Breakbulk Magazine July/August 2015 by Breakbulk Events & Media

Moving Targets n All in the Energy Mix n Solving a Global Puzzle n Starting From Scratch

JULY/AUGUST 2015

BANKING ON CHINA

China Expands Influence with New Formula for Asian Infrastructure

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contents

16 SECURITY

ADVERTORIAL EXTRA

MOVING TARGETS

GULF COAST SPECIALISTS

Don’t Discount the Ongoing Piracy Threat

26 ENERGY FORECASTS

ALL IN THE ENERGY MIX

Race is on Between Demographics, New Technologies

36 CARRIER PROFILE

SOLVING A GLOBAL PUZZLE

AAL, Peter Döhle Partnership Makes Logical Sense

8 BANKING ON CHINA

China Expands Influence With New Formula For Asian Infrastructure

cover story

44 MARKET SPOTLIGHT

CARVING A GLOBAL FUTURE Timber No Longer Comes in Neat European Packages

62 MIDDLE EAST

DRIVING REGIONAL DEVELOPMENT Abu Dhabi’s Industrial Growth Mirrors Cargo Volumes

74 INFRASTRUCTURE

STARTING FROM SCRATCH African Projects Test Limits of Infrastructure

6 Editorial n 66 Airbus, DHL Showcase Multimodal Approach n 80 Wheels of Commerce n 82 Synthetics vs. Steel 88 Breakbulk Europe Recap n 102 Breakbulk Index n 106 The Slow Season Cover image design: Catherine Dorrough / Source: Shutterstock 4 BREAKBULK MAGAZINE www.breakbulk.com

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editorial

INITIATIVE VS. INERTIA

EDITORIAL DIRECTOR Gary G. Burrows / +1 904 535 5460 gburrows@breakbulk.com

DESIGNER Catherine Dorrough

ome 50 years ago, car rental company Avis took an unconventional route in an advertising campaign. Championing itself as an underdog to market leader Hertz, Avis’ slogan was “When you’re only No. 2, you try harder. Or else.” By narrowing margins, China is considered the world’s No. 2 economy, trailing the U.S. Burgeoning exports and aggressive expansion into foreign markets fueled China’s meteoric double-digit economic growth. That growth has floated back to earth, but its efforts have not waned; instead it has shifted gears to a new normal, with steady, less robust growth tied to its internal consumption engine. In this issue, Eric Johnson explores the Beijing government’s new infrastructure and trade initiatives: the Asian Infrastructure Investment Bank, or AIIB, a multinational financing vehicle, and its One Belt One Road initiative targeting central and Southeast Asia through bilateral deals with dozens of countries (“Banking on China,” page 8). Western business leaders are enthused that this dual-pronged effort will support underdeveloped Asia while opening foreign companies’ access to China’s market. That enthusiasm doesn’t appear to be shared by the U.S. government, which refused to join as a founding member of AIIB, perhaps seeing it as unwelcome competition to the U.S.-led World Bank, despite both having the same alleged altruistic motives for world economic growth and development. That would be yet another recent example of the U.S. putting politics over its self-touted role as a driver of economic growth. On July 1, the charter lapsed for the Export-Import Bank of the United States, when Congress failed to extend the bank’s authority. Minus a charter, Ex-Im can’t authorize new transactions, only maintain pre-existing loans and guarantees. The Ex-Im Bank and its guarantees have proven vital to U.S. businesses looking to sell abroad. Export credit agency support is often the required ante for public and private foreign business opportunities. If U.S. companies can’t get into the game, competitors from other companies are well placed to take their seats. Besides Ex-Im Bank, there are 85 export credit agencies operating in nearly 60 countries around the world. 6 BREAKBULK MAGAZINE www.breakbulk.com

Near the front of the pack is China, whose lending institutions supported about US$58 billion in export credits in 2014. By comparison, Ex-Im Bank financed the sale of US$27.5 billion in exports through more than 3,700 transactions, Gary Burrows including nearly US$16.6 billion in manufacturing exports. Despite the obvious benefits Ex-Im Bank provides U.S. businesses, its reauthorization is just another can Congress has been kicking down the road. Ignoring overwhelming support from businesses and trade agencies such as the U.S. Chamber of Commerce, conservatives decry the bank’s loan guarantees as nothing more than corporate welfare. William G. Schubert, a former U.S. Maritime Administrator under George W. Bush, detailed Ex-Im Bank’s role in our January-February issue (“Banking on Ex-Im Bank,” page 32). And in a recent letter to the Houston Chronicle, he called out those in the beltway that “would rather kill a critical exporting tool and the thousands of jobs it supports, than stand up to their misguided financial contributors.” Senate Majority Leader Mitch McConnell, R-Ky, said the Senate would vote on renewing the bank this summer. In irony of ironies, that vote could come as an amendment to a transportation funding bill. Amid the nation’s crumbling infrastructure and vast business potential for resurrecting U.S. transportation, energy and essential systems, Congress has repeatedly proven itself incapable of action for decades on a meaningful transportation bill. With its latest initiatives, China has its infrastructure goals covered, as its economic efforts amplify the belief that its move from the world’s No. 2 economy to No. 1 is merely a question of not if, but when. Maybe when the U.S. finds itself in the backseat, it may motivate its government to trade political antics for tangible action. Or else.

NEWS EDITOR Carly Fields carly@breakbulk.com

REPORTERS Alan M. Field Herman K. Trabish Eric Johnson Mark Willis Mary Shacklett BREAKBULK EDITORIAL BOARD John Amos Amos Logistics

Ed Bastian

BBC Chartering

Murray Cooper

McDemott International Inc.

Etienne de Vel Fednav Belgium

Dennis Devlin Panalpina

John Hark

Bertling Project Logistics

Dennis Mottola Bechtel Corp.

William Moyersoen

ArcelorMittal Antwerp Logistics

Albert Pegg

Antwerp Port Authority

Dirk Visser

Dynamar D.V.

Grant Wattman

Agility Project Logistics

MANAGING DIRECTOR Alli McEntyre / +353 87 381 4021 amcentyre@breakbulk.com ACCOUNT MANAGERS Kathleen Pinson / +1 678 954 0552 kpinson@breakbulk.com Manager for West, East & North Africa Kingsley Ekweariri / +1 353 89 952 4754 kekweariri@breakbulk.com

HEADQUARTERS Clifton House Lower Fitzwilliam Street Dublin 2 Ireland To subscribe, email bb.breakbulk@adsg.info, or call from inside the US +1 855 613 8186 between 8:00 am and 5:00 pm CST. A publication of ITE Group plc Transport & Logistics business 105 Salisbury Road London NW6 6RG, UK.

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cover story

BANKING

ON CHINA

Design: Catherine Dorrough / Source: Shutterstock

China Expands Influence with New Formula for Asian Infrastructure

8 BREAKBULK MAGAZINE www.breakbulk.com

JULY-AUGUST 2015

By Eric Johnson

he Chinese have a wellearned reputation for building impressive skyscrapers and, as recent events in the South China Sea have shown, even islands in the middle of the ocean at breakneck speed. China is equally famous for the slow, methodical pace with which it’s been opening up its economy to the rest of the world over the past 40 years. The Beijing government’s ongoing “reform and opening up” campaign began in the 1970s, when then-leader Deng Xiaoping gave domestic manufacturers a green light to partner with foreign companies. China opened wider by launching the Shanghai Stock Exchange in 1990, joining the World Trade Organization in 2001 and hosting the Summer Olympics in 2008. Now, the campaign has reached another milestone with huge implications for the project cargo industry. The Beijing government is rolling out a new infrastructure and trade initiative balanced on two, mighty pillars: an international development bank with deep pockets coordinated by China, and a diverse set of trade and development programs arranged by China through bilateral deals with dozens of countries. This ambitious initiative is expected to strengthen China’s economic ties with the rest of the world while driving major construction projects across Asia for years to come. Over the next few years alone, contracts worth billions of dollars could be signed for infrastructure projects in underdeveloped regions from Indonesia’s islands to Uzbekistan’s mountains. And that could be just the beginning since, according to one study, the value of all regional infrastructure demand now exceeds US$8 trillion. In raising the initiative’s first pillar, Beijing has conceived and organized a multinational financ-

ing vehicle called the Asian Infrastructure Investment Bank (AIIB). The bank is expected to be ready to process project funding applications by the end of 2015. As of June, China and nearly 60 founding-member partners from Britain to South Korea had pledged contributions to AIIB’s start-up pool of US$50 billion. Bank officials say the pool eventually could expand to US$100 billion. Loans, loan guarantees and direct investments issued by AIIB could begin flowing as early 2016. The money would be used to build highways, railroads, port facilities, industrial parks, power plants and much more. Separately, China has organized an Asian development initiative called One Belt One Road (OBOR) that targets what Beijing officials are calling the “belt” countries of central Asia and “road” countries of Southeast Asia. Through OBOR, China plans to finance construction projects and trade programs by tapping Beijingbased policy banks. Chinese engineering, procurement and construction firms; transportation equipment manufacturers; and resource companies are expecting a hefty share of the contracts tied to bilateral deals with participating countries. According to a recent OBOR analysis by BMI Research, the Chinese government “has traditionally been very willing to provide financial assistance through entities such as the Export-Import Bank of China to regions in need of infrastructure investment” such as Sub-Saharan Africa. These deals “have typically led to Chinese state-owned enterprises benefiting from construction or operation contracts.” As of June, according to China’s official Xinhua news agency, governments in 60

BEIJING COMES OF AGE China started its reform and opening up campaign in the 1970s

1970

Former leader Deng Xiaoping gives domestic manufacturers a green light to partner with foreign companies

1990

Launch of the Shanghai Stock Exchange

2001

Joins the World Trade Organization

2008 Olympics

Hosts the Summer

2015

Roll out of the Asian Infrastructure Investment Bank

WANTED: INFRASTRUCTURE INVESTMENT IN ASIA Spending needed to meet basic public demand for infrastructure through 2020

East / SE Asia South Asia Central Asia TOTAL

US$5.47 trillion US$2.37 trillion US$374 billion US$8.22 TRILLION

By sector, percentage of total spending

Power 49% Transportation 35% Telecommunications 13% Water and sanitation 3% Source: Asian Development Bank Institute www.breakbulk.com BREAKBULK MAGAZINE 9

cover story

HOW MONEY MOVES ON ONE BELT, ONE ROAD Sizing up cross-border trade and investment activity between China and 60, mainly Asian, countries covered by OBOR in the first quarter 2015

global imports US$91.5bn China imports from OBOR countries

Chinese non-financial investments in OBOR countries

global investments: US$25.86bn

global exports US$144bn China exports to OBOR countries

New engineering contracts won by Chinese companies in OBOR countries

Engineering projects completed by Chinese companies in OBOR countries

up 7.6% from Q1 2014 US$15bn

up 10.3% from Q1 2014 US$14bn

OBOR investments: US$2.56bn

Singapore: Indonesia: Laos: US$570m US$300m US$260m

countries had “voiced support” for OBOR. Although the report did not identify these countries, other Chinese media reports over the past year have named a variety of supporters including Armenia, Belarus, Cambodia, Russia and Turkmenistan. Many countries eligible for OBOR deals are already strong trading partners with China. Beijing says combined trade with OBOR-zone countries exceeded US$1.1 trillion in 2014, representing about 25 percent of China’s total foreign trade. Western business leaders have been closely watching AIIB and OBOR take shape. Many see it as a positive development not only for supporting underdeveloped Asia but also as a step toward broadening foreign companies’ access to China’s market. They also hope the initiative gives non-Chinese EPCs, resource companies and other contractors a shot at new business in Asia. Jörg Wuttke, president of the European Chamber of Commerce in China, told reporters at a May press event in Beijing that he hopes OBOR offers 10 BREAKBULK MAGAZINE www.breakbulk.com

Source: China Ministry of Commerce

inroads to Asian contracts and markets for companies from around the world. Ideally, he said, the Chinese program should be “done in a way that’s not only beneficial for Chinese companies, but beneficial for others.” That so many countries have agreed to participate in AIIB and OBOR suggests many share Wuttke’s hope that China will welcome a variety of global contractors, and not just the Beijing government’s state-owned enterprises. Multinational support also testifies to the success of China’s methodical approach in launching the initiative. Indeed, the Chinese government spent years building financial and diplomatic ties with other governments before unveiling the plans. Negotiations were handled behind the scenes, in part due to the sensitive nature of China’s international relations. Yet controversies over China’s initiative have been surfacing ever since the first details of infrastructure financing were made public in late 2014. For example, the U.S. and Japan responded to China’s AIIB push by refus-

ing to join France, Australia and other western countries as founding members of the bank. That snub highlighted the competition for regional influence that’s pitted AIIB against the U.S.-led World Bank and the Japanese-led Asian Development Bank (ADB). Underscoring that rivalry was Japanese Prime Minister Shinzo Abe’s announcement in May that his country would support ADB-funded infrastructure projects with a fresh injection of US$110 billion over the next five years. The announcement coincided with a meeting of AIIB officials in Singapore. Japan’s new funds are expected to boost ADB’s Asia projects pool by 30 percent. Another controversy surfaced in April when China refused to give an AIIB membership card to Taiwan, which Beijing authorities consider a breakaway Chinese province rather than an independent nation. Meanwhile, China’s interest in supporting Southeast Asia infrastructure projects has been clouded by its territorial disputes with area countries, including AIIB founding members JULY-AUGUST 2015

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cover story

Delegates from dozens of countries gathered in Beijing on April 27 to hammer out cooperative agreements leading to formation of the Asian Infrastructure Investment Bank. / Credit: AIIB website

Vietnam and the Philippines, in the South China Sea. These long-simmering disputes have flared over China’s recent island expansion projects in the sea. And they’ve hurt Sino-U.S. relations, as the disputed area includes busy sea lanes that the U.S. has vowed to defend. Despite the controversies, China has forged ahead with AIIB and OBOR. Representatives of AIIB foundingmember countries drafted the bank’s charter in May. They also agreed to open the Beijing-headquartered bank by the end of 2015. China will contribute 80 percent of the seed capital, or US$40 billion, while other member-countries will contribute the rest. Funds are to be distributed in the form of loans, equity investments and loan guarantees, 12 BREAKBULK MAGAZINE www.breakbulk.com

according to the bank’s website. Which countries will be first in line to receive AIIB funds? And what kinds of projects are likely to be targeted? These and other questions have yet to be answered. The bank’s website offers only a general explanation: “AIIB will focus on the development of infrastructure and other productive sectors in Asia, which may include energy and power, transportation and telecommunications, rural infrastructure, and agriculture development, urban development and logistics,” it said. Projects that “bring benefits to more than one member in the region will be particularly welcome.” Much more is known about OBOR thanks to Chinese media coverage of

several visits to “belt” and “road” countries by Chinese leaders over the past two years. Chinese President Xi Jinping is credited with introducing the idea that, through OBOR, China should revive the spirit of its ancient Silk Road trade link to Europe. He outlined the idea during a September 2013 speech at Nazarbayev University in Kazakhstan. A year later, the program’s related focus on Southeast Asia came to light when Xi unveiled a trade strategy for the region while addressing Indonesia’s parliament in October in Jakarta. In May, Xi added substance to OBOR’s belt plans while cementing terms for bilateral deals during visits to Russia, Belarus and Kazakhstan. JULY-AUGUST 2015

cover story

Chinese state media said nearly 90 OBOR-related agreements “covering trade, energy, aerospace, finance, investment, infrastructure and other areas” were signed during the trips. Details have not been released. Also in May, a Chinese media report said China and dozens of OBOR countries had started building 70 “cooperative” industrial zones across Asia worth a combined US$8 billion. Factories and other facilities in these zones are expected to generate up to 200,000 jobs. China is also using OBOR as a springboard for domestic development. An area near the north-central city of Xi’an, for example, has been picked as a trade hub linked to China seacoast ports. Plans call for building an all-new city with a population of 900,000 to support an air transportation logistics center at Xi’an Xianyang International Airport.

The local government has reportedly allocated US$18 billion for the project’s initial construction phase, which is now under way. Regional transportation projects could also be a boon to Chinese manufacturers of high-speed trains and heavy equipment such as bulldozers. China’s Business Daily newspaper recently quoted unnamed sources as saying that China plans to use OBOR over time to put Chinese-made high-speed trains to work on more than 26,300 kilometers of new track in countries including Russia, Thailand and Cambodia. OBOR projects offer a foundation for economic growth and jobs through improved transportation, electricity, energy and telecommunications that foster investment, Zhang Yansheng, an economist with the Chinese government’s National Development and Reform Commission, recently told P A S S E NG E R

F R E I G HT

R E AL E STAT E

Xinhua. In turn, he said, better infrastructure will promote regional trade. In Jakarta, Xi said China through OBOR planned to build stronger trade ties with the 10 member-nations of the Association of Southeast Asian Nations. ASEAN members work under a limitedscope, free trade agreement with China. Moreover, OBOR and AIIB would coexist with the development-focused ASEAN Infrastructure Fund (AIF), which is backed by ADB. Non-China-affiliated institutions such as ADB and AIF have been supporting big Asian infrastructure projects for years. But their combined funding level is considered far less than what’s needed to meet demand for development in Southeast Asia and the rest of the continent. ADB’s research division in 2012 said more than US$8.2 trillion would be needed to meet all of the region’s infra-

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structure demands from 2010 to 2020. That huge amount is equal to about 12 percent of the world’s annual gross domestic product. “Asia’s infrastructure needs are enormous,” said Stephen P. Groff, ADB vice president of operations. “The need is defined by the vast numbers of Asians who still lack access to basic services. Around 1.7 billion people don’t have decent sanitary facilities, more than 600 million still have no electricity, and more 360 million don’t have safe drinking water.” And Asia’s ongoing urbanization is accelerating this demand. “With 40 million new city dwellers a year in Asia, the urgency to improve infrastructure to meet demand for decent services will become more acute,” Groff said. Yet Asian development banks should back rural-area projects as well in order to build “connections to devel-

oped areas” and support “the free flow of goods and services,” according to a recent Dezan Shira & Associates report. Without banks and government backing, the report said, rural projects might never get off the ground because they’re “generally not very profitable for private enterprises.” Western leaders are as aware as their Asian counterparts about the need for more financing in developing Asia. And some, such as France’s former premier Dominique de Villepin, have applauded China for stepping up to the task. “The World Bank and the International Monetary Fund are not a good solution to current economic problems,” de Villepin recently told Chinese business news web portal Sohu. “What we’ve seen today is that the biggest problem facing many developing countries is a lack of necessary funds to build infrastructure.

“We need new tools, powerful new tools such as the Asian Infrastructure Investment Bank” and OBOR, he said. A road-building project now under way in Cambodia offers a glimpse at what OBOR hopes to accomplish – and how. The state-run China Road and Bridge Corp. won the US$133 million, threeyear contract to build the 182-kilometer road connecting the country’s northwestern Pursat Province to the Thailand border. A Chinese government loan to the Cambodian government will finance the project. At a ribbon-cutting in May, according to Xinhua, Cambodian Prime Minister Hun Sen praised the Chinese initiative to support Asian development. China is providing “a new source of capital for countries for developing infrastructure and connectivity,” Hun Sen said. “Cambodia and other countries will benefit.” BB

www.breakbulk.com BREAKBULK MAGAZINE 15

security

MOVING Don’t Discount the Ongoing Piracy Threat

TARGETS

By Carly Fields

t first pass, the headline figures for the number of piracy attacks reported globally seem encouraging. Through the first quarter of 2015, the number of actual and attempted attacks stood at 54, according to the International Maritime Bureau, a far cry from the peak of 142 in the first quarter of 2011 when Somalian pirates ruled the waves. But scratch the surface and it’s clear that the problem has not gone away. While Somali piracy has been largely quashed thanks immeasurably to industry cooperation and the joint naval task force in the region, the number of reported incidents in other regions has shot up. Indonesia is a case in point: actual and attempted attacks here have more than quadrupled over the same period. With cargo theft, ransom demands, hostage taking and the real threat of crew fatalities worldwide, ship operators remain concerned. The most vulnerable vessels, according to Gerry Northwood, chief operating officer of maritime security company MAST, are the slower vessels with a low freeboard of less than eight meters. “Vessels involved in breakbulk, heavy-lift and project cargoes often fall into that category,” he said. Ship operator BBC Chartering said the constant threat of piracy is one that it takes “very seriously.” To tackle the problem it has invested in defensive security equipment for its vessels, additional crew training, and evasive action, such as rerouting ships to avoid piracy hotspots. The operator relies on regular advice on piracy risks from an external consultant, which can range from implementing recommended measures to complete avoidance of high-risk areas, said Raymond Fisch, senior vice president of public relations. 16 BREAKBULK MAGAZINE www.breakbulk.com

While breakbulk and project cargoes do not in themselves make attractive targets for theft, the threat of boarding remains real. Earlier in the year, the Chinese navy foiled a pirate attack on a heavylift ship in the Red Sea. Suspected pirate speedboats were seen cruising in small groups around the 1983built Zhen Hua 20 on the evening of Jan. 1, but were repelled by the navy. The Zhen Hua 20 was escorted for a further five days on its journey from the Suez Canal to Dammam. More recently, robbers boarded an underway heavy-lift ship and stole stores on May 16. According to a report from Protection Vessels International (PVI), part of British risk mitigation business Protection Group International, the crew heard the robbers moving around as the vessel sailed about 160 nautical miles southeast of Vung Tau, Vietnam. The crew launched an investigation before sighting the robbers making their escape by boat. Pirate activity in Vietnam is said to be highly unusual, but attacks in this location are becoming more commonplace. There have been 12 reported incidents of robberies against vessels in Vietnamese waters to date in 2015, against just one reported incident between January and September 2014. “The spike may be related to onshore economic motives, improved reporting of incidents and inadequacies in JULY-AUGUST 2015

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LOCATIONS OF ACTUAL AND ATTEMPTED ATTACKS, JANUARY-MARCH 2010-2015 Southeast Asia now accounts for the lion’s share of piracy incidents. 120 100 80 60 40 20 0

SE Asia

Far East 2010

India Subcontinent

2011

142 SUBTOTAL FOR FIRST QUARTER

2010

2 0 11

2012

102

2 0 12

Americas 2013

Africa 2014

2 0 13

rest of world 2015

2 0 14

2 0 15

TOTAL AT YEAR END

297

445

439

264

245

Source: International Maritime Bureau

detecting and punishing perpetrators,” PVI said. Speaking to Breakbulk, Matthew Parker, managing director of PVI, believes the sea today is a less stable place in which to operate than it was 12 months ago. He cites the ongoing issues dealing with mass migration from North Africa; the expanding ambitions of Islamic State and other extremist groups and their stated desires to conduct attacks at sea; and the instability in Yemen which is creating a launch pad for attacks. “These threats require a cooperative and comprehensive solution between the companies with assets at risk, industry bodies, government and the specialists who will supply a number of the solutions,” he said. James Wilkes, managing director of business intelligence consultant Gray Page, noted: “Piracy (and pirates) succeeds because no one ever sees them coming, literally and metaphorically. Just because pirate gangs in the South China Sea region are targeting refined oil cargoes at the moment, it doesn’t mean that they won’t target other types of cargo in the future, or turn to kidnapping seafarers from ships and holding them to ransom. “To protect ships properly against piracy we need to start thinking ahead and placing a greater emphasis on taking a holistic approach to security risk management, rather than just being reactive and applying ‘security patches’ in the hope that the risk, wherever it is right now, will go away eventually. It’s not a new message, but it can’t be said enough,” Page said. While Somalia has all but dropped off the piracy radar, two other trouble areas now hold the attention of ship operators.

Southeast Asia

Italian destroyer Andrea Doria escorts a World Food Project vessel. Credit: EU NAVFOR 18 BREAKBULK MAGAZINE www.breakbulk.com

The South China Sea threat is mainly directed at small to medium-size tankers, carrying refined oil cargoes such as gas/diesel oil or gasoline. Here, ships are being hijacked and part or all of their cargo is stolen. “These are cargoes for which there is a black market into which stolen cargoes can be easily sold,” Wilkes said. MAST’s Northwood described South JULY-AUGUST 2015

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East Asia as “an increasingly scary place for seafarers at the moment. “Operators should protect their crews, cargoes and vessels by thoroughly risk assessing their voyages. This is what the military calls ‘Mission Planning,’ ” he advised. “Considerations should be given to routing and communications security, time spent at anchor, implementation of BMP4 type measures to harden the vessel, additional lookouts, and citadel drills.” BMP4 are Industry Best Management Practices for Protection against Somalia-based Piracy. “This is not an exhaustive list and, sadly, most crews are too busy with operating the vessel to give appropriate consideration to basic security protocols. Most of these incidents are entirely avoidable with just some application of the mission planning principles listed above,” Northwood said. 20 BREAKBULK MAGAZINE www.breakbulk.com

ABOVE: Swedish combat boats participating in Operation Atalanta patrol off the Somali coast. BELOW: The officers of the local Marine police patrol unit train with EU Naval Force FGS Lubeck’s sea boat. / Credit: EU NAVFOR JULY-AUGUST 2015

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TYPE OF VIOLENCE TO CREW BY LOCATION, JANUARY-MARCH 2015 Hostage taking accounts for the majority of reported incidents. Malaysia Indonesia Malacca Straits Ghana Nigeria Papua New Guinea Vietnam Bangladesh

10 Hostages

20 Threatened

30 Assaulted

Injured

40 Killed

50 Kidnapped

Source: International Maritime Bureau

Parker adds that it’s not just the increase in piracy in the South China Sea that should worry operators; it’s the type of attack as well. “Low-level criminality of the type seen in the region for centuries is migrating to more sophisticated cargo theft. In the case of cargo theft, the pirates have been smart: smaller tankers belonging to companies generally not carrying oil majors’ cargo have been the target because the criminals have no desire to upset those with the financial and political clout to stop their activities,” he said. Having targeted a vessel and boarded, pirates cut communications and other tracking equipment and rendezvous with a lighter to pump the fuel

LIMITATIONS OF A JOINT NAVAL APPROACH The unwavering presence of the European Union Naval Force, or EU NAVFOR, has tipped the balance in favor of safe passage for the world’s merchant fleet and seafarers around the Horn of Africa. Operating within the framework of United Nations Security Council Resolutions, Operation Atalanta is the EU’s counter-piracy operation off the coast of Somalia. EU NAVFOR has warships from EU member states at sea in the piracy highrisk area 24 hours a day, conducting counter-piracy patrols. It also has maritime patrol and reconnaissance aircraft (MPRA) conducting aerial patrols, on the lookout for “pirate action groups.” Over an area that is one-and-a-half times the size of mainland Europe, EU NAVFOR coordinates piracy patrols and the escorting of vulnerable shipping with the other naval task forces from NATO and Combined Maritime Forces. It’s a model that has been a success story in the battle against piracy off Somalia, but it’s one that may be “lost in translation” if it were to be emulated in other regions suffering from increased piracy attacks. Both PVI’s Matthew Parker and Gray Page’s James Wilkes believe there are positive lessons to be learned from that 22 BREAKBULK MAGAZINE www.breakbulk.com

model, but with important caveats. “There is already a framework in place for international cooperation to deal with criminality at sea. The Regional Cooperation Agreement on Combating Piracy and Armed Robbery (ReCAAP) and its Information Sharing Centre (ISC) were designed to provide this function” in the South China Sea, Parker said. “Given the geopolitical frictions in the region, the imposition of a Western solution would be foolish; far better for interested parties to invest in a more localized solution, especially as membership is not limited to regional countries. Denmark, Holland, Norway, USA and UK are already signatories,” he said. In the Indian Ocean public/private partnership will be the key to success, he said, as governments are ill-equipped to deal with the threat on their own. Wilkes added the industry shouldn’t forget there was a much broader coalition of naval forces operating in the Gulf of Aden/Arabian Sea/Indian Ocean range, as well as a greater level of political interest in seeing that these waters – primary international trade routes – remained open to shipping and free

from the threat of hijacking for ransom by Somali pirates. “There was no single point of effort that you can point to and say confidently that it made all the difference in the fight against Somalia-based piracy. And there is no one thing, no ‘silver bullet’ if you will, that will make all the difference in combating piracy in the Gulf of Guinea and South China Sea region. Combating piracy of this nature requires a combination of many actors working on different levels, and it always will,” Wilkes said. MAST COO Gerry Northwood agreed that it was the multiagency approach that gave EU NAVFOR so much credibility and allowed it to play such a pivotal role in setting the conditions for the eventual suppression of Somali piracy. An EU Naval Force spokesperson confirmed that its current mandate runs until December 2016, and there are no plans by member states to extend its operating areas. However, in a small concession, it told Breakbulk that the cooperation model could be emulated, bringing together the maritime industry and a range of counter-piracy forces to deter and disrupt piracy in other regions. JULY-AUGUST 2015

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off. The precision of the attacks and repeat targeting suggest the attackers could be colluding with people within the target shipping companies, said Parker. However, while the statistical threat of piracy in this region has undoubtedly increased, growth remains linked to certain vessel types and follows a particular modus operandi. Pirates in the South China Seas lack the sanctuary of Somalia, making the threat of hijack for ransom less likely. “Visible hardening, regular reporting and a well-drilled crew will minimize the vulnerability of a vessel” in these areas, Parker said. “Voyage Data Recorders and the more routine use of comprehensive CCTV coverage for evidence capture would contribute to the successful pursuit of those responsible, leading to an inevitable reduction in attacks.”

24 BREAKBULK MAGAZINE www.breakbulk.com

West Africa

Cargo pilferage is a concern in the second piracy hot spot off West Africa, but the concurrent threat of hostage taking and violence, sometimes leading to fatalities, makes operations in this region all the more perilous. Kidnapping seafarers is particularly prevalent in the waters off the Niger Delta, where offshore support vessels, anchor handling tugs and platform support vessels commonly operate and which have been targeted over the years. In West Africa, BBC Chartering keeps its ships waiting outside and they only proceed to ports when the berth is ready and a pilot is available. “In some instances we are using local escort boats from fairway buoy to berth and vice versa,” Fisch said. The Somalian model of piracy was, by contrast, simpler to tackle as the attacks took place off the coastline of a

lawless country and out into deep-sea waters that are the subject of the United Nations Convention on the Law of the Sea, rather than territorial claims. “Security in the Gulf of Guinea is a complex legislative problem beset with constitutional ambiguity and inconsistency in enforcing the few clear laws that are in place,” Parker explained. “Endemic corruption and blurred lines between state jurisdictions further complicate the decisions that operators must make in weighing up physical risk against business risk. “The use of local government security personnel as embarked armed security is prohibited. Aside from the threat of prosecution, such practices bring an increased risk of violence, as pirates in the Gulf of Guinea will routinely sustain attacks against vessels. While embarked guards may prevent a hijack, operators increase their exposure. Quality assurance is dif-

JULY-AUGUST 2015

ficult to obtain, as is consistency in the professionalism of guards contracted locally. Currently, the only option for robust, legitimate physical protection is the use of naval escort vessels and stateprotected anchorage areas.” MAST’s Northwood believes the employment of armed guards instantly makes those vessels less attractive targets. However, he too questions the quality of the guards permitted by surrounding states. “In our view, it is better to have no armed guards and take the precautioned mission planning listed above, than to have armed guards who have not been trained to high standards and properly vetted,” he said. Finding an operational model whereby armed guards can be embarked or disembarked in the South China Sea is also problematic. Here, the efficacy and prevalence of regional military and law enforcement means that the use of privately contracted armed guards is unlikely to become commonplace. BBC Chartering employs armed guards on some routes from selected providers when this is recommended by outside experts. These guards must have the required skills, be registered in a Western European country, be properly trained, have the required gear and all necessary certificates. The use of armed guards has proved to be effective for the operator, although cost recovery is wholly dependent on the terms of the charter party, Fisch said. In a word of caution, PVI’s Parker said there are few situations where a headlong rush to the carriage of weapons with the potential to apply lethal force is wise. The introduction of guns must be accompanied by the appropriate training and other checks and balances to make sure risks are properly mitigated, problems are solved and not created, he said. With the armed guard option off the table, ships need to pay close attention to the BMP4 practices in these waters. Operators also need to carefully control the information surrounding a particular ship’s voyage and cargo. “Hijacking for cargo theft is not a random act of piracy,” Wilkes warned. “These incidents are targeted events. The pirates usually know which ships to go after and what cargoes they will be car-

rying. It is difficult to accomplish because ship movements and cargo information are shared among many parties – agents, charterers, buyers, sellers, shipowners and so on – but, limiting the distribution of information pertaining to ship move-

ments and cargo details is advised.” But for all the measures that can be taken, sometimes total avoidance of a particular port or region known to be high risk is the only “safe” solution for ship, crews and consequently operators. BB

www.breakbulk.com BREAKBULK MAGAZINE 25

energy forecasts

ALL IN THE

By Herman K. Trabish

ENERGY T

MIX

Race is on Between Demographics, New Technologies

he thirst for information on the future of world energy is insatiable and all-encompassing; even the Pope now wants to know what the future of world energy will be, as he indicated in his recent passionate encyclical about climate change. Is the transition toward renewable energy taking place right now a passing fad or an historic shift, and can those renewables meet rising demand? A just-released landmark International Energy Agency study says there is only a 50-50 chance of cutting global greenhouse gas emissions, or GHGs, enough by 2040 to keep the earth’s average temperature from rising more than 2 degrees Celsius before 2040. If it rises higher, the IEA reports, the world must be prepared to face the worst impacts of climate change. But, the IEA also says, the world’s energy producers and consumers can collaborate on a successful transition if they: • Increase the efficiency of industry, buildings and transportation. • Progressively shutter the least-efficient coal-

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26 BREAKBULK MAGAZINE www.breakbulk.com

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energy forecasts

burning facilities and stop building new ones. • Raise investment in renewables from 2014’s US$270 billion to US$400 billion in 2030. • Gradually phase out fossil fuel subsidies by 2030. • Reduce methane emissions from oil and gas production. The IEA’s plan, which it calls the “bridge” scenario, specifies some pretty demanding changes. Although 1.7 billion people would have electricity for the first time by 2030, oil and coal use would stop growing by 2020. Oil demand would peak and plateau at 95 million barrels per day. Despite global energy supply growing by 3,900 gigawatts between 2015 and 2030, coal demand would peak before 2020, as renewables grow to represent 37 percent of global electricity generation capacity by 2030. Natural gas would reach more than 20 percent of new generation capacity. The good news is that the US$26 trillion cost of such shifts falls US$1.6 trillion below the projected necessary global investment. The lower cost projection is due to increased renewables investments that are forecast to be lower than the fossil fuels investments they replace, and falling household energy expenditures as the result of the 33 percent higher average annual energy efficiency investment of US$650 billion.

WORLD POWER GENERATION CAPACITY MIX AND CAPACITY ADDITIONS In the IEA’s ‘bridge’ scenario, solar and wind power gains will offset coal capacity losses. installed capacity 100%

6,178GW

8,809GW

80% others solar PV

60%

wind hydro

40%

nuclear oil gas

20%

coal

2014

2030

additions 2015-2030 3,905GW 6%

12%

17% 21%

23%

14%

Bullish Oil Outlook

ExxonMobil’s View to 2040 starts with demographics: global population will rise, it projects, from 2010’s 7 billion to 9 billion in 2040. Despite an aging workforce, China’s GDP will grow 400 percent in that period. The working age population of India will increase as its GDP grows 300 percent. In ExxonMobil’s other “key growth countries,” expanding working age populations will double or triple GDPs. These changes will increase the world’s middle class from 2010’s 1.9 billion to 4.7 billion in 2030. That means 60 percent more people with money to spend on electricity and transportation fuels. Improved efficiency in the 32 leading advanced economies that comprise the Organization of Economic Coopera28 BREAKBULK MAGAZINE www.breakbulk.com

Source: IEA Energy and Climate Report

tion and Development, or OECD, will produce a 7 percent reduction in energy demand by 2040 despite an 80 percent increase in GDP. But developing countries’ energy demand will grow 70 percent by 2040, led by China’s 30 percent increase and India’s 20 percent increase. The net global 35 percent energy demand increase will be only half what it was between 1980 and 2010 – and 75 percent of the 2010 to 2040 growth will come by 2025. Transportation energy demand from OECD nations will decrease and electric and hybrid light duty vehicles will grow from 1 percent of the fleet in 2010 to one-

third of the fleet in 2040. But overall use of liquid transportation fuels will move toward 140 barrels per day as the rising middle classes in China, India and the key growth nations purchase their first cars. Rapid growth in the use of heavyduty vehicles in emerging economies will add to the upward pressure on liquid fuel demand. The fastest growing subsectors, however, will be consumption of liquid fuels for aviation, marine and rail transport. Together, they will grow from their present 20 percent share of all transportation fuel to 30 percent in 2040, ExxonMobil predicts. In 2010, the combined demand for liquid fuel by the aviation, marine and rail subsectors was about half of that demanded by the world’s light-duty vehicle fleet. In 2040, it is expected to be 90 percent of the light-duty vehicle fleet’s demand. Most of that demand will be met by oil, creating a combined 7 million barrels per day (equivalent) increased use. About 20 percent of demand growth in the marine and rail subsectors will likely shift to natural gas, so that by 2040 it will be about 10 percent of the fuel consumed in those markets. The overall result is an increase in oil demand in 2040 of “almost 30 percent due to growth of commercial transportation and the chemical industry’s need for feedstock.” It is natural for the world’s biggest independent oil company to be bullish in its outlook, but the forecast is a far cry from what the IEA says is needed to prevent the worst impacts of climate change. This is unlikely to please the Pope. Global electricity demand is projected by ExxonMobil to grow 85 percent. But coal’s share will fall from 2010’s 40 percent to below 25 percent in 2040, as China and the OECD countries shift to lower emission resources for electricity generation. Natural gas will take a big share of what coal loses; its use in the electricity sector will increase 135 percent. Demand for nuclear power is forecast to increase 2.3 percent per year through 2040 and use will increase 90 percent overall. Solar capacity in the electricity sector will grow 2,000 percent and wind capacity will grow 500 percent. Demand JULY-AUGUST 2015

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by 2035 and 80 percent of that will be used for power generation or industrial heating. The U.S. will provide almost a quarter of all gas supplied. BP expects shale gas to be increasingly important to supply. North America now provides almost all shale gas, and will still provide 75 percent in 2035, but by the 2030s growth of the rest of the world’s share will be bigger. China will account for 13 percent of global shale gas supply growth. By 2035, China and North America will provide 85 percent of global shale gas output. Liquefied natural gas, or LNG, will be the biggest source of natural gas importexport activity by 2035. While natural gas trade will grow about 2 percent per year, LNG trade will grow at a 4.3 percent-per-year pace. Renewables will become affordable, BP’s evaluation predicts, due to technological advances, learning-by-doing, and economies of scale. “Both solar PV and wind appear to be following well-established learning curves, with costs falling rapidly as production increases,” BP reports. “Onshore wind power in the best locations is increasingly able to compete with new conventional fossil power plants, even without subsidy and allowing for grid integration costs.” Solar PV is becoming competitive in some markets, but only a price on carbon will give it the edge against efficient

2040 GLOBAL DEMAND BY FUEL Global energy demand will increase 35 percent from 2010 to 2040. 250*

0.8%

– average annual growth rate 1.6%

200

0.1%

150

100 0.5%

2.3% 5.8%

1.8%

oil

gas

coal

biomass

nuclear

*in quadrillion British thermal units, or BTUs Source: The Outlook for Energy: A View to 2040, ExxonMobil

for solar, wind, biofuels, and geothermal will grow by at least 5.8 percent per year. Yet ExxonMobil’s conclusion about renewables’ role in power generation is quite conservative. They will be only 4 percent of global energy demand in 2040, it says, because of the “cost and intermittency” of solar and wind. GHGs from energy use will grow 25 percent, peak in 2030, and then diminish about 5 percent by 2040. This would likely leave the Pope grumbling. Or praying. The BP Energy Outlook 2035 projects similar conclusions to those by its sister oil giant, but the five-year time horizon difference limits comparisons. Like ExxonMobil, BP sees GHGs rising 25 percent by 2035. Another unmistakably similar if unsurprising conclusion is that nonOECD countries are where the action is. They will provide 96 percent of the 37 percent growth in energy consumption and more than half of that will come from China and India. Demand will also grow 37 percent and those two countries will make up half of that growth as well. Liquid fuel consumption, including oil, biofuels, and alternative fuels, will be 111 million barrels per day by 2035, BP predicts. The biggest impacts will come from non-OECD transportation and industrial consumption. Almost 60 percent of capacity growth will be for electricity generation. Renewables (including biofuels) will grow 6.3 30 BREAKBULK MAGAZINE www.breakbulk.com

solar/ wind/ biofuels

hydro/ geo

percent per year to be twice as big as in ExxonMobil’s future, providing 8 percent of total energy consumption in 2035. Nuclear will grow 1.8 percent per year, about the same as hydroelectric power’s 1.7 percent per year. Natural gas will be the fastestgrowing source of fossil fuel generation, growing at 1.9 percent per year, more than twice as fast as coal’s 0.8 percent per year growth. Coal loses market share everywhere in the world, including in China. Even generation with oil will grow a tiny bit faster than coal’s use. Natural gas will have an almost 500 billion cubic feet per day capacity

ANNUAL PHOTOVOLTAICS DEMAND BY REGION 2015-2020 Europe will continue to play second fiddle to Asia Pacific’s PV needs. 150*

120

2014E

2015E

Europe

Asia Pacific

2016E

2017E

North America

2018E Latin America

2019E Middle East

2020E Africa

*in gigawatts Source: GTM Research Global PV Demand Outlook 2015-2020 JULY-AUGUST 2015

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energy forecasts

...THE REN 21 ANALYSIS SEES THE ENERGY FUTURE THROUGH 2050 AS “FUNDAMENTALLY A CHOICE, NOT A FOREGONE CONCLUSION.” natural gas generation by 2035. The EU will remain the world’s renewables leader, thanks to falling costs that relieve its subsidy burden. China and the U.S. will be neck and neck by 2035. Emissions can be reduced faster, BP reports, but any choice entails challenges that present risks of higher costs, limits to technology, stranded capital stock, global policy implementation obstacles, or resistance to behavioral change. Clearly the Pope would not be pleased with the oil companies, though he might give BP credit for at least offering, though tentatively, some options. 32 BREAKBULK MAGAZINE www.breakbulk.com

Alternative Analysis

The Global Futures Report from the Renewable Energy Policy Network for the 21st Century, or REN 21, offers a range of possible futures drawn from 50 recent scenarios and evaluated by 170 surveyed experts. Unlike oil company forecasts, which take oil’s dominance of new technologies as a given, the REN 21 analysis sees the energy future through 2050 as “fundamentally a choice, not a foregone conclusion.” Various future scenarios are built on projections for investment that range from US$300 billion to US$1

trillion by 2020, it explains. The report recognizes there are “conservative” projections by energy companies that, perhaps swayed by vested interests, do not expect the share of renewables in future energy markets to grow. It also recognizes “moderate” projections that foresee renewables providing 30 percent to 45 percent of the electricity, heating and cooling, and transport fuel markets by midcentury. Such projections, it explains, allow for higher renewables penetrations into the world’s grids and the entry of biofuels and plug-in vehicles into the transport marketplace. JULY-AUGUST 2015

energy forecasts

Finally, it recognizes “high renewables” projections by advocacy organizations like Greenpeace International as well as those from the IEA that offer roadmaps to possible 100 percent renewables futures by midcentury. Such future scenarios are supported by aggressive, if hypothetical, policies that drive unprecedented investment in grid strengthening, new markets, affordable energy storage, smart technologies, and a completely transformed transportation sector. “In transport, large shares of biofuels and electric vehicles are projected, even for freight transport, such as biodiesel and electric trucks and electric rail,” REN 21 explains. “The use of electric vehicles for grid balancing purposes is enhanced through smart-grid interactions and ‘vehicle-to-grid’ (V2G) and ‘vehicle-to-home’ (V2H) concepts.” Smart technologies and breakthrough

34 BREAKBULK MAGAZINE www.breakbulk.com

architectural and materials science thinking creates a “different paradigm” in building energy management. What most “high renewables” scenarios have in common is a constraint on GHG emissions, often in the form of an emissions price or emissions trading market, REN 21 finds. Not left to choice is that “at least 30 countries around the world already have shares of renewable energy above 20 percent,” REN 21 reports. An estimated 120 countries also have long-term policies to grow renewables by 10 percent to 50 percent in the 2020-to-2030 timeframe. They include Algeria, China, Indonesia, Jamaica, Jordan, Madagascar, Mali, Mauritius, Samoa, Senegal, South Africa, Thailand, Turkey, Ukraine, and Vietnam. The historic China-U.S. agreement on emissions reductions and the Obama administration’s Clean Power

Plan are expected to add to momentum for expanded renewables targets. Led by at least some of the BRIC countries, more demanding policies are expected from Argentina, Chile, Colombia, Egypt, Ghana, Indonesia, Jordan, Kenya, Mexico, Nigeria, the Philippines, South Africa, and Thailand, according to the REN 21 report. In transportation, next-generation technologies will take biofuels well beyond their current 3 percent share of the transportation fuels market. Some will still be blended into petroleumbased fuels but some will be standalone products by the 2020s.

Wind Projections

The most recent Global Wind Energy Council forecast predicts Europe will stay on course to achieve its 20 percent renewables target by 2020, with about 70 GW of new wind capacity yearly through

JULY-AUGUST 2015

2019. Sweden, France, Turkey, and Poland are expected to lead. U.S. growth, GWEC adds, will remain unpredictable because of uncertainty about its key production tax credit. Canada’s lack of specific binding policy makes it equally unpredictable. Mexico’s legislation targets a 2 gigawattper-year wind growth that, GWEC predicts, will not likely be met before 2019. Overall, North America will add about 44 GW of wind capacity by 2020. China, GWEC predicts, will add 100 GW of wind by the end of 2019, beating its 200 GW cumulative installed capacity 2020 target “by a healthy margin, and a year ahead of time.” India will not achieve its 5 GW-per-year target in 2015, but will continue growing and be close to that annual installed capacity by 2020, GWEC expects. The rest of Asia will add 140 GW of wind capacity by the end of 2019, with

notable growth in Pakistan, the Philippines, Taiwan, and Thailand, but not in Japan or South Korea. Brazil will lead Latin America, with an estimated 12 GW to 13 GW by 2020. Chile, Uruguay, Peru, and Panama are expected to grow wind but Argentina has Latin America’s most untapped potential. The region is expected to account for about 25 GW of new capacity by 2020. Africa and the Middle East will likely add about 13 GW by 2020, according to GWEC, with South Africa and Egypt leading and Morocco, Ethiopia, Kenya, Tanzania, Ghana, and Jordan contributing. The Pacific region will contribute perhaps 4 GW, led by Australia. After growing only 2 percent in 2014, the global photovoltaics market will grow 36 percent in 2015, GTM Research’s Global PV Demand Outlook, 2015-2020 reports. This unprecedented

growth from a small base may not get much attention from ExxonMobil and BP but it will likely please the Pope. Asia will own half the 2015 market, Western Europe will remain strong and Turkey will emerge. In 2017, global growth will slow due to uncertainty created by the Dec. 31, 2016, expiration of the U.S. investment tax credit, but 23 percent yearly growth will return from 2018 to 2020, GTM Research predicts, led by China, the U.S., and Europe. Latin America, the Middle East and Africa will emerge to capture 18 percent of the global market by 2020. Global installed capacity is forecast to reach an estimated 696 GW by 2020, according to GTM Research. An energy transition is clearly underway, but scenarios significantly differ and it is hard to know which is most accurate. In the end it may all come down to what you are praying for. BB

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carrier profile

SOLVING A GLOBAL

PUZZLE AAL, Peter Döhle Partnership Makes Logical Sense By Eric Johnson

36 BREAKBULK MAGAZINE www.breakbulk.com

he busy sea lanes traversed daily by the world’s project cargo shippers might be compared to squares on a Rubik’s Cube puzzle with multiple configurations but only one solution. Now, two of the world’s most experienced and extensive operators of multipurpose vessels have solved part of the global puzzle by agreeing to pool hardware, international resources and collective experience while combining their project cargo services. Singapore-based AAL and Hamburgbased Peter Döhle Schiffahrts-KG have agreed to cooperate closely but maintain corporate independence while sharing tonnage across major trade routes, offering customers a new dimension in worldwide tramp and project services. Under the deal announced in May, AAL will handle all project cargo operations, while Peter Döhle will oversee time charter and bulk cargo operations for the combined fleet. In this way, the companies plan to share operational responsibilities for global coverage with a combined fleet of more than two-dozen multipurpose, heavy-lift-capable cargo vessels in seven classes, ranging from 12,000 to 31,000 deadweight tons. Each company brings to the table “functional and geographical strengths” that, when combined, provide “economies of scale (and) far greater reach within the marketplace,” said Namir Khanbabi, managing director of AAL’s Tramp & Projects Division. Namir Khanbabi AAL is the younger of the two partners with 20 years of liner service under its belt, compared with Peter Döhle’s nearly six decades in the business. AAL is based in the backyard of young, fast-growing Asian economies. This year, the company has grown its fleet’s combined tonnage to more than 500,000 dwt to maintain bragging rights as “the youngest and most advanced” fleet in the breakbulk sector. Moreover, AAL has a solid track record JULY-AUGUST 2015

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carrier profile

AAL handles a variety of project cargoes. / Credit: AAL

for reliable services and quality cargo moving throughout Southeast Asia, China, Australia and the Americas. For these and other reasons, a close look at AAL’s past and present can open a window to its future as Peter Döhle’s partner. And AAL’s current business points to where the Asia project cargo market is heading. AAL’s current position as a leading global ocean transport operator is based on its ability to serve the breakbulk, heavy-lift and project cargo industry with 19 special multipurpose, heavy-lift vessels under distinct business units, namely the Liner Division and the Tramp & Projects Division. The company is a subsidiary of Kyriacos Panayides the privately held shipping group, Schoeller Holdings. AAL recorded significant growth last year, underscored by Schoeller’s decision to strengthen management by transferring company board member and appointed Managing Director Kyriacos Panayides to Singapore from the group’s home base in Limassol, Cyprus. Breakbulk caught up with Panayides at the annual Breakbulk China exhi38 BREAKBULK MAGAZINE www.breakbulk.com

bition in March and again in May at Breakbulk Europe, where the AAL team was busy promoting its agreement with Peter Döhle. Panayides, with nearly 25 years of maritime industry experience, has been serving AAL since its inception in 1995, holding a managerial position in the early days and later via a seat on the board of directors. AAL got its start 20 years ago as a Dutch-incorporated company called Austral Asia Line BV. Management offices were opened in Brisbane, Australia, and Singapore, and a liner service launched with routes connecting Southeast Asia ports, Papua New Guinea and Queensland, Australia. Three years later, Schoeller incorporated a sister firm to complement Austral Asia Line, giving the new company the same structure and management. The sister, called Project Asia Service BV, launched a service linking northern Asia and Australia’s east coast. It also opened offices at major ports in China, and arranged an owner’s representative in South Korea. The sisters merged in 2006, maintaining the name Austral Asia Line. The company in early 2015 was officially rebranded to AAL to reflect its global growth and operations. Now that he’s moved to Singapore, Panayides’ chief assignment is to

“oversee AAL’s next stage of business development,” according to a recent company press release. “My focus will be on the corporate side of the business” to make sure “our management systems and infrastructure are in line with our growth plans,” he said. “We will continue to embrace the dynamic and entrepreneurial approach to business that defines us.” Panayides’ transfer to the Orient coincides with dynamic changes under way in Southeast Asia, where accelerating development has attracted companies with a vast array of special cargo needs. Manufacturers, for example, are shifting production from China to less expensive Malaysia and Indonesia. Chinese engineering, procurement and construction companies are winning bids for infrastructure projects from railroads to pipelines. And the renewable energy business, encompassing initiatives from wind power farms to hydroelectric dams, has sparked strong demand for special cargo hauling between Asia and North America, and Asia and Europe. These days, there’s a lot of talk about slowing economic growth in China, but Panayides said AAL’s service-oriented business model has helped the company maintain healthy relations with Chinese companies and their clients. Despite the decline in China’s gross domestic product growth, “we don’t see the situation as serious, as the country still records a significant growth rate of 6 percent to 7 percent” every year, he said. Neither does Panayides see the ongoing slump in global oil prices, which started in mid-2014, as a reason to worry about AAL’s growth. Because the company manages a sizable fleet, he said, it’s flexible enough to manage risk and rapidly diversify. AAL can, if necessary, quickly veer away from the oil and gas sector and give attention to other sectors, such as renewable energy, with its growing wind farm sector, or the infrastructure construction sector. AAL has positioned itself in these trades at the right time for doing business with China, where the government has for several years been encouraging its state-run companies to expand into other countries, particularly developing nations. “The Chinese government is pushing JULY-AUGUST 2015

carrier profile

into more overseas investments, so Chinese EPCs are following this path and developing more and more overseas sites,” said Panayides. “With a long established presence and strong relationship with Chinese stakeholders, we are glad to participate in this business trend.” Thus, in Asia AAL has a major focus on infrastructure project cargo. What kind of cargo? “You name it,” Panayides said. “There are so many nations with still-poor infrastructure that have already approved huge budgets to embark on new development projects, including but not limited to ports, railways, power stations and other general construction.” In terms of ports of call served, AAL is adaptable and never wants to get stuck in a rut. Owing to this flexibility, the ports and regions on its service list can vary from year to year or even month to month, according to market demand. “We position our fleet from one area to another wherever we see sustainable business and where our customers need us to be,” Panayides said. AAL maintains a tramp unit separate from its liner division because tramp vessels can handle “specific volume

needs,” he said. This business is wellsupported by shippers of the itinerate cargo moving between China’s ports and points across Southeast Asia. Southeast Asia is an area with “extreme competition” for short voyage shipping, Panayides said. “We have a number of ships dedicated to intra-Asia markets.” The liner service, on the other hand, is the choice for customers who demand fixed frequency and set-in-stone schedules. The regularity of the company’s liner services “ensures that we are the preferred carrier for specific project needs,” Panayides said. That’s not to say AAL is sailing through today’s changing business environment in China, Asia and the world without challenges. For example, Panayides said, tight profit margins have tested the company’s commitment to its “zero harm-zero damage” pledge. But for AAL, he said, that pledge remains “engraved in stone.” “Because of falling freight rates, it’s hard for carriers to maintain quality of service and high level safety factor practice,” he said. But for AAL “it’s a non-compromise situation. We will not

change our tradition or our long history and reputation, regardless of the trend in the index of freight rates.” No wonder AAL has won prestigious industry awards from trade groups in Canada and Hong Kong. “These are rewards for our efforts and strategy,” Panayides said. “In principle, if your main motivation is to find services that are cheap, it inevitably means a compromise to the level of quality and safety.” Still, looking at the breakbulk cargo hauling industry worldwide and especially in the super-competitive Southeast Asia region, AAL is working in a business environment where it may seem there’s a race to the bottom, marked by carriers offering services at ever-cheaper prices. This climate has presented “new constraints” for AAL, Panayides said. So a freight owner who is shopping for a carrier may have to choose between a low-cost service and another company with a solid reputation but higher price. “One has to judge,” Panayides said with a smile. His smile highlights the fact that smart shoppers are well aware of the risks associated with port-to-port breakbulk hauling. Any damage or delay in deliver-

Prince Rupert is a new destination for AAL’s Pacific Service. / Credit: AAL 40 BREAKBULK MAGAZINE www.breakbulk.com

JULY-AUGUST 2015

carrier profile

AAL’s heavy-lift ships take the strain. / Credit: AAL

ing cargo destined for a new oil refinery, power plant or wind farm can result in major and costly setbacks for investors with billions of dollars on the line. That’s just one reason why, as Panayides sees it, cheaper is almost never better. Through AAL’s agreement with Peter Döhle, the companies will share 80 years of experience, resources and hardware worldwide. Their plan calls for offering services and solutions to the global market, with the goal of delivering efficiency, personal care and competitive advantages. The two carriers remain independent, with separate owners, operations and identities. However, across a number of key trade routes linking Asia, Europe and the Americas, their partnership will deploy and jointly represent the market’s youngest fleet of 26 multipurpose, heavy-lift vessels. And they’ll provide tailor-made tramp and project solutions to major industry sectors. “With Peter Döhle, we share those synergies that are crucial ingredients in building a long and mutually beneficial 42 BREAKBULK MAGAZINE www.breakbulk.com

relationship,” Panayides said. “These include our shared multipurpose sector expertise, our aligned ethics and culture, our service philosophy, and our ambition for the sustainable growth and success of our respective organizations.” Khanbabi explained, “This cooperation builds upon the functional and geographical strengths of each party. We find ourselves with the enviable prospect that the whole is now greater than the sum of the parts.” Even beyond the global cooperation agreement, though, AAL is continuing to expand operations by, for example, seeking new market opportunities in the Americas and Europe. That search recently led the company to northwest Canada’s Port of Prince Rupert, British Columbia, as a new destination for AAL’s Pacific Service. The service’s three A-Class, 31,000 dwt vessels will be put to work to supply the oil and minerals industries in northern Alberta Province. With the inaugural voyage into the Port of Prince Rupert on May 10, the AAL Brisbane

delivered a cargo of processing units for an oil sands project in Alberta. Less than two months earlier, the company announced the addition of the 25,800 dwt, Super A Class ship AAL Galveston. Through a long-term charter, the vessel is expected to enhance the company’s Tramp & Projects division while focusing on service to Europe and the U.S. Khanbabi said the AAL Galveston is well suited to growing sectors, “particularly renewables, where logistics challenges have become greater as components get larger and more complex to transport, and ports of loading and discharge are more globally widespread. “These factors demand solutions that can ensure cargo safety and project efficiency – expertise that AAL has a 20-year reputation providing,” said Khanbabi. Now, AAL and new partner Peter Döhle are putting that expertise to work for breakbulk customers around the world. Through their cooperative strategy, they’re offering a satisfying solution to a Rubik’s cube puzzle. BB JULY-AUGUST 2015

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market spotlight

ABP takes weekly deliveries of paper in breakbulk vessels from Sweden and Finland. Credit: ABP

44 BREAKBULK MAGAZINE www.breakbulk.com

JULY-AUGUST 2015

CARVING A GLOBAL FUTURE Timber No Longer Comes in Neat European Packages By Mark Willis

fundamental trade shift is set to challenge European dominance of the timber and associated forestry products industry. Up-andcoming South American exports mean that ship operators and ports need to step up to the plate to accommodate the larger ships with deeper drafts making their presence felt in these trades. Trade in timber and forestry products, while traditionally a largely regional business, has recently developed into a much more global affair, with the greater distances between producing countries and end user markets resulting in more complex and geographically wider supply chains. Founded in 1958, Verbrugge International B.V. is a secondgeneration family-owned business headquartered in the port of Terneuzen, on the Dutch North Sea coast. According to Dolf van Dijk, commercial manager at Verbrugge, forestry products represent about one-third of the breakbulk cargo that the firm handles. While Verbrugge also handles timber and paper reels, woodpulp is the most significant forestry product and the largest single commodity handled by the firm. Dealing with about 4.5 million tons of cargo per year, Verbrugge has become the largest European handler of woodpulp. “We have been handling this product since the late 1960s. At that time woodpulp was mainly produced in the Nordic countries, and our terminal in Terneuzen was acting as an import hub into continental Europe, with the end market mainly in the Benelux countries, France and Germany. The company developed particularly strong links with producers in Finland,” Van Dijk said. “In the late 1990s we saw developments coming that the production of woodpulp was switching from the Northern to Southern hemisphere, www.breakbulk.com BREAKBULK MAGAZINE 45

market spotlight

and would increasingly be located in South American countries such as Uruguay, Brazil and Chile,” he added. While the firm still handles pulp from the main European producing countries of Sweden and Finland, there has been a reduction in quantities coming from the Nordic countries over the last decade, with the largest volumes now arriving from South America. Wider statistical data also confirms this sizable rise in South American timber and forestry product exports during the last 20 years. According to the United Nations Conference on Trade and Development, or UNCTAD, the U.S. dollar value of forestry-related South American exports expanded from US$7.3 billion in 1996 to US$17.8 billion by 2013. While still a long way behind the combined 2013 export value of about US$33 billion from the largest two European timber producers, Sweden and Finland, South America exports grew an impressive 143 percent during the same period compared with the 23 percent gain for the Nordic countries. On the current trend growth rate, South American exports will overtake those in Scandinavia within the next decade. Lars Traaseth, CEO of Saga Welco, a Norwegian firm with 52 open-hatch bulk

carriers, explained how the rise in South American woodpulp exports – at the expense of some of the large European economies – has been primarily driven by greater cost competitiveness and investment in countries like Brazil. “South America in general is more competitive on a cash cost basis for producing woodpulp. The reason is that they have more modern and larger mills. They also have larger plantationbased production of trees, so in a sense they are more competitive than the Northern Hemisphere,” said Traaseth, whose firm carries South American woodpulp to the Far East and Europe, and smaller volumes from Scandinavia to Asia. This changing pattern in the supply and demand of woodpulp, and other forestry products, has presented new challenges to firms operating within global supply chains. In particular, the greater distances and different orientation between producer countries and the final destination has resulted in larger cargo vessels, as well as ports more strategically suited to the new South American trade. According to Van Dijk, Verbrugge in the past handled most woodpulp imports through its terminal in Ter-

Verbrugge’s Scaldia terminal is suited to larger vessels servicing the transatlantic woodpulp trade. / Credit: Verbrugge International B.V. 46 BREAKBULK MAGAZINE www.breakbulk.com

neuzen. Having anticipated the rise of South American exports, in the early 2000s the firm moved to develop a new terminal, Scaldia, with an open connection to the North Sea, more suited to the larger vessels with deeper draft servicing the burgeoning transatlantic woodpulp trade. “Located closer to the North Sea in Vlissingen, the Scaldia terminal is more suited to South American imports, and with no sea locks and less congestion allows vesGareth Russell sels to unload faster and around the clock,” Van Dijk added. Gareth Russell, business development manager, Humber, at Associated British Ports (ABP), pointed to largely stagnant growth of forestry product imports at 15 of the firm’s 21 UK port facilities that have handled forestry products during the last five years. Annual breakbulk volumes have remained at about 100 million to 110 million tons since 2010, Russell said. Regarding the breakdown of specific products, timber and sawn timber – which accounts for about half of ABP’s total forestry imports – have declined modestly, alongside a slight increase in both paper and woodpulp. While the lack of growth is surprising given the UK’s status as the fastest growing “major economy” in 2014, it’s possible that inventories built up during 2010-13 led to the tepid demand of the past 18 months. With consensus forecasts suggesting the UK economy will continue to outstrip the rest of Europe over the next few years, there are reasonable grounds for a projected acceleration in forestry product imports – notably timber for the construction sector – over the short- and medium-term horizon. According to Russell, ABP has not witnessed a marked increase in South American imports, with Sweden and Finland still the dominant provider of UK forestry products at its facilities. However, he acknowledged that earlier transshipment at continental European ports, including Antwerp, might cloud the wider trade trends, and the growing JULY-AUGUST 2015

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relative worldwide importance of transatlantic imports. Of the 15 ABP facilities handling forestry products, the port of Hull in North West England remains the dominant shipping cargo entry point, accounting for about half of total imports. Alongside the location of manufacturing plants and the development of surrounding infrastructure, Hull’s status as the principle recipient of foreign timber products also reflects the ability of shippers to gain a profitable cargo for the return journey leg, according to Russell. “Once a vessel arrives in the UK, among the biggest proportion of its costs will be the onward haulage from the port … which will have a large influence on selection of port of entry,” he said. The typical weekly delivery of paper in breakbulk vessels from Sweden and Finland will carry backloads of machinery and containers, Russell added. Given the levels of investment that have taken place during the last several years and further spending plans in the pipeline, many analysts expect

that supply of South American timber and forestry products will continue to expand, with a corresponding increase in sea bound exports traveling to European and in particular Asian end users. While consumption of paper for newspapers, magazines and books has diminished in line with the decline of the global print media sector, demand for woodpulp for packaging, replacing less environmentally friendly and non-biodegradable plastics, has increased. There is an expectation, therefore, that woodpulp will continue to prove its worth in future years, with demand broadly expected to keep up with the growth in supply. “In general, the pulp industry is doing very well. Both supply and demand are generally on an upward trend and remain well balanced. You still see big investments in the building of woodpulp mills in South America, and we expect further new investment to take place,” said Verbrugge’s Van Dijk. Saga Welco’s Traaseth is slightly less optimistic about the outlook for global

woodpulp demand, but nevertheless expects positive growth on the back of robust emerging market expansion. “The international demand for paper products or products based on food fiber is not spectacular, but expanding by about 2 percent per year. What you see is that there is negative growth in North America and relatively flat growth in Europe. But Latin America and the Far East are having healthy growth. So [aggregate world] demand for woodpulp is positive,” he said. The largest European suppliers in Finland and Sweden will continue to see their global export share diminished by more cost competitive developing countries, where larger investments have taken place. However, with end users and manufacturers still requiring a mixture of hard and soft woodpulp and fiber qualities, analysts expect Scandinavia to remain a significant exporter of forestry products. To this end, recent investments in Finland are considered a promising sign for the European pulp industry. BB

CATERING TO WOODPULP DEMAND Verbrugge, which operates out of the ports of Terneuzen and Flushing (Vlissingen) in the Netherlands and nearby Zeebrugge in Belgium, offers its clients a range of logistics services, including stevedoring, distribution and warehousing for breakbulk and bulk cargoes. Starting in the 1960s as a handler of Nordic forestry products, the operator initially dealt with transporting these cargoes to clients in the Benelux countries, France and Germany. However, in line with the stellar rise of South American production and exports during the last 15 years, Verbrugge’s European demand has since expanded to include the UK, Poland and Austria, as well as its former core markets. Verbrugge has since grown to become the largest European handler of woodpulp, dealing with imports of both Nordic and South American

48 BREAKBULK MAGAZINE www.breakbulk.com

forestry products. Verbrugge, which initially established in 2000 with just a single warehouse to handle the increasing transatlantic woodpulp trade, has since expanded its Scaldia terminal to 22 warehouses. Dolf van Dijk, the firm’s commercial manager, highlighted a number of value-added services provided by Verbrugge. “We have enormous storage capacity. If the market is slowing down, we can increase our storage. We have the largest storage facilities in Europe, with total capacity of 1 million square meters of good quality space in predominantly modern warehouses,” said Van Dijk. “With our depth of experience, we know the market very well, and can adjust to the demands of our customers,” he said. Along with its modern handling

equipment and warehouses, Verbrugge is strategically located for shippers and end-user clients, Van Dijk said. Situated at the port of Vlissingen, on the north bank of the Scheldt estuary, the Scaldia terminal was developed specifically to handle the South American trade. With the deep port allowing easy entry for the larger vessels servicing this trade, the absence of sea locks and congestion facilitates swifter unloading of cargo than at nearby Antwerp, according to Verbrugge. Situated close to the North Sea and to the major river and canal networks of Northern Europe, Verbrugge can transport woodpulp via barge throughout the continent within a relatively short space of time, switching to coasters to transport goods to the Baltic Sea, Poland and parts of northern Germany.

JULY-AUGUST 2015

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BUILDING UPON SUCCESS Port of New Orleans Builds Upon Record Breakbulk Business

The Port of New Orleans is a deep-draft multipurpose port at the center of the world’s busiest port system, Louisiana’s Lower Mississippi River. Connected to major inland markets and Canada via 14,500 miles (23,335 kilometers) of navigable waterways, six Class I railroads and the Interstate Highway System, the Port of New Orleans is the ideal gateway for containers, chemicals, coffee, steel, project cargo, natural rubber, forest products, manufactured goods and more. “Shippers of such goods as steel, nonferrous metals, forest products and rubber, as well as heavy-lift project cargo, choose the Port of New Orleans because we offer logistical advantages unlike any other port in the world,” said Gary LaGrange, President and CEO of the Port of New Orleans. Due to the historic industrial expansions and new construction both on the Lower Mississippi River and along the Gulf Coast, Port of New Orleans stevedores are experiencing a real boost in project cargo.

RECORD CARGO GROWTH

In 2014, cargo worked at the port totaled 8.37 million tons, the highest total since 2000. Leading the growth, imported steel rose 101.6 percent over the year-earlier period to 3.54 million tons. Overall breakbulk tons totaled 3.76 million tons, up 51.7 percent, while container volume topped 4.61 million tons, up 13.5 percent compared to the prior year. “At the Port of New Orleans, we are built for breakbulk, and our continued drive to provide value-added services will ensure our exceptional abilities to handle breakbulk and project cargo for generations to come,” LaGrange said. Terminal operators Coastal Cargo, Empire Stevedoring, New Orleans Cold Stage, Ports America and Seaonus Stevedoring-New Orleans offer a wealth of experience and decades of commitment to the Port of New Orleans shippers. Gaining recognition for its premium connectivity, worldclass customer service and strategic location, the Port of New Orleans was named Business Facilities’ top Logistics Leader in 2013 and Port Operator of the Year by Lloyd’s List in its 2014 top North American Maritime Companies.

MEGA PROJECTS ABOUND

Louisiana, the nation’s No. 1 producer of crude oil and the second-highest producer of natural gas, is attracting mega projects. In the past several years, US$80 billion in capital infrastructure investments have been announced in Louisiana, including an estimated US$21 billion investment by South Africa-based Sasol to build an ethane cracker as

50 BREAKBULK MAGAZINE www.breakbulk.com

well as an integrated gas-to-liquid (GTL) facility. Several other projects coming to Louisiana boast a capital investment of more than US$1 billion each, including a US$2.1 billion expansion of CF Industries’ Louisiana nitrogen complex in Donaldsonville and a $1.2 billion methanol manufacturing plant in Plaquemines Parish by Castleton Commodities International. The Port of New Orleans recently completed two of the heaviest project cargo lifts in its history successfully discharging a 718-ton, absorption tower and a 790-ton ammonia converter from ship to barge. On Jan. 20 the Port of New Orleans handled its largest project cargo piece to date at the Louisiana Terminal, operated by Coastal Cargo. Dan-Gulf Shipping was the appointed agent for the record-breaking 790-ton, 128-footlong project piece that journeyed to New Orleans from Jebel Ali, Dubai, aboard the Palabora. Operated J. Poulsen Shipping, the Palabora became the second vessel in one week to discharge project cargo that weighed more than 700 tons at the Port of New Orleans. Dan-Gulf officials were pleased with the success and efficiency of the operations at the port. “As agents, it was our pleasure to coordinate the discharge operation between the vessel operators in Denmark and local entities such as the Port of New Orleans, Coastal Cargo of Louisiana and the receivers,” said John-Paul Gehrkin, Operations Manager for Dan-Gulf Shipping. “We are honored to be a part of such a historic event and hope to continue that tradition as more large-project cargos come to the Port of New Orleans.” Just eight days prior to the record move, Fracht USA/ Germany, a global freight forwarder, successfully handled the 718-ton, 164-foot-long absorption tower, which was destined for the CF Industries plant project in Donaldsonville, La. The SAL Amoenitas arrived at the port’s Louisiana Avenue Terminal Jan. 10 after a 45-day trip from Shanghai, China. The lift from ship to barge was completed Jan. 12 by SAL Heavy Lift, Fracht, Roll-Lift, McDonough Marine and terminal stevedore Coastal Cargo Co. “This is great business for Coastal as well as for the Port of New Orleans,” said Dan Haeuser, President and CEO of Coastal Cargo Co. “Project cargo of this type and magnitude has not been traditional in the Port of New Orleans. It’s wonderful to have this type of diversity added to the Port’s cargo mix.” Fracht officials said the successful move took more than a year of careful planning.

JULY-AUGUST 2015

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Stevedore Coastal Cargo Co. recently worked steel wire rod coil at the Louisiana Avenue Terminal at the Port of New Orleans. Steel imports rose more doubled in 2014 leading to a 14-year high for general cargo at the port’s public docks. Photo by: Tracie Morris Schaefer, courtesy of Port of New Orleans

“When you look at this move, project forwarding isn’t just calling the vessel lines and calling the stevedore,” said Reiner Wiederkehr, Fracht’s Chief Operating Officer. “There are so many things involved with such a huge task. The Port and Coastal Cargo have been very accommodating and helpful, but we picked the Port for a reason – they have the best people to handle this type of cargo.” Reflecting on the Port of New Orleans’ busy year, LaGrange said its successes were realized from the combined efforts of the entire port community, and has created momentum for its terminal operators and customers. “The challenge now is to build upon these successes and continue to grow,” he said.

Dan-Gulf Shipping was the appointed agent for the record-breaking 790-ton, 128-foot-long ammonia converter at the Port of New Orleans’ the Louisiana Terminal, operated by Coastal Cargo. The piece journeyed to New Orleans from Jebel Ali, Dubai, aboard the Palabora, operated by J. Poulsen Shipping. Photo by: Tracie Morris Schaefer, courtesy of Port of New Orleans

www.breakbulk.com BREAKBULK MAGAZINE 51

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THE LATEST “NEW” FROM THE PORT OF GREATER BATON ROUGE Ranked 9th nationally in total tonnage, there’s a lot of “new” these days at the deepwater Port of Greater Baton Rouge. For example, say port officials, NEW COMPANIES locating at the port, NEW INVESTMENT in infrastructure, and NEW LAND AVAILABLE for development. Highlights of these new developments include: Energy, L.P. is constructing a $150 million crude • Goil,enesis intermediates and refined products import/export terminal, expanding that company’s commitment to providing efficient mainstream supply and logistics services to the region.

rax Biomass, one of Europe’s biggest renewable elec• Dtricity generators, has launched its $30 million wood pellet storage and transfer operation. The storage facilities have the capacity to store approximately 80,000 metric tons of wood pellets. Each storage dome is approximately 200 feet in diameter by 145 feet tall including the mechanical housing unit atop the structure.

tupp Coatings, LLC has constructed a facility on 24 • Sacres at the Baton Rouge port’s Inland Rivers Marine Ter-

minal to operate concrete weight pipeline coating services for the oil and gas industry. The site is service by rail, truck and barge with access to the Gulf Intracoastal Waterway.

54 BREAKBULK MAGAZINE www.breakbulk.com

ouis Dreyfus Commodities is successfully operating its • Lnew, state-of-the-art grain dock and export grain elevator. estway Terminals, LLC has completed its $3.5 million • W expansion at the port’s liquid bulk terminal. ver $10 million in improvements have been made to the • Oport’s rail lines and infrastructure. creage at the port’s Inland Rivers Marine Terminal is avail• Aable for development, with access to the Gulf Intracoastal Waterway.

Recent reports show that cargo worked at the Port of Greater Baton Rouge’s public docks in 2014 more than doubled the amount handled in 2013, according to year-end statistics from the port. In 2014, the Port of Greater Baton Rouge handled more than 9.2 million tons of cargo, an increase of more than 100% over the 4.2 million tons that passed through in 2013. For the more information, officials at Louisiana’s capital city port suggest giving them a call to ask, “What’s new?” Contact Greg Johnson, Director of Business Development, at 225.342.1660. JULY-AUGUST 2015

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PORT OF LAKE CHARLES KEEPS PACE WITH UNPRECEDENTED ECONOMIC GROWTH The Port of Lake Charles in Southwest Louisiana is no stranger to widespread industrial growth. Even with an economic boom reaching upwards of $80 billion in announced

56 BREAKBULK MAGAZINE www.breakbulk.com

capital investment in the region, the Port has kept pace with rapidly evolving cargo demands as new industrial facilities break ground and new global customers gravitate to the region.

The Port acts on behalf of the State of Louisiana as the local sponsor for the maintenance of the Calcasieu River Ship Channel—the major economic artery to the region. The region’s role in national and global economies can be measured by the Channel. According to Lake Area Industry Association—an organization comprised of area oil and petrochemical plants—cargo transported on the Channel supplies 7.5 percent of the nation’s daily petroleum products consumption. Consistently ranked by the U.S. Army Corps of Engineers as the 13thbusiest Port District in the U.S., the Port’s 13 berths and large lay-down facilities are being upgraded to meet future maritime trends. Deep-draft ship traffic is projected to double on the Channel over the next 10 years, and the Port is already preparing for this increase by dedicating $46 million in capital investments this year. These improvements will modernize warehouses, add new docks, improve traffic patterns and reinforce services on which Channel users and Port tenants rely. Other major developments include the IFG export bulk grain elevator, which is already drawing international customers and will move 1 million tons of grain annually. The elevator works congruently with the Port’s train track infrastructure, which has been upgraded to include two loop systems, and together they substantially increase the Port’s cargo capacity, handling speed, and overall efficiency. The Port recently established a short-line rail corporation that now oversees train movements to and from City Docks, and this endeavor fits with the Port’s aim to enable smart growth during the next decade of rapid industrial expansion. The Port of Lake Charles is governed by a seven-member board of commissioners and comprises two marine terminals and over 5,000 acres of property zoned for industrial use, including an industrial park. For more information, call 337-439-3661 or visit www.portlc.com. JULY-AUGUST 2015

OUR

CAPABILITIES RUN DEEP. In New Orleans, we’re known for letting the good times roll. But to our customers, our capabilities are as world-class as our food and music. The Port of New Orleans is America’s most intermodal port. We connect you to major inland markets and Canada via 14,500 miles of waterways, all six Class-I railways, 50 ocean carriers, 16 barge lines and 75 truck lines. The Clarence Henry Truckway, a dedicated two-lane roadway on Port property, makes fast transit times even faster. The Port also offers near-dock rail and ship-to-barge services. Looking forward, the Port of New Orleans is always innovating and expanding, so you can comfortably do business here.

You’ll be glad you came.

portno.com

GULF COAST SPECIALISTS | 2015 ADVERTISEMENT

GULF STREAM MARINE See What Makes Us the Most Dependable Stevedoring Company on the Gulf Coast

Gulf Stream Marine is a leader in cargo handling, stevedoring and terminal operations in the Gulf Coast region. Founded in 1990, Gulf Stream Marine has grown to become one of the largest privately-owned stevedoring companies on the Gulf Coast. This year, we have launched the expansion of our operations from the seven terminals in Texas, to offer our services across the Gulf Coast in Louisiana, Mississippi, and Alabama. With this geographic presence and the depth of our skilled supervision and labor, we can deliver unparalleled management flexibility with safe and efficient operations for our customers. We believe we currently possess an industry leading position in our safety performance as measured by the Total Recordable Incident Rate metric. Safety and quality are among the highest priorities in all of our terminal operations. Our long term success rests with our ability to engage our employees in continually improving the quality of our services while ensuring everyone goes home to their family injury free. Cargo shipments are like stevedoring companies: no two are exactly the same. We believe that a stevedoring company should be driven by the demands of its clients and Gulf Stream Marine has established a reputation as an industry leader. We manage cargo from all over the world. From industrialized Northern Mexico, to the Far East and Europe. We own and maintain one of the largest equipment fleets in our sector, employ a rigorous equipment renewal program and procure advanced equipment to drive productivity. We actively pursue improvement opportunities company-wide, and employ Lean Six Sigma methodology and practices to scope, execute and measure improvement projects. Accurate and timely transfer of information is as important as moving the cargo itself. At Gulf Stream Marine, we

58 BREAKBULK MAGAZINE www.breakbulk.com

view technology and systems development as a core business strategy and strength. STMS (Stevedore and Terminal Management System), our proprietary system, manages and tracks your cargo through the planning, receiving, moving and loading process. Our industry leading cargo receiving process utilizes hand held tablets in the yard so real time information for cargo is available. Our customer portal enables our customers to conveniently access visibility to the status of their cargo. We are committed to identifying and developing advanced technological solutions, such as STMS, that will enable us to better serve our customers. Gulf Stream Marine’s desire is to integrate our customer’s data into our process to optimize efficiency. In 2014, Gulf Stream Marine acquired Big John Marine Services. As a result, Gulf Stream Marine has increased our service offerings to include heavy lift capabilities at all of our terminals and throughout the Port of Houston. Big John Marine Services is a marine service company based in Houston, Texas. At the center of the company’s portfolio, is a harbor service derrick barge “Big John”. The Big John has served the Port of Houston and surrounding areas on the Gulf Coast since 1967 and serves a very important role in facilitating the transfer and movement of cargo within the Port. With its 500-ton lift capacity, Big John has executed more than 4,000 lifts without a single incident of cargo damage. Since Gulf Stream Marine began, we have been developing transport solutions and providing a vital link between shippers and receivers of unique goods. Daily safety meetings, customer rigging, heavy lift expertise, on-site engineers and highly-trained staff are what makes Gulf Stream Marine the most dependable stevedoring company on the Gulf Coast.

JULY-AUGUST 2015

GULF COAST SPECIALISTS | 2015 ADVERTISEMENT

BIG JUST GOT BIGGER Höegh Autoliners is a leading global provider of Ro/Ro transportation services. This year, the company takes a new step in its investments in the breakbulk market, introducing a new generation of vessels with improved capabilities for carrying high and heavy cargo. This is only one of the activities Höegh Autoliners is taking to improve its services to the break bulk market where new equipment and a dedicated organizational set-up are other significant investments. By 2016, Höegh Autoliners will have six of the New Horizon vessels in its fleet, operating within the company’s global trade network. The vessels will be of the Post Panamax size and offer ramp capacity up to 375 tonnes and 6.5 meter door opening height. With five out of 14 decks being liftable, the vessels will enable loading of a wide variety of cargo and offer high flexibility in trade. Besides offering excellent cargo operation opportunities the New Horizon vessels can also pride themselves with a better environmental footprint compared to standard car carriers and the vessel model is given DNVGL’s class notification “CLEAN” for cleaner design.

DEDICATED RESOURCES

To further enhance the company’s capabilities in the breakbulk segment, Höegh Autoliners last year launched a new global breakbulk and project cargo group. Oskar Orstadius, Head of Breakbulk segment says: “Our team exclusively service those accounts that move breakbulk and project car-

goes. Everyone in the team has long experience in this cargo segment and we are spread across the key breakbulk markets, ensuring personal and local service to customers.”

NEW EQUIPMENT

Höegh Autoliners did last year complete the implementation of a program to introduce two new sizes of mafis or roll trailers to add to the traditional 20’, 40’ and 62’ sizes. The newest roll trailers are now 72’ and 80’ in length and custom made to accommodate longer cargo. They also have rails in the bed of the trailers making them even suitable for rail cars and locomotives. Oskar Orstadius continues: “The rails offer safe and smooth transportation of trains and trams as it enables cargo operation without lifting the unit. It also offers a more cost efficient solution as there is no need to hire cranes for the operation.” Höegh Autoliners continues to invest in specialised equipment to accommodate for even bigger and heavier cargo suitable for the New Horizon vessels.

LOOKING FORWARD

Höegh Autoliners are very excited about what the future holds as the company expands and provides new levels of service to its customers. New markets are likely to evolve and put new requirements to the trade networks. Höegh Autoliners already has presence on all continents and offers a global trade network. Now with a dedicated project cargo team, investments in equipment and the world’s largest PCTCs soon in its fleet, Höegh Autoliners is ready to welcome new customers with even bigger and heavier cargo.

www.hoeghautoliners.com 60 BREAKBULK MAGAZINE www.breakbulk.com

JULY-AUGUST 2015

25-28 October 2015

Abu Dhabi National Exhibition Centre (ADNEC) Abu Dhabi, UAE

GLOBAL LOGISTICS EXPERTS, REGIONAL PROJECTS FOCUS Superior Education, Unmatched Networking Join top project cargo logisticians from around the world for the inaugural Breakbulk Middle East Conference and Exhibition. This important industry event provides unmatched networking and superior education workshops, plus an agenda that will focus on the Middle Eastâ&#x20AC;&#x2122;s growing investments in major infrastructure projects. Located at the gateway to the Middle East,

Abu Dhabi and the Abu Dhabi National Exhibition Centre, is an international destination that welcomes foreign visitors, businesses, investors and inviting them to learn about its rich cultural history and valuable natural resources. EXHIBITORS/SPONSORS reserve your stand today: Mohammed Ryad mohammed@breakbulk.com Tel: +973 3900 1399

LAND

AIR

SEA

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middle east

VESSEL CALLS IN 2014

Mu saff ah Po rt – 1 5 ,5 2 5

More than 20,000 ships called at Abu Dhabi Ports’ facilities last year.

Fre e Po rt/Ne w Fre e Po rt – 6,467 Zaye d Po rt – 1 ,0 6 2 Kh alif a Po rt – 1 ,0 4 0

DRIVING REGIONAL DEVELOPMENT Abu Dhabi’s Industrial Growth Mirrors Cargo Volumes

UNITED ARAB E M I R AT E S

By Carly Fields

M GENERAL CARGO PERFORMANCE IN 2014 Abu Dhabi Ports experienced record growth last year. 15*

2010

2011

2012

2013

2014

*million tonnes / Source: Abu Dhabi Ports 62 BREAKBULK MAGAZINE www.breakbulk.com

iddle East infrastructure investments in excess of US$1.3 trillion over the next 10 years promise a complementary growth in the cargo and transportation market. Industrial growth and cargo volumes go hand-inhand; increased trade flows through a port are a good indication of a healthy economy. The capabilities of a port also directly affect the industrial centres it supports. Abu Dhabi Ports contributed 2.9 percent to the non-oil gross domestic product of the Emirate in 2014, and as such has a crucial role to play in Abu Dhabi’s economic development. As the capital of the United Arab Emirates and the source of more than 90 percent of the country’s oil revenues, many consider Abu Dhabi as the primary growth engine for the success the nation enjoys today. The Emirate’s forward-thinking leaders are, however, shifting their focus towards the strategic diversification of the local and national economy in order to secure the long-term prosperity for the U.A.E. Abu Dhabi Ports has been a catalyst for economic development that is not entirely dependent on hydrocarbons, and if the company’s recent

performance is anything to go by, the future is bright for Abu Dhabi. Since its creation in 2006, Abu Dhabi Ports, the developer, operator and manager of commercial logistics, community and leisure ports and industrial zones in Abu Dhabi, has been constantly evolving, driven by a commitment to innovation and facilitated by its ability to handle growing volumes of cargo. Last year, Abu Dhabi Ports handled more general cargo than ever before. With a 37 percent year-on-year increase in the total number of tonnes, Abu Dhabi Ports broke the Emirate’s record by handling 12.8 million tonnes in 2014. Dry bulk made up the majority of total volume at 81 percent, with the remainder representing breakbulk (19 percent), including steel and project cargo. The ability to handle record loads has been facilitated by the recent completion of the transfer of its entire roll-on, roll-off operations to Khalifa Port from Zayed Port, in line with its mission to expand the Emirate’s port infrastructure. Handling a record 106,071 ro-ro units, Khalifa Port opened the door for Zayed Port to focus on and thrive as the Emirate’s breakbulk specialist. With more than 2.2 million tonnes of raw steel handled by Zayed Port, 2014 also saw Abu Dhabi Ports receive the largest ever shipment in the free port, with five heavy-lift pieces JULY-AUGUST 2015

middle east

for the Abu Dhabi Oil Refining Co.’s (TAKREER) Carbon Black Project weighing in at a total of 29,492 tonnes. Abu Dhabi Ports continues to build on these successes, with general and bulk cargo experiencing a 32 percent increase in the first quarter of 2015 over the same period in 2014. Abu Dhabi Ports operates the port facilities of the Emirate’s nine commercial logistics, community and leisure ports, including its flagship Khalifa Port – one of the world’s most advanced deep-sea ports and the region’s first semi-automated port – and its industrial trade and logistics hub, Khalifa Industrial Zone (Kizad). Abu Dhabi Ports’ facilities and zone offerings, as well as the company’s subsidiaries, are prime examples of its strategy to be an enabler for trade and development contributing to the economic vision of developing and diversifying the Emirate’s economy. In 2015, Zayed Port took delivery of two new mobile harbor cranes, which will be used to more quickly and efficiently handle the increasing general cargo volumes. The new cranes were supplied by Liebherr and can lift 65 tonnes, thereby complementing Abu Dhabi Ports’ existing cranes, which are capable of lifting loads of up to 100 tonnes. The new cranes, as well as other equipment, such as hoppers and forklifts, are part of an ongoing upgrade to all of the general cargo handling equipment across Abu Dhabi Ports. It also carried out essential maintenance work at Zayed Port and its neighboring Freeport, repairing the quayside wall in order to enhance port facilities and services. Such investments and upgrades, together with Abu Dhabi Ports’ ability to complement activities across its ports, allow the company to boast a value proposition for the global industrial and trade community. As a result, Abu Dhabi Ports, which prides itself on offering competitive services at high levels of productivity and quality, has seen numerous small and medium Emirati enterprises transition back from other, regional ports. More companies are expected to return once all infrastructure extensions, including road and rail networks, to and from its ports have been completed. “The customer lies at the heart of 64 BREAKBULK MAGAZINE www.breakbulk.com

the success experienced by Abu Dhabi Ports and the Emirate itself,” Gary Lemke, executive vice president of ports at Abu Dhabi Ports, told Breakbulk. “We decided to recognise the impact of Abu Dhabi Ports and its customers on the U.A.E. economy, and therefore last month hosted our inaugural customer awards ceremony. The event celebrated the achievements of the past year, with winning customers applauded for their business growth, their professional bestpractices and their overall contribution to the Emirates’ growing regional and global trade volumes as well as non-oil GDP and economic diversification.” At the ceremony, Abu Dhabi Ports honored companies including Al Ghurair Iron & Steel, for breakbulk, and Emirates Steel, for dry bulk, as Importers of the Year for their contributions as market leaders to importing and manufacturing finished products, as well as their contribution to Abu Dhabi’s economic transition. Before kicking off celebrations, however, Abu Dhabi Ports and their customers have had to work hard to overcome labor and infrastructure challenges, among others. To this end, the implementation of employee-training programs has been crucial in developing well-versed staff able to handle specialist projects. Set up in 2013, the Abu Dhabi Ports’ Maritime Training Centre has developed into a leading training facility in the region, with the number of trainees studying at the center increasing by 15 percent in 2014. The center, which recently signed a memorandum of understanding with the Higher Colleges for Technology (HCT) Abu Dhabi to develop an academic partnership, saw its efforts awarded with international recognition, passing a Lloyd’s Register audit and being officially accredited as an approved training provider – the first of any maritime training institute in the Gulf Cooperation Council region – thereby driving overall career development and the national goal of empowering Emirati talents. Abu Dhabi Ports has also committed significant investments across all ports to bring in world-class infrastructure that can facilitate quicker and better services, be more cost-effective, and environmentally sustainable. At Kizad, Abu Dhabi

Ports invested in the Modular Path, which is designed to enable large plant and equipment to be transported directly between Khalifa Port and investor facilities. In addition to hardware, Abu Dhabi Ports is also upgrading its terminal operational software. As of July 1, Jade Master Terminal Operating System (TOS) will be gradually implemented across all of Abu Dhabi Ports, with Khalifa Port and Zayed Port marked as the first adopters. The initial round of employee training workshops have already been completed. Abu Dhabi Ports also has to deal with the challenges of temperature extremes. With an average summer temperature of nearly 43 Celsius/110 Fahrenheit, Abu Dhabi Ports has invested in and implemented best practices and general safety standards in line with the International Maritime Organization to protect not only cargo shipments but also its employees. Providing cold and cool storage for the former, Abu Dhabi Ports, as part of a wider educational program, recently launched its annual summer health and safety program – aiming to reach more than 2,000 Abu Dhabi Ports users – to raise awareness about and help prevent heat-related illnesses during the summer months. “Health and safety is a top priority at all times. At Abu Dhabi Ports, we strive to educate our staff and other port users, and empower them to identify when a colleague is in need,” said Lemke. The central business strategy of Abu Dhabi Ports is to facilitate development and trade to support the diversification of the Emirate’s economy, which is a main pillar of the Abu Dhabi Economic Vision. The introduction of the latest technologies that respond to the needs of the 21st century and further optimize all its operations, including breakbulk, and the wide range of customer service offerings is necessary to position the authority at the forefront of progress to also enable it to face tomorrow’s challenges. Abu Dhabi Ports offers a wide intermodal transportation network via sea, road and air, and provides market access to 4.5 billion people within four time zones. With Abu Dhabi Ports set to link into the Emirate’s wider road and rail network, it will further contribute to the overall prosperity of the Emirate. BB JULY-AUGUST 2015

case study

Among the A320 family production components being shipped from Hamburg, Germany, to Mobile, Alabama, is the forward fuselage section for a JetBlue A321ceo aircraft to be delivered in 2016. / Credit: Airbus

FLYING HIGH Airbus, DHL Showcase Multimodal Approach to A320 Assembly

66 BREAKBULK MAGAZINE www.breakbulk.com

By Mary Shacklett

anufacturing aircraft for the Airbus A320 family is an enterprise that engages multiple parties and continents. This multiplicity is one of the driving factors that prompted Airbus to engage the DHL Industrial Projects group in a multimodal logistics plan that was capable of delivering sensitive breakbulk goods with unit weights of 30 tons each from Europe to the U.S. “Transport management for highly sensitive heavy goods calls for highly specialized expertise in project logistics as well as a strong grasp of technical and security issues,” said Nikola Hagleitner, CEO Industrial Projects, DHL Global Forwarding. “Together with Airbus, JULY-AUGUST 2015

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case study

our Industrial Projects team designed a sophisticated multimodal transport concept.” The Airbus A320 logistics project involved shipping 80,000 tons of freight that included aircraft components like rear and forward fuselage, wings, and vertical and horizontal tail plane. These components needed to be shipped from Hamburg, Germany, to Airbus’ newly constructed aircraft assembly plant in Mobile, Alabama, with the first group of shipments beginning in June. The large A320 components, along with 1,000 sea freight containers of additional parts, crossed the Atlantic by ship. These were augmented with air freight shipments of hazardous materials and other goods. Configuration and control of the final assembly processes at Airbus’ manufacturing facility required all cargo delivered from Germany to Alabama within a 29-day delivery schedule. In developing the multimodal logistics plan, DHL was responsible for designing and manufacturing the special trailers and lifting devices that were needed to execute Airbus’ transportation requirements. “DHL designed and provided lift-

Heavy-lift cranes take the strain of loading components. / Credit: DHL Global Forwarding

ing devices and roll trailers in Germany, and also the road trailers in the U.S.,” said Peer Wulf Herrmann, head of DHL Global Forwarding Industrial Projects in Germany. “These devices and trailers are

customized to fit the specific dimensions of the unique cargo and transport jigs.” Oversized cargo was shipped by charter vessel, and other cargo went on standard routes, vessels and planes, he said.

BEST PRACTICES FOR COMPLEX PROJECT MOVES While the DHL Airbus shipment process had only just started at the time of writing, both companies had already reported several best practices that they would recommend to others facing similar types of movements: Define the shipment in great detail: “Every party, including the transport provider and the shipping company, has to have the same understanding of the shipping objective,” said Klaus Fischer, workstream leader transport and logistics, Airbus FAL U.S. “Both parties need a thorough explanation and understanding of the parts they are going to ship. They must also understand how handling and shipping aircraft parts is unique from handling and shipping other breakbulk goods.”

68 BREAKBULK MAGAZINE www.breakbulk.com

Create a detailed description of the transport process: “Going into great detail on the transport process ensures the right understanding of the process’ sequence of events, and its relationships with all other actions,” Fischer said. “The development of this process takes time, but it is a mandatory baseline.” Establish clear and open communications between the shipper and the transport service provider: “[This is] especially when the transport service provider is coordinating with other service providers such as a shipping or a trucking company; the main objective is to have transparency of the operations in a short time,” Fischer said. “Often, you will face the situation of short time decisions, and this

requires clear transparency of the situation and its related consequences, if you are to make the right decision. Throughout the entire project, you have to create an environment of trust between both parties.” Enact a quality program that aims at zero harm and incidents: “Transportation of aircraft pieces has its own unique requirements,” said Peer Wulf Herrmann, head of DHL Global Forwarding Industrial Projects in Germany. “It cannot be compared to other heavy-lift cargo.” Employ seasoned experts when doing a project this complex: “A project as detailed as this requires high technical knowledge at all times,” Hermann said.

JULY-AUGUST 2015

RLTransportca RLTCA R&L TRANSPORT

case study

Putting this plan into action is no small task: special sea transport frames secured on roll trailers with twistlocks were needed to facilitate trans-ocean shipments of five aircraft components up to 30 tons each. Transport frames were used to move this heavy cargo over land from Hamburg to the Finkenwerder Airbus plant’s wharf. Once the cargo arrived at the wharf, the transport plan called for two 200-ton cranes to transfer the components to a chartered, heavy-cargo vessel for voyage to the U.S. Timing was critical as all loading had to be completed within six hours of the cargo’s arrival at the wharf. Special handling was a factor because major sections of the A320 aircraft are much too large to fit into a normal sea container. Consequently, these sections had to be loaded onto special transport jigs, which were then locked into position under the weather deck of the ship to protect them from the elements. “The heavy components, each with a single maximum weight of 30 tons that is inclusive of the weight of the sea transport jig, are not really heavy for breakbulk operations, but the sensitivity regarding movement during the shipment is the main challenge,” said Klaus Fischer, workstream leader transport and logistics, Airbus FAL U.S. “There-

fore, safety aspects and a secure loading and unloading of the components are mandatory. Specialized handling equipment is also needed at the ports and for the road shipments.” Once the cargo arrived in the U.S. and cleared customs in Mobile, special cranes loaded the aircraft components onto heavy-duty trailers, which then transported the cargo to the Airbus assembly plant a few miles away. After unloading these aircraft components, the sea transport frames were disassembled and transported on flatracks by ship back to Bremerhaven then trucked to Finkenwerder, where they were reassembled. While this heavy cargo was being transported, an additional 4,000 parts of general cargo were loaded into sea containers at DHL’s Hamburg hub, and then transported by truck to Bremerhaven and on to Mobile by container ship.

Special Handling

“In the shipment process, there is another element that we had to consider in the planning,” said DHL’s Herrmann. “The cargo is very sensitive in that there can be no touching and no welding. Strict requirements are in place with regards to acceleration forces, flatness of

Members of DHL Global Forwarding, Airbus, the International Longshoremen’s Association (Local 14010) and APM Terminals employees pose in front of the fuselage of the first Airbus A320 aircraft to be assembled at the Airbus U.S. Manufacturing Facility in Mobile, Alabama. / Credit: Airbus 70 BREAKBULK MAGAZINE www.breakbulk.com

ground and clearance around the pieces. We also have a set of strict lead times that we have to meet.” To help address these issues, Herrmann said Airbus asked to have large safety clearances maintained around the cargo handling operation. Airbus also insisted that hatch covers were kept clean at all times of any falling debris that could land on aircraft parts. As part of the security measures, secured areas were also set up for these major aircraft components, prohibiting entry of any unauthorized or untrained personnel. As part of the A320 shipping effort, the Airbus-DHL team utilized air transport as a complementary strategy to ocean shipping, and Airbus insisted that DHL pass the European Aviation Safety Agency audit in order for it to be an approved by-air Airbus supplier. DHL used air transport primarily to ship hazardous goods, but consolidated shipments were also air freighted. Both types of cargo required special procedures that are legally required for securing and transporting the cargo. The overall logistics plan called for air shipments to arrive in the U.S. and to clear customs just as the ocean-carried shipments must. After customs clearance, the freight was transported by truck to the Airbus assembly plant in Mobile. Containers, once unpacked, were shipped back to Finkenwerder to be used for other projects. A project of this magnitude required close collaboration between Airbus and DHL. Initially, this included working together on all document preparation and logistics alignment meetings that were arranged with customs authorities in Germany. Maintaining the quality of shipments throughout the logistics process is also critical. “For the handling of hazardous cargo, DHL has strict internal requirements and regulations, which allow for a smooth and uneventful handling,” Herrmann said. “DHL has also implemented a strict handover process at each change of the transport mode and will supervise the entire transportation supply chain. Components were visually inspected for damage at various check points through the shipping process. Dedicated DHL Industrial Projects Health, Safety, Security and Environment (HSSE) staff supervised load-out and load-off and JULY-AUGUST 2015

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case study

A rear fuselage section for the first A320 Family aircraft to be produced at the Airbus U.S. Manufacturing Facility in Mobile is loaded onto the BBC Fuji cargo ship ahead of its transatlantic voyage. / Credit: Airbus

performed regular risk assessments and analyses during the entire shipping operation, he said. “QAP (quality assurance procedures), safety meetings, and toolbox talks are just some of the many measures we have in place to ensure that the entire chain of sea and air shipments for the aircraft goes smoothly,” Herrmann said. Airbus’ Fischer added: “Airbus also has stringent Quality Gates at the end of each manufacturing stage to ensure the quality of a component or assembly before it is moved or shipped to the next stage. Although we do not check quality during shipping, the quality of an aircraft component is checked before and after shipping.” Given the stringent 29-day delivery timeframe for 80,000 tons of parts to be shipped between Germany and the U.S., together with the special handling and sensitivity requirements for several key aircraft components, the AirbusDHL team focused on several important project cornerstones as it developed a comprehensive logistics plan covering costs, equipment suitability, system 72 BREAKBULK MAGAZINE www.breakbulk.com

visibility, and contingency planning, among other issues. Firstly, time was of the essence, but controlling shipping costs was also important. This was one reason a multimodal shipping approach was adopted, placing as much cargo as possible on standard, lower-cost shipping routes. Meanwhile, the decision was made to ship oversized pieces of cargo requiring special handling or hazardous components by charter vessel or air. Secondly, oversized aircraft sections could not be transported, loaded or unloaded using standard equipment requiring DHL to design and manufacture special trailers and lifting devices. Thirdly, with the intercontinental shipment of so many aircraft components in such a tight timeframe, having end-to-end system visibility of all goods in transport was an absolute necessity. “Airbus used its own internal planning tools to synchronize deliveries of components to ensure they arrived at the Airbus U.S. manufacturing facility on time, Fischer said. “This tool incorporates the necessary manufacturing and transport lead times.

“DHL also has to work to very tough timelines to manage cargo availability on time and without damage,” added Herrmann. “High-level project and supply chain management is required on DHL’s side with joint cooperation between Industrial Projects, Germany, who is in the lead, and working with the Industrial Projects team in the U.S.” Fourthly, contingency planning is a mainstay in the aerospace business. To assure contingencies for unexpected glitches that could arise in the Airbus A320 logistics plan, DHL used its own internal logistics contingency methods and also identified in advance the backup solutions it would use in the event that a contingency cutover to other systems or logistics avenues became necessary. “We also worked closely with the ports, carriers, etc., on these plans,” Herrmann said. DHL Industrial Projects is backing its logistics effort for Airbus with its own fully customized and proprietary developed Material Management System. “The usage of this system has great advantages due to its tailor-made design, data and high visibility,” Herrmann said. BB JULY-AUGUST 2015

BOLD STEP The commissioners of the ports of Seattle and Tacoma decided to do something never done before. They decided to combine the strengths and resources of the two ports instead of competing with each other. The Alliance was formed to forward the highest standards of operational excellence, optimize strategic and infrastructural investments, offer better, complete value to the customers, benefit the community and consolidate negotiating power on state and federal levels. The result is the 3rd largest gateway in North America. Ranked #1 for ease of doing business with. Example is set.

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The Northwest Seaport Alliance is a marine-cargo operating partnership of the Port of Tacoma and the Port of Seattle

infrastructure

STARTING FROM SCRATCH

The site of the new airport on the island of St Helena. / Credit: Basil Read

74 BREAKBULK MAGAZINE www.breakbulk.com

JULY-AUGUST 2015

African Projects Test Limits of Infrastructure

alma in Mozambique is a small unassuming fishing village in the north of the country. Situated in dense jungle there are few roads, the locals live in scattered mud huts and hardly, if at all, speak English. Those locals vary from friendly fishermen to gun-toting rebels. There are snakes – the poisonous kind – and hordes of mosquitoes, the malaria kind. The current port is nothing but a stretch of beach and the airport a dirt strip. Drinking water and electricity is as hard to find as the shops. This unassuming place is where Anardarko Petroleum Corp. plans to build a gas-export project, one of the biggest of its kind, to recover gas reserves of 250 trillion cubic feet in the region. It’s a project of enormous proportions, not least because of the lack of even basic infrastructure to support the development. But ask any project manager in Africa what the minimum infrastructure requirements are for a project of this nature and you get the same answer every time: nothing. At most they will say some kind of access is necessary, but even that is desirable, rather than essential. “Our organization has never walked away from a project due to the lack of infrastructure,” said Ferose Ferose Majam Majam, commercial, international and tenders manager for Basil Read. “No infrastructure is the norm on most projects in Africa. Our approach is simply to find solutions and create that which is not there. We have developed a skill set that puts us in a position where we can tackle and find means to complete any project.”

Ernst Kunfermann, a projects specialist who has worked across Africa, agrees, saying that he has yet to find a project that is not doable. “The bigger question is more about whether there is budget to create the infrastructure for the infrastructure. It can be extremely costly and run into huge figures before you have even started construction of the actual project,” he said. In Mozambique it is estimated that the exploration company’s costs are already around the billion-dollar mark and there is little to show for it all in terms of minimum infrastructure input thus far. In fact, Anardarko is still at the pre-project planning stage and feasibility studies have not yet been completed. The magnitude of what the company has to establish is difficult to comprehend. Before any gas plant goes up, the company is going to have to find a way of housing and feeding more than a thousand project workers. Anardarko has already had to truck in tons of soil to create a temporary campsite for the small handful of people on site. Lars Greiner, managing director for materials management and logistics of consultancy Greiner, Mendi & Associates, said the viability of projects is not measured in terms of what is already on the ground. “Mozambique is a prime example of our willingness to take on just about anything regardless of what it costs or how difficult it is,” he said. “Innovative logistics that speak to the delivery of cost-effective projects is being required more and more. Logistics experts have to just perform the extraordinary, and one then begins to question if there should not be a minimum requirement of infrastructure in Africa.” Francois du Toit, global discipline director: logistics for Hatch, said there is no standard in Africa, as it varies for www.breakbulk.com BREAKBULK MAGAZINE 75

infrastructure

The wharf on the island of St Helena – one of the most remote places in the world with minimum to zero infrastructure. / Credit: Basil Read

every project and for every company operating on the continent. “Some people will say roads, ports, railways must be in place before they undertake a big project, while others will say understanding of the customs regulations and compliance to it is just as important. After all if you don’t have the necessary understanding and ability to manage the import and export of your materials and equipment in and out of a country you might as well not even be in it, and you will not be constructing your project, let alone achieve schedule and cost,” he said. 76 BREAKBULK MAGAZINE www.breakbulk.com

In fact, it’s far more complex than that. “Electricity, water, sewage, accommodation for employees, food, security, storage – all of these would be considered minimum requirements in most countries before a project could kick off. In Africa none of these things have to be in place for a project. Remote logistics addresses it all.” It all starts with pre-feasibility – in African terms that means establishing how much of those essentials need to be taken to the site for the project to begin. Taking this into account, risk then plays a major role in the African project

landscape. “The importance of knowing what you are going up against cannot be underestimated,” Majam said. “You have to plan, plan and then plan some more. In Africa there are no shortcuts and you have to as far as possible eliminate all elements of surprise.” A near impossible task as there are virtually always surprises; expecting the unexpected is part and parcel of project planning in the continent. “The trick,” said Majam, “is to plan for those unexpected elements and to understand the landscape you are operating in – an environment with very little or no infrastructure.” Once you know what you are dealing with, it is simply a matter of constructing an access point. “We start with the road. All we need is a starting point and from there one can just about do anything,” he said. The St Helena island airport construction is a prime example. Situated 2,000 kilometers from the nearest point of land on the African continent, initial infrastructure was limited. “There was no harbor, no construction plant and no material available for construction apart from rock and water,” Majam said. “In order to get our equipment and material to the island we sourced a ship which is a landing craft type vessel to which we had to make modifications to allow it to carry fuel and cargo. A crane was also installed to allow us to offload.” A forwarding facility was created in a bonded yard in Walvis Bay in Namibia to consolidate all cargo before shipment to St Helena. On the island itself Basil Read constructed offices, storages and workshops. “We constructed an accommodation camp that could accommodate about 100 people. The vessel that we sourced – the NP Glory 4 – was the first vessel to voluntarily touch ground on the island. We built a temporary jetty to allow for this.” The company also built a haul road that climbed about 350 meters in the first few kilometers to get to the site. To date, the company has shipped in excess of 22 million tons of fuels, 5,000 tons of explosives, 27,000 tons of cement, more than 200 pieces of heavy construction equipment, brick-making machinery, crushing equipment, batching plants for concrete, and tons of sand. The list goes on: “Then there are the hundreds and JULY-AUGUST 2015

infrastructure

hundreds of kilograms of fresh meat and food produce that had to go,” Greiner said. In Nacala, Mozambique, where a railway line was constructed a few years ago, people lived in tents on site for at least six months while living accommodations were constructed. Camping in the middle of nowhere means trucking or flying in fresh food, fuel to generate power and water for drinking and washing. “Once there is access anything and everything is brought to the site, water and food being the most obvious. Electricity is created with generators and containers are turned into storage facilities,” Greiner said. In Palma these necessities will have to be trucked in over hundreds of kilometers, as was the case for the Ascaf iron ore project in Mauritania. “Literally a desert site in the middle of nowhere, one of the biggest questions initially was how do we get the first containers off a truck.

Once that was solved everything was delivered to the site,” Greiner said. Kunfermann added that in the case of Mozambique the first priority – once the road to the site is completed – will be to create a settlement of sorts. “These camps are quite primitive and provide only for the bare necessities. Even so it is expensive. Putting this minimum infrastructure in place plays a big role in why logistics in Africa is so expensive,” he said. Paul Runge, an African projects expert and managing director of the Johannesburg headquartered Africa Project Access, noted that the high cost of logistics has not deterred project flow in Africa, which is riding the crest of a wave. Monitoring projects across a broad range of sectors in Sub-Saharan Africa, excluding South Africa, Runge said he is not surprised to see the private sector paying close attention.

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“The continent has an abundance of natural resources and minerals, oil and gas and it is politically stable in many regions,” he said. However, he noted that funding is a problem and it is affecting projects as logistics costs are “sky rocketing.” In its latest Africa infrastructure report, Capital Projects & Infrastructure in East Africa, Southern Africa and West Africa, PricewaterhouseCoopers (PwC) found that the top three challenges in delivering capital projects across Sub-Saharan Africa were: • The availability of skills. • A lack of internal capacity among state organizations to plan, procure, manage and implement capital infrastructure projects. • The impact of political risk and government interference during project lifecycles. But, failure is simply not an option,

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JULY-AUGUST 2015

said Du Toit. “In Madagascar we built a mine with hardly any infrastructure available, not even a port. At least 160,000 tons of cargo was moved on to the island via barge onto a temporarily established quayside. A port was constructed at the same time as the mine was going up. Accommodation, water, food, power, supplies … everything else was imported for the duration of the project and the permanent infrastructure requirements were constructed as we went along.” According to Runge, developers also need to consider emergency preparedness. “Not only planning and creating of living facilities and getting food, water and electricity to people, but you also have to have a plan in place as to what you are going to do if someone becomes ill or if an accident happens. How are you going to evacuate them and how quickly you can do it?” Community involvement is another

minimal requirement – albeit not infrastructure related, Runge said. “Without the buy-in of the local community you are not going to go very far. It is essential for a project to have the village chiefs and tribal leaders on board.” In the case of Anardarko in Mozambique some 3,000 locals from a handful of villages will have to be relocated. However, successful projects are able to mitigate risks, Runge said. “The problem is that these large international companies just don’t understand the risks. Yes, there are those that have paid their dues and have come to appreciate what it means to do a project in Africa, but many have learned the hard way. “You might run a big multinational in a very developed country, be very good at projects and have a string of successful projects that attests to that, but a project in Africa is a different kettle of fish. Understanding the risk and then mitigat-

ing it is what makes the difference.” In Tete, Mozambique mining companies faced very real problems in the relocation of local communities out of the coalfields. “That is but one of many examples,” Runge said. “Another minimum requirement for any African project is that there has to be an off taker for the product. Unless someone really wants that mineral the money being put in to make it happen is going to be wasted.” Explained Greiner: “It’s not about what can be delivered but rather at what cost. It has to be cost effective for it to make sense in the long run.” Du Toit agreed saying the development of a project has to be sustainable especially in remote areas. “It’s about implementing durable solutions over a long period of time which ensures sustainability and that remain cost effective. If the solution is just too expensive it’s not durable or sustainable.” BB

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opinion

WHEELS OF COMMERCE Robust Procedures Can Help to Mitigate Compliance Challenges

B By Alexandra Wrage

reakbulk and project cargo operations present challenges for shipping companies, as well as cargo and shipowners, in their efforts to comply with local antibribery laws and international standards. These challenges arise from several factors. Unlike liner shipping, breakbulk and project cargo ships frequently have to call at ports in high-risk jurisdictions. They may be unfamiliar with these ports and typically have little discretion to change ports of destination. The complex and often high value nature of project cargo may flag its handling in ports as an opportunity for “entrepreneurial” government officials to extort bribes. They may do this, for example, by threatening to conduct additional, unnecessary checks and other procedures that would lead to significant delays. Finally, companies often have to hire local agents to perform customs, forwarding and logistics services, and these agents may not subscribe to international standards of compliance. What can be done to reduce risk in the industry? Shipping companies should perform a rigorous risk assessment of the ports at which they’re scheduled to call. Risk assessments should

include research on local laws and regulations with respect to legitimate payments that may be demanded, who is authorized to demand them, and acceptable methods of payment. It is often helpful to have local counsel on call to answer nuanced questions related to local regulations and practices, when such questions arise. At a minimum, company policies and internal controls should ensure that their local employees in high-risk jurisdictions do not approve questionable payments or services, regardless of business or operational pressure, and instead let the compliance and legal departments of the parent company handle such decisions. Given the timesensitive nature of these issues, advance planning is rewarded with reduced business disruption. Any payments that are ultimately approved should be accurately recorded and supported with the proper documentation, including receipts, in order to comply with books and records provisions of anti-bribery laws. If receipts are not available, companies should consider creating their own templates that government officials can complete, sign and stamp in return for payments. Frequently the act of insisting on documentation will alert the person

PERCENTAGE OF THIRD PARTIES WHO PUT THROUGH DUE DILIGENCE ANNUALLY

ENFORCEMENT ACTIONS – BRIBERY OF FOREIGN OFFICIALS

Few third party respondents make yearly due diligence a priority.

U.S. enforcement actions peaked in 2010, coinciding with a rise in non-U.S. enforcement actions in 2008-2010. Actions appeared on the rebound in 2014.

20 33% (17)

35 30

15 27% (14)

U.S. enforcement actions non-U.S. enforcement actions

25 20

10 13% (7)

13% (7)

5 6% (3)

8% (4)

0%-10%

11%-20%

21%-30%

31%-50%

51%-70%

71%-100%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: TRACE International Inc., 2015 80 BREAKBULK MAGAZINE www.breakbulk.com

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demanding payment that your company will not sanction inappropriate payments. When this is coupled with delay – “I’ll have to check with headquarters” – companies can become such a burden for bribe-takers that they are permitted to pass while easier targets are identified. With respect to facilitation payments – “grease” or “expediting” payments – companies are advised to unequivocally prohibit them. These payments may seem innocuous initially, but they may prompt additional and higher value demands and undermine compliance efforts. As a side note, payments made in response to a reasonable expectation of physical harm or illegal detention are not bribes; they are criminally extortionate demands and employees shouldn’t be expected to risk personal safety, health or liberty for their employer. Shipping companies

should clearly make the distinction for these types of payments and should circulate a policy stating which are acceptable. Third-party providers are a perennial area of risk. The best way to address this is for shipping companies to perform thorough due diligence. This accomplishes three goals: • It elicits information that can help companies make prudent choices among providers. • It creates a record that the company can point to should misconduct by the third party be uncovered at a later date. • The due diligence process itself sends a message to third parties that the company values and prioritizes compliance amongst its business partners. This should not be underestimated. Wherever possible, companies should also endeavor to train their agents using actual scenarios for the same reasons. It

is prudent for companies to avoid third parties, whether small and local or large and multinational, if they are unable to demonstrate a prior commitment to compliance or a willingness to promote the standards propagated by the shipping company. While the challenges to this industry are considerable, companies can demand appropriate business practices and remain profitable if they demonstrate the internal will, undertake as much advanced planning as practicable and convey their willingness to walk away from business opportunities presenting insurmountable bribery risks. BB Alexandra Wrage is president of TRACE, an anti-bribery business association offering tools and services to multinational companies and their partners. For more information go to www. TRACEinternational.org.

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lashing

SYNTHETICS VS. STEEL By Alan M. Field

reakbulk and project cargoes that shift in transit or in handling are not only a major safety concern; the costs for repair, replacement and repair to property can be eye-wateringly high. Unsurprisingly, it’s something that shippers actively strive to avoid. For decades, lashing solutions to secure these cargoes have been dominated by unwieldy chains, with little in the way of innovation to overcome the problems of weight, risk of sheering, and threat of damage to some sensitive cargoes. Times are changing and synthetic straps and webs are starting to gain a foothold in the cargo-lashing sector. But before there can be widespread adoption, manufacturers need to win the battle for hearts and minds. “A lot of people in the shipping industry have the

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image in their head that synthetic strapping and webbing material is only good for [securing] small cargo and light cargo,” said Mark Openshaw, senior application specialist at Cordstrap, the world’s largest manufacturer of synthetic, woven strapping. “In actual fact, the webbing that we make will actually compete in [terms of] strength with chains for a fraction of the weight.” But, he noted that the “tide has been turning” in the industry, as more traditional breakbulk firms – long users of steel strapping – are beginning to understand the virtues of synthetic materials. Recently, Openshaw said: “When someone shipped some 100-ton hoppers from Ireland to a port in the U.K., they used our product because it was quicker to apply, and quicker to remove. The less time your ship is in the port or dock, the less it is costing you.” Traditional wire systems have been used for hundreds of years, and people are generally more familiar with them. Cordstrap has been making strapping for

JULY-AUGUST 2015

Credit: Shutterstock

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lashing

It’s important that high tension is applied to the strap. / Credit: Cordstrap

about 50 years, using lines of fiber that were originally held in place by glue. As an alternative to steel banding, that product was made out of rayon; a natural fiber. “It had some good applications, but any kind of water or weather, over time, could make the product go weak, and then fail,” Openshaw recalled. With the emergence of innovative plastics during the 1970s, Cordstrap moved into using polyester to make strapping; polyester fibers running in parallel, held in place by a new glue coating. This made it more weather resistant and a longer-lasting strap. From the 1980s the company switched from a glue to an extruded plastic coating. The manufacturer’s original market was the timber industry, moving into the chemical industry and then into unitizing or palletizing and securing cargo in containers. “As our experience with customers evolved, we realized that we needed stronger products, so we moved into our own woven strapping, which we call ‘webbing,’ which also came in various size strengths,” Openshaw said. “It is important to provide a product that is very high tension so that when you put it on, you get high tension applied to the strap, and it retains that tension. The 84 BREAKBULK MAGAZINE www.breakbulk.com

tension gives you a pulling force.” Today, Cordstrap’s woven strap is made and treated in such a way that it can control the amount of elongation in the product, he added. “Our product range goes from a couple of tons right into 20 tons. So for heavy cargo – breakbulk cargo – it is our heavy-duty woven lashing that we use.” A typical Cordstrap product involves lines of fiber running in parallel, which provide strapping strength from 300 kilograms up to 2,600 kilograms, depending on the needs of the shipper. Gwin Hilton, technical sales manager of North Carolina-based Carolina Strapping & Buckles, a U.S. manufacturer of woven, composite and bonded polyester strapping and lashing products, noted that the market for these products is growing largely because of widespread concern for safety issues. “Every shipper has a story about a cut or a near miss or accident in which a cut occurred with the use of steel strapping,” Hilton said. He noted that the insurance rates paid by companies who use steel strapping are affected by the frequency of accidents and near-misses. Whereas steel strapping can “impale or cut people,” Carolina’s product “will not do that. It has tension on it, of course, but it won’t cut you. That makes it the

most attractive product for senior level management,” who pay close attention to insurance costs. Hilton added that railroads have tried over many decades to solve some of their load shift problems by using this kind of product. “You can imagine a load of pipe being close to a tank car – and if that pipe was to impale that tank car, especially chlorine, then you would have evacuation on your hands of the adjacent population.” Although steel strapping takes an impact, steel does not have the elongation properties to hang on to the load, he said. “Our material will stay with the load; on impact, it will take the impact and keep the load secure.” When steel strapping breaks, “you have a series of broken steel banding, hanging down from the railroad car going down at 30 to 50 miles per an hour. You can only imagine what would happen if you have a pedestrian at a rail crossing with that [steel banding] hanging off that car.” Openshaw noted: “Customers who were using chain to secure steel slabs onto flat racks have moved to our products because the chain was breaking. Chain may be a steel product, but when you put it over a sharp edge – like a steel product; such as the chain on the edge of a piece of plate steel – if a load is [then] applied, the chain can snap.” JULY-AUGUST 2015

BELTS, BRACES AND BUCKLES Adequate and appropriate webbing to secure breakbulk and out-of-gauge cargoes is only one piece of the strapping puzzle. Connectors and ties are also critical components and are consequently the subject of ongoing research and development. Cordstrap’s offering is its patented Dynamic Load Buckle, known as the Dynablock Buckle, designed for those cargoes most affected by vibrations. The company’s Mark Openshaw explained that when it comes to securing shipments with lashing and strapping, there are three different categories of cargo to consider: Cargo that is fixed and solid and won’t move at all, for example a steel box. Cargo that can move, such as a truck with wheels and suspension. In such a case, “the whole thing can move and bounce, independent of what it is sitting on,” Openshaw said. Dynamic cargo – “the kind of cargo that can’t move, but as a result of the way that it is transported, you can have vibrations. Truck or big machinery can move, relative to whatever it is sitting on, through vibrations.” These kinds of vibrations mean that the lashing system is the subject of forces that are applied and removed very quickly. This third kind of cargo is known as ‘dynamic cargo’ because a dynamic action is happening on the cargo at all times. “For traditional webbing systems, this dynamic action can cause the [strapping] to go loose and to fail,” Openshaw said. “With our original [earlier] system, you couldn’t use [our strapping] in this [dynamic] environment because it could go loose.”

Strapping is used to secure an outsized cargo. / Credit: Cordstrap

Cordstrap developed its Dynamic Load Buckle to prevent against such failure in the securing of this third type of cargo. The patented buckle system is used for joining the straps together, he explained. When the cargo is placed on the ship, it must be secured to the lashing point on the ship. Using a loop-and-strap system, the Dynamic Buckle goes through one lashing point and back down again. While the Dynamic Buckle looks the same as a normal buckle from a distance, special ridges have been cut into it so that it can’t slip. The system works on dynamic cargo and static cargo that is behaving dynamically. Openshaw added: “Once it is applied – and we have developed tooling to apply it – you can actually secure dynamic cargo with this system and it will not go loose. This works on things like trucks, but also on things like wind turbines – which is a common breakbulk cargo around the world at the moment.” Indeed, Cordstrap’s Dynamic Buckle is attracting more and more users for securing wind turbines.

“Traditionally, people use chains to secure wind turbines,” Openshaw said. “But chains are heavy, so moving them from the deck of the ship, five or six meters into the air, involves a lot of weight [being moved]. If you use a [synthetic] webbing system, there is a lot less weight, but people are concerned that the webbing system could go loose. So it’s that kind of market where we can work with our system, so it won’t go loose.” Openshaw admitted that the Dynamic Buckle was not an immediate success, despite its benefits. Although the product has been on the market for a couple of years, many people “haven’t noticed that it can make a difference,” he said. The dynamic buckle system has been used on railroad systems for a few years and it is available for other kinds of users, but it has not been heavily promoted in the marine industry. “Cordstrap wants to make sure that it has good test cases that are being used – and make sure that there are no issues with it before [we] start pushing it big time,” Openshaw said.

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lashing

In addition to the safety and the strength issues with chain, Hilton noted that steel strapping can also lead to rusting and abrasion of some breakbulk cargo. “Our product, being a textile product made here in the U.S., is not an abrasive product on sensitive commodities that will be shipped over rail. If you have a pipe that already has a finish on it, then you do not want that product being secured by something that is going to be abrasive. Our product will secure the product in place without compromising the finish of the product. This is not something that is going to have to be touched up later on. This is safer for the individual and for the product itself.” Allen Creech, director of technical services, at Southern Bracing Systems, based in Rome, Georgia (U.S.), added, moreover, that “traditional steel banding can be very difficult to handle and use. Handling, installation and removal can

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require safety gear to ensure the user is not hurt. During installation, heavy tools are also needed to tension and secure the bands. The sheer weight of the individual coils, which can be in excess of 100 pounds, requires additional machinery to transport and handle.” In contrast: “A typical woven or bonded strap coil or spool is designed to be transported by a single person. Our standard coils are kept below 15 pounds [in weight], and the tensioning device is a single tool – in most cases, lightweight – making the application very easy for the installer,” he said. On the other hand, added Creech: “On the customer side, the material can be cut with a pair of scissors rather than the need for a heavy tool designed to cut steel banding.” Moreover, “Steel banding can become extremely sharp when cut and can result in injury to not only the installer but also the customer. Steel banding can also be

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difficult to tension correctly as the steel doesn’t always conform to the product and must be manually manipulated to help ensure a proper tension is achieved.” Given all these selling points, why then is there still significant resistance to synthetic replacements for steel among veterans in the industry? Openshaw explained: “The maritime breakbulk industry is pretty well regulated and has a pretty good safety record. Because they’ve been doing a certain thing a certain way for a long time, people just don’t like to change. Even though you have a product that does everything you need it to do, there is just a feeling in the industry that ‘chain is big and heavy; how could something synthetic be just as strong as a chain?’ ” While Cordstrap’s woven product offers as much strength as steel for those who require it, “there is a perception in the industry that chain has to be better.

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Whereas, in actual fact, if you go down to a technical level, with regard to what abuse they can take with use, the synthetic system is actually far more forgiving because it can give and stretch, whereas a chain will either hold or break.” Manufacturers remain hopeful that their products will become more popular among users, although they are unable to provide sales figures. Hilton noted that his firm’s market share is increasing “because of the safety issues. “There is resistance to change in any organization,” he said. “When you talk to steel manufacturers in the U.S., they are the first ones to tell you that they are not going to be changing away from steel strapping; ‘we are a steel company,’ they say. But once they start using it, they have, one by one, seen the advantages of it – not only pricewise, but also in efficiencies. As different load designs are developed by railroads, you see them

more and more leaning toward nonmetallic strapping.” For his part, Creech said: “As with any new product or process, there is always resistance to change. Steel banding is still an accepted standard and one that will continue to play a role in load securement for a long time to come. However, some applications have been shown to no longer work with steel banding, largely due to the fact that the bands can pose a danger to others if they fail during transit. While the start of this change occurred in the rail industry, we continue to see it affecting other modes of transit every day, as people see the benefits of woven and bonded strapping. These same veterans are the main people that end up helping to push the popularity of the product, as they see the benefits after some initial resistance and are happy to tell others.” More education of the market is required, the executives agree, as many

potential users still do not understand the benefits of using these products. “Many people do not initially see the benefits to upgrading,” Creech said. “It is our job to explain that typical strapping is made with between 15 percent and 30 percent elongation, and this additional stretch can allow the freight to move. As a simple example: a 10-foot length of strap with a 30 percent elongation could elongate as much as three feet when under tension. That much movement in a shipment could be the cause of very expensive damages and these can be prevented with a true load securement strap. “Another challenge is the flood of very similar products.” Creech concludes that potential users must also understand that “to get the most out of a strap, it must be used with the correct buckle or the entire system will underperform, resulting in excessive movement and potentially damage.” BB

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EVENT COVERAGE

breakbulk europe 2015

CONTAINER SHIPS CONUNDRUM Midsized Boxships Dent Demand for Oversized Cargoes By Carly Fields

oll-on, roll-off and multipurpose vessel owners’ share of steady general cargo volumes will increasingly erode going forward, a leading consultant has warned. Instead, container lines will take a larger share of global general cargo trade as carriers repurpose 4,000- to 8,000-TEU containerships to accept non-containerized cargo. Niklas Bengtsson, director of Sweden-based maritime-insight, told delegates at the Breakbulk Europe event in Antwerp that the problem is “not with the cargo itself.” “The problem is that the growth will be handled by the container carriers. They will steal the cargo and not necessarily earn money – that is a problem,” Bengtsson said. Container carriers’ bulging orderbook will “change the foreseeable future” for general cargo ships, overshadowing forecast flat growth in the general cargo ship fleet through 2019. “Container carrier capacity has outgrown general cargo capacity massively in the last 20 years. The trouble is that the current ro-ro cargoship orderbook will not come close to replacing ships, so the fleet will decrease by almost 16 percent by number of ships over the next few years,” Bengtsson said. The “general cargo fleet will get older and ro-ro cargo ships will struggle; I’m not saying that the concept is dead as it is not, but it will be even more niche in the future,” he said. Instead, Bengtsson expects comparatively inefficient mid-range container

88 BREAKBULK MAGAZINE www.breakbulk.com

Niklas Bengtsson, director of Sweden-based maritime-insight, speaks at Breakbulk Europe 2015.

ships to be taken out of the regular sailings to accept more awkward cargoes in the medium term. As a result, general cargo and ro-ro ship operators face tough times ahead, as their ships “are expensive to build and run and relatively high consumers of fuel. To survive, there must be more efficiency, and shipbuilding in Asia to bring costs down. Ro-ro operators must also work a lot more with complete logistics solutions to remain competitive,” he said. In a breakdown of the vehicle sector, Bengtsson noted the fleet is forecast to grow slower than trade. Normally, this situation would have prompted new orders, but strained finances for many of the lines active in this trade have reduced newbuild opportunities. The upside of this, said Bengtsson,

is that vehicle carrier operators will not overbuild their market and will consequently benefit from improved earnings for the next five years. That said, container ships also pose a significant threat to traditional car carriers: “All expensive cars and cars that are not going in the big trunk lines will be containerized first. Cheaper cars directly on the trunk lines will be in car carriers for a few more years. “The trouble is that as containerships have tremendously increased in size, others have not, so where container carriers have lower costs, car carriers do not.” Bengtsson predicted that car carriers would need to increase in size to 10,00012,000 car equivalent units in the near future to capitalize on the same economies of scale. BB

JULY-AUGUST 2015

Where too complicated simply doesn’t exist

Too big? Too heavy? Too complicated? Not for Spanish Ports

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EVENT COVERAGE

ANTWERP ADDS BREAKBULK TO ITS PCS Port Overcomes Challenges of Digitalizing Paper-heavy Business By Carly Fields

ntwerp has finally brought breakbulk into its port community system through an innovative 22-month partnership with the port of Bremen and dbh Logistics IT. A new breakbulk application, launched at the Breakbulk Europe exhibition in Antwerp, will automate much of 90 BREAKBULK MAGAZINE www.breakbulk.com

the port’s existing breakbulk process. “We have been searching for a digital application for breakbulk cargoes for a long time,” John Kerkhof, director of Antwerp Port Community System, said on the sidelines of the Breakbulk event. “It’s much easier to digitalize containers than breakbulk.” Annick Dekeyser, marketing communication coordinator, added: “This application will help the digitalization of breakbulk cargo at Antwerp. Today, it’s

a very paper-heavy business and at the moment, not all people in the breakbulk supply chain are informed enough, so it is important to make this cargo more transparent.” In the new breakbulk process, the forwarder who initiates the transport makes a single declaration concerning the consignment through the breakbulk application. The application then assigns a unique reference to the consignment that is then used by all subsequent parties in the chain. This allows the forwarder to view the status of the consignment in the system at all times. All users of the application will be expected to share in the cost, with the port working on the basis of €0.10 per tonne to be shared between the forwarder, ship’s agent and terminal operator. Kerkhof explained that it is not the intention of the port to “get rich” from the application, as the proceeds will be returned to the community. Currently in a pilot phase with ArcelorMittal Logistics, Fednav and NHS, the port is aiming for the application to achieve “fairly full coverage” by the end of the year. The port is also planning further breakbulk developments in its community system, focusing next on the integration of Customs applications and hinterland connections. “Cubix is another example of the innovative approach in breakbulk in Antwerp,” said Luc Arnouts, chief commercial officer of the Port of Antwerp. “Antwerp remains positive and confident to the future as a leading breakbulk port. We need to remain vigilant and innovative and act and react quickly. Transparency and avoiding redundancy are key words.” Antwerp’s Port Community System was initially developed by the port authority in conjunction with Customs and private companies. It’s a combination of an electronic messaging system with information exchange, supporting all goods and transport modes that utilize the port. Antwerp’s vision for its PCS is to allow its users to “achieve a competitive position in cargo logistics” through the efficient exchange of information with other links. BB JULY-AUGUST 2015

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EVENT COVERAGE

breakbulk europe 2015

Signature infrastructure projects include the US$93 billion King Abdullah Economic City project in Saudi Arabia.

MIDDLE EAST MONEY-MAKERS US$1.3 Trillion Investment Proves MENA Project Worth By Carly Fields

lanned Middle East infrastructure investment in excess of US$1.3 trillion over the next 10 years validates its importance as a key project cargo destination. With almost 30 percent of that 92 BREAKBULK MAGAZINE www.breakbulk.com

spend already committed, the area will continue to be a powerhouse in infrastructure spending despite lower oil prices. “The scale of change is so big; we are talking about regional transformation at a scale that has never happened before and will probably never happen again,” said Teresa Lehovd, head of market intel-

ligence, Höegh Autoliners, speaking at Breakbulk Europe. Some projects have been postponed or cut in the region as a result of lower oil prices, but the sub-US$50-per-barrel rates have also prompted a “paradigm shift” in the Middle East, said Lehovd. “The current prices expose the risks of overdependence on one single commodity and emphasize the need to diversify. This has created a very large and fastgrowing project cargo market.” Population in the Middle East-North Africa region is expected to grow by 100 million from 2014 to 2050, placing intense demographic pressure on the region. Added to which, countries in the Middle East have lost an estimated US$38 billion in revenue over the past year on the back of lower oil prices, compounding the pressure to finance JULY-AUGUST 2015

breakbulk europe 2015

projects. Saudi Arabia alone needs to create 4 million jobs in the next five years to accommodate its young population. “In order to develop areas of comparative advantage, these countries need infrastructure, that’s why infrastructure is becoming the critical catalyst for the diversification process in certain countries,” Lehovd said. Signature infrastructure projects include the US$93 billion King Abdullah Economic City project in Saudi Arabia, the US$147 billion Dubailand project in Dubai, the US$45 billion Lusail development in Qatar and Oman’s US$20 billion Duqm New Town project. In a comment on the effect lower oil prices will have on planned infrastructure projects, Lehovd said: “I believe that projects that are tied to international major events are safe, as are mega projects related to economic diversification and social infrastructure projects. The

94 BREAKBULK MAGAZINE www.breakbulk.com

projects at risk are the refining and petrochemical projects, as well as projects that are not strategically important, commercial/retail construction, and high-end real estate projects.” When it comes to delivering on planned projects at current oil price levels, she placed Qatar, U.A.E., Egypt, Morocco and Saudi Arabia at moderate risk, while Bahrain, Oman, Abu Dhabi, Kuwait and Algeria were high risk. “Short term these countries are well prepared for currency declines,” Lehovd said. “Longer term they will have to turn to debt and borrow from private banks and/or sell strategic assets.” In summary, Lehovd said prospects for project cargo “remain good for now,” but cautioned that a deepening oil price crisis could mean there will be further cuts to come. “They have perhaps done too little, too late,” she said. BB

Teresa Lehovd, head of market intelligence, Höegh Autoliners, at Breakbulk Europe 2015.

JULY-AUGUST 2015

EVENT COVERAGE

breakbulk europe 2015

18-21 May 2015 | Antwerp Expo | Antwerp, Belgium

Breakbulk Europe, the largest exhibition and educational forum in the world addressing the needs of traditional breakbulk and project cargo logistics professionals, celebrated its 10-year anniversary in record-setting fashion with nearly 7,200 qualified attendees from 113 countries gathered in May at the Antwerp Expo in Antwerp, Belgium. In addition, more than 350 exhibitors and sponsors filled more than 13,000 square meter exhibition area. In addition to a series of executive presentations in the exhibition hall, Breakbulk Europe provided a range of networking activities, including the welcome reception, a VIP Leadership Summer, Ports America’s Happy Hour, Breakbulk Business Run and numerous hosted parties and receptions. 96 BREAKBULK MAGAZINE www.breakbulk.com

JULY-AUGUST 2015

Industrial Solutions Feel the power

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The 10th anniversary celebration included recognition of the Breakbulk Europe’s “founding fathers” – Edouard F. Dekkers, president, Dekkers International Inc.; Albert Pegg senior advisor-marketing, promotion and commercial relations, Antwerp Port Authority; and Jean-Jacques Westerlund, director, TasteWesterlund. Ann DeSmet, business development manager of Port of Antwerp, was also recognized for her tireless efforts on behalf of Breakbulk Europe. The 11th Annual Breakbulk Europe Exhibition will be held May 23-36, 2016 again at the Antwerp Expo. Additional information will be available at www.breakbulk.com. 98 BREAKBULK MAGAZINE www.breakbulk.com

JULY-AUGUST 2015

EVENT COVERAGE

breakbulk europe 2015

2015 BOOTH WINNERS VIP Shipper judges from Alstom Power, Wartsila OY, and FLSmidth reviewed the 350-plus exhibitor booths and awarded the following: BEST IN CLASS

BBC Chartering GmbH CREATIVE BOOTH DESIGN

Martin Bencher Group

INFORMATIONAL/EDUCATIONAL

Holmatro

STRIKING INTERNATIONAL THEME

Ports of Spain

TOP ENTERTAINMENT

Nirint Shipping

MOST WELCOMING STAFF

Port of Blyth South Harbour MOST “FUN ON THE FLOOR”

Broekman Logistics

100 BREAKBULK MAGAZINE www.breakbulk.com

JULY-AUGUST 2015

INDEX

reakbulk cargo is an eclectic mix, encompassing forest products, steel, pressure vessels, windmill blades, rolling stock and out-of-gauge items. With this in mind, BREAKBULK INDEX data ranges from steel production to details of planned capital projects. The global nature of today’s breakbulk and heavy-lift sectors requires transportation professionals to be on top of economic trends worldwide, which calls for inclusion of focused macro-economic data on prices and events that affect EPCs, the breakbulk community and the multipurpose fleet.

INDUSTRY VETERAN FIELDS JOINS BREAKBULK

eteran maritime editor Carly Fields has joined Breakbulk Events & Media’s international editorial team as news editor. Fields has more than 20 years of shipping industry experience, including writing and editing maritime publications since 2000. After six years as special reports editor at daily shipping newspaper Lloyd’s List, she has worked as a freelancer journalist, serving as editor of Port Strategy magazine, the Institute of Chartered Shipbrokers’ Shipping Network magazine, The Mission to Seafarers’ The Sea newspaper and the Baltic Exchange’s online news source. Fields has also served as a lecturer for the Institute of Chartered Shipbrokers and was named Seahorse International Editor of the Year in 2012. “I’m truly excited at this opportunity to immerse myself in the breakbulk and heavy-lift sectors in my role of news editor of Breakbulk magazine,” Fields said. “I’m keen to further develop this hugely successful magazine, sourcing fresh content and tailored features in support of our international stable of events.” 102 BREAKBULK MAGAZINE www.breakbulk.com

JULY-AUGUST 2015

FORWARDING INDEX

PIRACY

EUROPEAN FREIGHT FORWARDING INDEX

WEST AFRICA MARITIME SECURITY INCIDENTS

The index, based on European forwarders’ actual and expected freight volumes, remains below 50 although August marked an increase. Values below 50 on the zero-to-100 scale indicate a decline.

2015

2014

2013

2012

2011

2010

Actual

Forecast

There have been 47 incidents from Senegal to Gangola during the first half of 2015, with 14 kidnappings, nine robberies, three thefts, two hijackings and 19 failed attempts. Efforts to combat piracy off the Horn of Africa have been largely successful, although there was a single hijacking in March.

M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J

Total Failed Attacks Hijackings Attempts Theft Robbery

October ‘13 9 November 5 December 3 January ‘14 5 February 7 March 10 April 4 May 5 June 6 July 3 August 7 September 5 October 9 November 13 December 9 January ‘15 7 February 6 March 10 April 7 May 12 June 5

4 2 1 3 3 5 0 1 5 1 3 1 6 5 2 1 1 0 0 0 0

5 0 0 1 0 0 2 0 0 2 0 0 3 0 1 4 0 1 3 0 1 1 0 2 1 0 0 2 0 0 3 0 1 1 0 3 3 0 0 7 1 0 5 1 1 2 1 2 1 0 1 4 2 1 4 0 0 5 0 4 3 0 1

Note: “Failed” includes attempted robberies/thefts as well as hijackings. “Hijackings” include kidnappings from vessels.

SOUTHEAST ASIA MARITIME SECURITY INCIDENTS Through the first half of 2015 there have been 100 maritime security incidents. Sixty-five were successful, led by theft (29) robbery (23) and hijacking (12).

Total Failed Attacks Attempts Hijackings Theft Robbery

October ‘13 19 November 13 December 13 January ‘14 1 February 7 March 9 April 12 May 18 June 15 July 14 August 14 September 8 October 26 November 20 December 16 January ‘15 18 February 11 March 15 April 16 May 22 June 18 0

Source: Danske Market Equities, www.danskebank.dk

9 4 3 0 1 2 1 11 2 5 6 2 7 9 7 6 3 6 9 7 4

1 4 5 0 6 3 0 9 1 0 0 1 0 0 6 2 1 4 4 5 2 1 2 4 3 4 6 2 1 6 1 4 3 3 2 1 4 8 7 0 5 6 1 3 5 2 4 6 2 3 3 2 2 5 1 4 2 2 11 1 3 5 6

Note: “Failed” category is for attempted robberies/thefts, not hijackings. Source: Risk Intelligence, www.riskintelligence.eu

www.breakbulk.com BREAKBULK MAGAZINE 103

bb index

FOREST PRODUCTS: PULP INDEX EUROPE Pulp prices cost, insurance and freight to main European ports were normalized to 100 in January 2000 and are based on average euro prices of northern and southern bleached softwood and eucalyptus kraft and northern bleached hardwood kraft pulp weighted by production volume. 125

100

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJ 2010

2011

2012

2013

2014

2015

NORTH AMERICA Delivered pulp prices were normalized to 100 in January 2000 and are based on average US$ prices of northern and southern bleached softwood kraft, bleached eucalyptus kraft, and northern bleached hardwood kraft pulp weighted by production volume. 175

150

125

100

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJ 2010

2011

2012

2013

2014

2015

ASIA Pulp prices cost, insurance and freight to main East and Southeast Asian ports were normalized to 100 in January 2003 and are based on average US$ prices of northern, southern and Russian bleached softwood, radiata, eucalyptus and mixed tropical hardwood pulp weighted by production volume. 225

200

175

150

125

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJ 2010

Source: RISI, www.risi.com

2011

104 BREAKBULK MAGAZINE www.breakbulk.com

2012

2013

2014

2015

JULY-AUGUST 2015

A division of

2015-2016 EVENT DATES

NETWORK WITH BREAKBULK & PROJECT CARGO LOGISTICIANS FROM AROUND THE WORLD. October 5-8, 2015 Port of Houston, TX, USA

25-28 October 2015 Abu Dhabi, UAE

1-2 December 2015 São Paulo, Brasil

February 2016 Istanbul, Turkey

14-17 March 2016 Shanghai, China

4-7 April 2016

23-26 May 2016 Antwerp, Belgium

Johannesburg, South Africa

TO REGISTER OR RESERVE A BOOTH, VISIT

www.breakbulk.com »

opinion

THE SLOW SEASON By Janet Nodar

I Credit: Keith Necaise Photography

An unlocked Iran means the world’s third-largest oil and gas reserves will gradually begin supplementing the pool despite a massive global oversupply.

t’s Breakbulk Events’ slow season, as we prepare for the 2015-2016 event cycle, plan our program content and watch the news – and boy, is there a lot to watch, much of it triggering ripple effects that will surely impact the breakbulk sector. Joao Augusto de Castro Neves, an economist with consultancy eurasia group, and a keynote at Breakbulk South America last December in Sao Paulo, told us recently that he sees distinct signs of brighter times ahead for Brazil’s shipping sector. Petrobras, Brazil’s state oil company, has been the sole operator of Brazil’s vast “pre-salt” offshore oil fields since President Dilma Rousseff’s leftist government changed the laws. However, in the face of recession, crippling scandals at Petrobras and intense financial pressure, Brazil’s congress appears poised to pass legislation that will again allow foreign and private oil and gas companies to invest in and operate these fields. Since Brazil’s assets will be selling very cheaply, de Neves expects an inflow of desperately needed foreign investment. New policies will also encourage foreign investment in logistics and other sectors, he said. However, the pre-salt oil is challenging, and therefore very expensive, to reach. Low global oil prices greatly increase the risks. News from Iran, where an historic agreement means yet another set of legal barricades is falling, will only add downward pressure on oil prices. Once Iran has met certain required nuclear program-reduction steps, and assuming no roadblocks arise, international sanctions should begin lifting from Iran’s US$400 billion economy. At press time, oil prices were sliding; an unlocked Iran means the world’s third-largest oil and gas reserves will gradually begin supplementing the pool despite a massive global oversupply.

106 BREAKBULK MAGAZINE www.breakbulk.com

This will be tough on the project cargo transport industry, which thrives on the kind of remotely located, complex energy projects triggered when energy prices hover at US$80 a barrel and above. On the other hand, Iran will soon be a rapidly rebuilding/developing market on Turkey’s doorstep, as well as a busy transit corridor for central Asia, factors we will be discussing at Breakbulk Turkey Congress in Istanbul. Low natural gas prices will also be a boon for the U.S. Gulf Coast, where billion-dollar investments in petrochemical manufacturing facilities and LNG export projects will come into play over the next 12 to 24 months. Louisiana’s Port of Lake Charles is just about out of real estate, according to Dan Loughney, the port’s director of marketing and trade development. “A few years ago we couldn’t give space away,” he said. Now project owners, EPCs, service suppliers and regional planners are bracing for a boom that will shape the region for years to come. This, too, will be a Breakbulk panel discussion topic, this one at Breakbulk Americas in Houston in October. Another Breakbulk Americas discussion we are excited about, “Managing the Transport Envelope,” will focus on the EPC/OEM perspective on the transport supply chain. The idea actually rose out of a great panel on managing risk presented at Breakbulk Africa last February, and we’ll be adapting it for other Breakbulk events. Enjoy the rest of the summer – and I hope to see you at one of our Breakbulk events over the 2015-2016 season. If you have a great idea for a panel, give us a call.

JULY-AUGUST 2015

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