than ourselves.” However, “it’s of the network that holds together not a time to step back and ease up the diverse set of supply chains and on our vessels. We need to use this operation of those supply chains.” time to move toward a deeper level of However, the logistics industry is impact on the business.” “awakening” to the fact that sustain-

“Covid hasn’t affected our vision ability is no longer a side issue, Punte and goals around sustainability,” said said. The industry is realizing that inteJason Pratt, vice president – group grating sustainability within business health, safety and environment, DP strategies brings internal and external World. “A few projects have been stakeholder value, and that companies delayed, and we can’t always get should make sustainability reporting

part of its annual reports, rather than monitoring separately.

“Sustainability is not a bolt-on corporate activity,” Strevens said. “It’s central to our thinking and we expect to see it develop more widely across business. It must be deeply ingrained in corporate strategy. If you don’t have strategy, you have hope, but hope is not a strategy.”

Strevens said that three things are driving the importance of sustainability: regulation, innovation and demand. The shipping industry is entering a “golden era of regulatory development,” he said. Innovation brings increased transparency, as industry embraces technology solutions.

For demand, he said breakbulk customers’ minimum requirements are increasing. “Unless you do X, Y or Z, you’re not going to be considered for the business,” he said.

In response to that demand, some logistics companies will question whether customers are willing to pay more for sustainability measures. However, he said solutions won’t always come with increased cost, but even so, those costs bring value in increasing resilience and reliability that value the customer and the provider. bremenports recognizes multiple drivers of sustainability, von Bargen said.

The German port group has developed its green port strategy over 10 years, and this has become a core of its corporate philosophy.

As an industry infrastructure provider, the port seeks sustainable solutions as it weighs future investment, and as it relates to the maritime business and the community surrounding the port. “We ask (stakeholders) what they need and want and look for good solutions to serve them.” BB

Clockwise from top left: Smart Freight Center’s Sophie Punte; DP World’s Jason Pratt; Wallenius Wilhelmsen’s Roger Strevens; Breakbulk’s Elizabeth Rankin; bremenports’ Uwe von Bargen; and World Ocean Council’s Paul Holthus. CREDIT: HYVE GROUP

View the webinar at: http:// breakbulk.com/Articles/sustainingthrough-covid-19

Permanent Shift to Project New Normal Needed

Industry Told to Wake and Wise Up to Disruption

BY CARLY FIELDS

The breakbulk industry needs to wake up and wise up. As the project cargo and breakbulk sector enters the fourth quarter of 2020, stakeholders need to realize that pandemic-related disruption is here to stay, according to industry professionals.

Speaking at a Breakbulk365 webinar, Arnoud Dekkers, commercial director at 4D Supply Chain Consulting, said the industry’s focus needs to shift to the new normal.

“We really need to change the mindset, be more proactive and adapt to the new normal.” Dekkers was speaking at the opening webinar to this year’s virtual Breakbulk Europe event held in October.

He said that companies today are asking a series of common questions: • How long can our business sustain disruption? • What will our industry look like in the next 12 months? • How long will it take for our business to recover after Covid? • What steps can be taken to provide organizations with the resilience to ensure the required level of continuity.

“We see continued supply chain disruption, new outbreaks, and newly imposed restrictions – companies need to adapt and improve their processes, their people and their systems in order to survive,” Dekker said.

Other panelists noted that change is happening at a fast pace, with Javier Lopez Oliver, senior logistics project manager for Abengoa, explaining that the engineering, procurement and construction company is now managing supply chains in a much more efficient way. “The reality is that you don’t know where disruption is going to happen, so you have to manage the short and long supply chain at the same time,” he said.

CARRIER CHALLENGES

Air and sea carriers on the panel spoke of the “numerous challenges” that they have faced since the start of the Covid-19 pandemic, acknowledging that no one had experience to draw on to address a crisis of this kind.

AAL Shipping Managing Director Kyriacos Panayides noted a significant drop in cargo demand with growth rates moving from positive to negative. “That has been a real impact for the whole MPV industry and we felt it from all industry sectors,” he said. However, he was more optimistic that positive growth would return in 2021.

Pointing up the potential bright spots, Panayides highlighted construction and renewables – particularly wind energy. However, project work in general is dependent on government stimulus, the impact of second waves of the pandemic and the discovery of a vaccine.

Ekaterina Andreeva, commercial director at Volga-Dnepr UK, said that she was optimistic for the project cargo sector, and noted that current volatility is dependent on individual countries and companies.

Volga Dnepr faced unusual competition during the pandemic: passenger aircraft transporting cargo in the passenger compartment, something that Andreeva described as the “new normal” for the company in 2020. Balancing out that competition was a new market for Volga Dnepr: transporting personal protective equipment.

“Our normal project cargoes completely stopped as people sat and waited,” Andreeva said. “We discovered a new market, PPE, a brand new segment that only started this year.”

She noted a gradual recovery for traditional cargoes from June and expected that trend to continue.

TREATMENT OF CREWS

Johan-Paul Verschuure, project director at Rebel Group, asked the two carriers on the panel to compare the treatment of air crew and pilots with ships’ crew and captains over the pandemic.

Andreeva noted that while it was unclear at the start of the pandemic how pilots would be treated, frequent testing – sometimes before and after a flight – was quickly put in place to ensure that they could continue to work across borders.

Contrast this to the roadblocks to crew changes for ship operators, an issue which has turned into a humanitarian crisis for fatigued crew who are working well beyond their contracted rotations. Panayides said that AAL has had some crew stuck on board for 12 months and has lobbied hard with governments to change the way they treat ships’ crews.

“The crew is the crucial element of the trade,” he said. “We have started to see unrest on our ships, with some crew being psychologically affected by the fact that they are unable to return to their family.” BB

View the webinar at: http://breakbulk.com/Articles/wake-up-wise-up

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Adopting Technology by Storm

With Maturing Technologies, Industry Poised for Next Steps

BY GARY BURROWS

The breakbulk and project cargo industry faces a “perfect storm,” with technologies relatively mature and developing an abundance of data.

“I think the infrastructure is there, it needs to get to a point where technology is going to leverage the efficiency gains,” said Aljosja Beije, director of BlockLab, during a Breakbulk365 webinar on Oct. 1.

Solutions are not one-size-fits-all, nor found in one miracle innovation, Beije added during the session, which was part of the Breakbulk Europe Digital Special.

“It’s not going to be one single technology that’s going to transform the industry or allow us to get the efficiency gains we’re looking for,” he said. “It’s normally a combination of different technologies to solve a particular issue … the sum of these technologies is bigger than the parts.”

Of course with his company’s focus being blockchain solutions, he acknowledges that focus, but notes, “there has been a lot of talk about using blockchain to solve all of the world’s problems.”

Blockchain allows validated data, with numerous proofs of data integrity. It also can certify the transfer of ownership in a shipping transaction, enabling a negotiable electronic bill of lading, the speakers said.

In response to an audience survey that asked which technologies would impact the breakbulk industry in the next five years, the panelists roughly agreed that internet of things, platforms and big data analytics were at the core, with perhaps artificial intelligence and blockchain shortly behind.

“Especially starting with big data analytics. That’s especially where freight forwarders and freight owners could do a lot more in this kind of field,” said Sven Hermann, managing director ProLog Innovation and professor for logistics and supply chain management, for the Northern Business School.

Which technologies will impact the breakbulk industry most in the next five years?

Big Data Analytics 23% IoT 15% Blockchain 15% Platforms 14% Artificial Intelligence 9% Drones and Aerial Vehicles 9% Autonomous Equipment and Vehicles 4% Cloud 4% Robotics and Automation 4% 3D Printing 3%

This cooperation would allow them to better evaluate projects, cooperate among different freight owners, in order to better plan projects. Further it would enable the freight owner to leverage logistics services providers, while helping LSPs to better evaluate and optimize the supply chain, he added.

‘CLOSE THE GAP’

In response to another survey question asking what is the biggest challenge for a company in implementing new technology, webinar viewers ranked “lack of vision/ strategy,” “lack of skills within the company,” and “training and development.”

Hermann agreed that he saw a lack of competence among small and mid-sized LSPs.

“Closing the gap is something where we try to do it hand-in-hand with partners that are open to innovation,” he said. “Then it’s easier to close that gap than going it alone.”

Beije agreed. “Rather than trying to develop every functionality yourself, you’re linked to platforms where services are offered by providers that operate on that platform. Infrastructure is based on what you need and you can plug-and-play. I believe these processes, especially in the order processing, have huge potential to collaborate between different parties – even competitors – without sacrificing your unique selling points for your clients, while creating efficiencies.”

Beije did note that breakbulk requires more careful analysis of the types of cargoes and situations involved. “Compared to other areas of logistics or containerized trade, they have a huge advantage in that the industry is standardized – we’re

“What we’ve seen in general is that people are aware digitalization is the way to go. Covid has brought remarkable speed in which people want to digitize their activities and processes.” – Aljosja Beije

talking 20-foot or 40-foot .. and between the top 10 ports. The identification is easier.

“When you talk about breakbulk, it gets more complex, but also the infrastructure for projects in some countries is not that far developed. Try to get a 5G connection in some of these areas.”

Leif Arne Strømmen, vice president – innovation and project logistics, G2 Ocean and the webinar’s moderator, noted that, as a carrier, “we have a long way to go to digitize the customer journey.”

He noted there are a number of digital freight forwarders and ecommerce providers up-and-coming that could help pull the breakbulk industry forward. “To some extent, we’ll compete with these players but also work with them; how does the breakbulk industry close the gap?”

Hermann said that, while blockchain participants operate in a trusted environment, he sees the need to “design something for a trustless environment,” which would operate with an electronic bill of lading.

Technologies can present all sorts of bells and whistles, Beije said, but it all reverts back to managing the data to improve processes.

“I was talking a couple of months ago with somebody from Tesla. They claim they have perfect visibility and they know exactly where the car is when it’s being transported.

“On the other hand, my car was delivered two months late,” he added.

What is your biggest challenge as a company when it comes to implementing new technology?

Lack of vision/strategy

Lack of skills within company

Training and development

Finance issues

Pushback from employees

Availability of data

Other 26%

23%

19%

10%

10%

10%

3%

What is most important reason to become more digital?

To improve efficiency of processes 41%

To remain competitive 28%

To better meet customer expectations 22%

To create more visibility throughout the supply chain 9%

COVID ACCELERATION

The worldwide shift to remote officing among businesses has helped to evolve the process of assimilating technologies, the speakers agreed.

“What we’ve seen in general is that people are aware digitalization is the way to go,” Beije said. “Covid has brought remarkable speed in which people want to digitize their activities and processes.”

Certainly the need to remove paper from the process during a pandemic is the most obvious push towards going digital. “What we’ve seen in the last weeks and months is that all are satisfied to change to remote work,” Hermann said. We’ve given employees sufficient technologies and all companies are happy with it. Now we need to see how to manage going forward. Even when Covid is over and we can see each other again, I still think there will be lasting change on this people business.” BB

View the webinar at: http:// breakbulk.com/Articles/adoptingtechnology-by-storm

THANK YOU TO THE INDUSTRY CONTRIBUTORS WHO KEPT OUR COMMUNITY TOGETHER IN 2020

4D Supply Chain Consulting • AAL Shipping • Abengoa • Allianz Risk Consulting • Amos Logistics • Amy Kan Consulting • Apostleship of the Sea - Diocese of Beaumont • ATS Trucking • AYOP Amsterdam Ijmuiden Offshore Ports • BBC Chartering • Bechtel Corp. • Bechtel Global Logistics • BIMCO • BlockLab • Blue Water Shipping • Bolloré Logistics • bremenports • COSCO Shipping Specialized Carriers • Crowley • DHL Global Forwarding • DNV GL • DP World • Drewry • Export Import Bank of the U.S. • Fluor • Fracht USA • G2 Ocean • GE • GE Renewables • Gecko Robotics • Global Shippers Forum • Greenroad International Logistics • Juergen Osmers • Halliburton • Hansa Meyer Global Transport Co., Ltd. Thailand • Intermarine Americas • International Trade & Transportation • LV Shipping • Mammoet USA South Inc. • McDermott International Inc. • MSC • Nacero • NASA Johnson Space Center • NNR Global Logistics • Northrop Grumman • NuScale Power • Ørsted Energy • Page Macrae Engineering • Port Houston • Port of Beaumont • Powerchina Hubei Electric Engineering Corporation Limited • Proactive Change • ProLog Innovation • Rebel Group • SAL Heavy Lift • Seafarers International Union • Shey-Harding Executive Search • Smart Freight Centre • Spaceflight • Thomas Damsgaard • Tradepoint Atlantic • TSL Shipping & Trading • United Heavy Lift • University of Houston • UTC Overseas, Inc. • Vogt Power International • Volga-Dnepr • Wallenius Wilhelmsen Ocean • WISTA Germany • WISTA Netherlands • Wood • Wood Mackenzie • World Ocean Council