outlook 2017
STAYING ALIVE
Consolidation May Lift Recovery Prospects
8 BREAKBULK MAGAZINE www.breakbulk.com
ISSUE 1 / 2017
I Credit: Shutterstock
t’s a new year, but the same challenges remain: unsustainable freight rates; oil prices that are unsupportive of oil and gas projects; overcapacity in this and competing sectors; and political and economic uncertainty in too many countries for comfort. You would be forgiven for wondering if you are reading the outlook for 2014, 2015 or 2016, rather than one for 2017. But there has been one important change that could finally lift the breakbulk and project cargo sector out of the doldrums in 2017: the urgently needed consolidation that many predicted finally found its teeth in 2016. We saw births, deaths and marriages as companies came together in new joint ventures aimed at controlling costs, while others
finally raised the white flag and bowed out of the industry once and for all. Overcapacity has been a bugbear of the industry for many years, and while the consolidation at an owner level will not necessarily fix that particular problem, new regulations promise to draw some of the pus out of that wound. That more than one of the contributors to this year’s Breakbulk outlook feature spoke of silver livings and pockets of growth adds to the cautious air of optimism. But no one is gushing about recovery – tempered and measured sums up the overall feeling, both adjectives the industry should be using in spades in 2017 if any of that longed-for recovery is to stick.
Edward Osterwald, CEG Europe, p. 10; Dennis Devlin, DB Schenker, p. 10; Roger Strevens, Wallenius Wilhelmsen Logistics, p. 12; Jake Swanson, CB&I, p. 12; Thomas Gimbel, Hansa Heavy Lift, p. 14; Dirk Visser, Dynamar, p. 16; Grant Wattman, Agility, p. 16; Kyriacos Panayides, AAL, p. 18; Marco Poisler, UTC Overseas, p. 22; Mohammad Jaber, Agility Abu Dhabi, p. 22; David Collett, Collett Group, p. 24
www.breakbulk.com BREAKBULK MAGAZINE 9
outlook 2017
A FEW MONTHS AGO, there were reasons for
CHANGE sometimes
those active in the oil and gas business to feel somewhat optimistic, following two years of turbulence triggered by a global surplus intentionally created by Saudi Arabia. It appeared that investment would finally begin to rise, followed by higher trade volumes in crude oil, LNG and fuel products. A damper has now emerged, however, on such optimism. As we all know, the international shipping industry – and not just breakbulk – depends on many things. Perhaps most importantly, it requires trade. Since the end of World War II, increasing economic integration and multilateral agreements have facilitated mechanisms and agreements to enhance commercial exchanges, delivering benefits for all parties involved. These factors include reductions in tariff barriers, wider customs unions and standardization of technical and environmental regulations. But it now seems that some of BY EDWARD the world’s largest economies, OSTERWALD most notably the U.S. and Senior Partner, the UK, are about to radically CEG Europe “reverse course.” Key members of the new Trump administration have never been friendly to multilateral institutions or trade agreements. Whatever Brexit “strategy” eventually emerges from the British government in London, it will inevitably be anti-migration towards use of workers, skilled or otherwise, that are not UK citizens. This same government is also quite determined to remove the UK from the single market and customs union of the EU – the largest consumer market in the world. The global distribution industry has billions of dollars of assets and employs thousands of people. It needs to use its influence to oppose policies that could lead both the developed and developing world back into the murky world of protectionism and trade wars, where there are few winners and many losers.
comes slowly. The UK’s surprising (and unfortunate) vote to leave the European Union is sure to drag on. Upcoming elections in Germany and France may result in changes in government in those countries, but the economic fundamentals in those countries will not change quickly. And despite a change in the U.S. executive branch, change there will also come slowly. For those of us in the field of breakbulk, heavy-lift and project cargo transport, 2017 will likely be a continuation of 2016, characterized by weak markets all around. There’s weakness in the oil and gas and commodity markets, with new investments in large-scale oil, gas and mining projects likely to be few and far between, and with decisions on capital spending likely to be deferred. Similarly, low demand will make for continued weakness in the ocean shipping industry, despite some predicted improvements on the breakbulk side. While the price of oil has improved over this time last year, it is still too low to support significant investment. Changes in supply may help, but ultimately, only strong demand will have a significant impact on the oil price. The same is true of natural gas, which is oversupplied. Alternative energy, specifically solar and wind power, are bright spots, and will continue to grow. And globally, and maybe even in the U.S., infrastructure projects will be further bright spots. Although it would have been far better to have invested in improving the crumbling U.S. infrastructure immediately following
IT NOW SEEMS THAT SOME OF THE WORLD’S LARGEST ECONOMIES, MOST NOTABLY THE U.S. AND THE UK, ARE ABOUT TO RADICALLY ‘REVERSE COURSE.’ 10 BREAKBULK MAGAZINE www.breakbulk.com
BY DENNIS DEVLIN Senior Director/ Head of Business Development – North America, Global Projects/Oil & Gas, DB Schenker
the Bush Recession – when interest rates were low – and the investment would have had a simulative as opposed to an inflationary impact (as it will now have) on the U.S. economy, the need to invest remains. Although the timing is not perfect, under its new president, the U.S. may finally begin to invest in the outdated infrastructure in our country. However, the likelihood that this investment will have a major impact on the project cargo market is small. Unlike infrastructure projects in other parts of the world, U.S. investment is likely to focus largely on highways and bridges – it will be very interesting indeed to see if any new bridges are built with Chinese steel in the new U.S. political environment, as was the Bay Bridge in California. Things are improving, but change won’t happen overnight. And 2017 will see gradual improvement in most of the markets which drive breakbulk, heavy-lift and project cargo transport. One hopes that by the end of 2017 the forecast for 2018 will appear far rosier. ISSUE 1 / 2017
outlook 2017
“LIVE HORSE AND YOU’LL GET GRASS” is an Irish expression which means “if you can just manage to survive for long enough, you’ll get the one thing you need to survive.” For many stakeholders in the industry, it sums up current market conditions. In our reading of the tea leaves, overall breakbulk volumes will continue at relatively subdued levels in 2017. The oil and gas segment is not expected to see much improvement, although the Organization of Petroleum Exporting Countries’ recent agreement to cut production may change that. In the mining segment, the Purchasing Manager’s Index is above 50, which, coupled with a favorable earnings outlook for the big players, suggests capital expenditure conditions are finally improving there. Other segments such as power generation equipment and rail rolling stock are expected to continue at BY ROGER STREVENS more buoyant levels. Vice President, Global The supply side of the Head of Key Accounts, equation indicates excess Wallenius Wilhelmsen capacity will continue for the Logistics foreseeable future. This is reinforced by the fact that breakbulk cargo can, to varying extents, be carried by four different vessel types (roll-on, roll-off; lift-on, lift-off; container and bulk carrier), each of which is dealing with its own overcapacity issues. Reducing supply through early retirement of vessels is not an obvious choice either. On the one hand, the low steel rates from vessel recycling make scrapping a particularly unattractive option. But on the other it does have the benefit of being able to avoid costly new regulatory requirements for ballast water treatment systems and sulfur emissions. For shippers, the demand and supply dynamics are highly favorable and some may even be hoping for further rate cuts. That may happen, but it would be prudent to also keep in mind that there is a point where good rates go bad, meaning that the risk of another Hanjin situation starts to increase as rates decrease. One response to oversupply and the margin pressure it creates is to achieve savings through increased
12 BREAKBULK MAGAZINE www.breakbulk.com
economy of scale, or, in a word, consolidation. Obviously, this is a trend that has already begun, but I believe it has not yet run its course. Large parts of the carrier and forwarder sides of the breakbulk logistics industry are highly fragmented; in short, there’s a lot of scope for further deals. Risks abound in a consolidation phase, not least of which is that there can be loss of customer focus and hence a failure to meet their everevolving needs. One customer trend of note is the increasing number of original equipment manufacturers that are opting for a time-based, rather than project-based, liner contract. Many are finding the stable, flexible and industrialized liner option that ro-ro offers fits perfectly with their modern supply chain needs. Finally, one last area to keep an eye on in 2017 is the digital developments at the industry’s periphery. The concept of digital disruption has been touted for quite some time now, but has had limited impact so far. It is tempting to view its proponents as creating new dot-com bubbles. However, a more measured approach is advisable. To quote Bill Gates: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10.” This industry is not inherently immune to digital disruption. As Gates continued: “Don’t let yourself be lulled into inaction.”
BY JAKE SWANSON Global Logistics Director, CB&I
HOPEFULLY, the biggest trend that we will see in 2017 will be the steady increase of the price of oil. Unfortunately, on the negative side, we will see the continual struggle of ocean carriers, which may lead to more bankruptcy reports and the exit of a few more carriers from the industry. I believe the issues that the carriers are facing will force shippers to take a hard look at their carrier base and ensure that they are working with the right players. This means improved vetting processes, open discussions between shippers and carriers and strong partnerships. The role of technology will continue to increase, with shippers, freight forwarders and carriers paying more attention to improved transportation management, material management and supply chain systems. Additionally, there has been an increase in the number of online tools that are available to help shippers find carriers quickly and transparently. However, technology alone will not move the industry to the next level in 2017; financial and employee investment is required to propel the industry forward.
ISSUE 1 / 2017
ADDRIVE
ADDRIVE
POWER YOUR FLEET TO MORE EFFICIENCY!
The new »ADDRIVE« is the perfect combination of the sixth generation of towed modules and longterm experience of self-propelled units. Simply more efficiency for your fleet! This intelligent solution satisfies and combines all the requirements of a towed module and self-propelled unit in terms of traction, speed, flexibility, availability and economy in every respect.
Visit us!
Goldhofer – Das Original.
WWW.GOLDHOFER.DE
outlook 2017
BY THOMAS GIMBEL Chartering Director, Hansa Heavy Lift
THE GENERAL market outlook is still slowly recovering from a period of overcapacity. Difficult market conditions for the project and super-heavy-lift markets remain, and low oil prices are not helping the situation. We believe ongoing consolidation will be needed to help the market to recover. That said, we see a lot of potential in the offshore transport and installation market, and we believe the decommissioning market will grow over the next few years as well as the market for renewables. Hansa Heavy Lift is moving away from commodity and standard project trans-
portation, and increasing our investments in transport and installation in the subsea oil and gas markets as well as in the offshore windfarm sector. We are operating two offshore construction vessels, and we see a lot of potential in the decommissioning market over the next few years. Customers often ask for a single-source solution and we can offer the combination of transportation and installation due to our dynamic positioning DP3 offshore construction vessels and our P2-1400 types which ensure a high degree of flexibility as well as complete end-to-end heavy-lift solutions, which is of a growing demand in this industry. Infrastructure developments, including floating units, are also important in driving demand for heavylift vessels from the Europe, Middle East and Africa, or EMEA, region to developing countries. The EMEA region is very important to us, as even though production is predominantly moving into regions like Asia-Pacific and India, most engineering, procurement and construction companies still act out of
14  BREAKBULK MAGAZINE  www.breakbulk.com
THE OPERATIONS MARKET WILL REMAIN BUOYANT OVER THE NEXT COUPLE OF YEARS. WE SEE OIL AND GAS OPERATORS ENTERING THE RENEWABLES MARKET, WHICH IS CERTAINLY A SHIFT FROM THE TRADITIONAL MODEL.
Europe, and as such the nexus of commercial control on projects and transportation is expected to remain in Europe. There are a number of significant projects and expansions slated for 2017 that could signal little improvements by the end of 2017 or the beginning of 2018 for the industry. However, many of these projects are still subject to finance or final approval, and weak commodity prices means some investors and decision makers still feel cautious, so we will have to wait and see. There was a steep drop in investment in 2016 and very little activity going forward for new projects. However, the operations market will remain buoyant over the next couple of years. We see oil and gas operators entering the renewables market, which is certainly a shift from the traditional model. That said, the market environment is still difficult with an unhealthy freight rate level, postponed projects due to weak oil prices, and the overcapacity of tonnage. The freight rate level needs to recover and this will occur only when the market is no longer oversupplied. However, carriers need to resist the temptation to pursue the purchase of newbuilds once again, when any recovery starts to naturally occur. Ongoing consolidation is also necessary to overcome these challenges and support a recovery of the market. Already last year, we saw a number of new partnerships, as well as mergers and acquisitions. We see a positive development in such collaborations, as it reduces the players in the market and at the same time adds dynamic to an otherwise rigid industry.
ISSUE 1 / 2017
outlook 2017
I SINCERELY REGRET not being able to
2016 HAS BEEN a transition year. Agil-
give Breakbulk readers much consolation on the state and direct prospects of the multipurpose, project and heavy-lift shipping segment. Since around 2010, the breakbulk, project and heavy-lift markets have been characterized by a somewhat seasonal pattern. When there was an, albeit limited, upturn towards the end of 2015, optimism abounded at the start of 2016. However, this quickly became muted by poorer-than-expected results by the half-year mark, and the market limped on until the end of the year. The real slump kicked in with suspensions and cost-cutting of major projects. On top of that was ever-increasing capacity and price competition from the dry bulk and container segments, as well as a rising market presence from pure car and truck carriers. The latter will not be so quick to leave the breakbulk sector, as their ships have been outfitted with additional reinforceBY DIRK VISSER ments and higher Senior Shipping decks to accomConsultant, Dynamar modate heavy-lift cargoes. 2016 was, in short, simply dreadful with respect to rates, although cargo offerings were not so bad in every niche, save for the oil and gas segment. Hence, and ignoring the effect on their bunker bills, all eyes are on an ongoing recovery of oil prices: at about US$80 a barrel a deluge of investments in new projects is expected. However, if that happens, these will not appear overnight, except for those projects that were postponed at a late stage in the process. And while there are signs that the worst is over in the container and bulk segments, it will be a slow recovery. Heavy overcapacities will take time to eliminate, and in the meantime they will continue to compete for breakbulk cargoes to fill space. A true recovery will require ongoing consolidation – continuing the trend of 2016 – additional scrapping, financially strong backers, stomach, patience and a healthy optimism to withstand another three meager years. Ultimately, the future will be bright for the breakbulk/multipurpose survivors.
ity Project Logistics outlook for this year is positive over 2016, with oil prices moving either side of $50, significant cost being carved out of international oil companies’ balance sheets, improved productivity in non-revenue producing areas and new technology reducing cost of upstream operations. We have the U.S. election behind us, with apparent optimism, commodity prices relatively stable in range bound trading and U.S. consumer strength building. However, anticipate inflation inching up, validating improvement, but needs to be watched, and there is certainly geopolitical uncertainty. Expect a slow roll into 2017 with opportunities surfacing in the first half and real work hitting the ground in the latter part of the year. Many in the industry have gone through consolidation, bankruptcy, selling assets, pulling back from certain market segment and downsizing personnel. Agility has weathered the industry downturn well, balancing our team globally and repositioning strong talent where we see our growth. But, the health and sustainability of the carrier and service provider sectors is a reality. We will see increased cost from providers and declination in quality. This will impact overall performance, schedules and in some sectors, lead to a weakening in health, safety and compliance. Professional, skilled and trade labor is the next big hurdle. There will be a shortage because reductions have been deep; many do not want to return to this business sector because of its cyclical nature and aging resource pool. This will impact availability and cost, which will trickle down to project schedules, funding for these projects and operational efficiency and quality. Added to which, we are truly a global economy facing geopolitical uncertainty in every hemisphere. There is a strange dichotomy in that emerging markets, which have typically been where this risk has been considered highest, are now over-
16 BREAKBULK MAGAZINE www.breakbulk.com
BY GRANT WATTMAN President and CEO, Agility
shadowed by perhaps more volatile uncertainty. We have, and continue, to work through events that have disrupted our industry and fundamentally changed it going forward. To quote Essa Al Saleh, our CEO: “What has earned us money in the past 10 years is not how we will earn money in the next 10 years.” Whether you are an international oil company, engineering contractor or servicing these market segments, you are a part of this supplier ecosystem. Failure to recognize this will, and has, impacted exploration, capital projects, production and fabrication supply chains. Agility is confident in its strategy as part of this value network to deliver success. This requires an organization with strong balance sheet and values, that is agile with an entrepreneurial spirit. How will you respond to disruptors in the industry?
PROFESSIONAL, SKILLED AND TRADE LABOR IS THE NEXT BIG HURDLE. THERE WILL BE A SHORTAGE BECAUSE REDUCTIONS HAVE BEEN DEEP.” ISSUE 1 / 2017
Blade lifter
Specialist for Green Power Project Transports
FIRST CLASS IN PROJECTS
www.dakoworld.com
40479 Düsseldorf | Germany | +49 (0)211 5502640
outlook 2017
2016’S WINNERS AND LOSERS
Breakbulk industry consolidation was vivid in 2016. It was perhaps not as spectacular as the machinations in the container sector, but still no less than 16 operators and 10 non-operating owners were involved in mergers, takeovers or similar consolidation. Another four filed for bankruptcy. Dynamar compiled the following timeline exclusively for Breakbulk.
JANUARY FAILURES: CARRIERS
Restructured multipurpose/heavy-lift operator OXL and its parent Flamar BVBA of Zeebrugge fail; both declare bankruptcy.
MARCH CONSOLIDATION: CARRIERS
Safmarine is taken over by NileDutch, to be operated separately as NileDutch MPV.
FEBRUARY CONSOLIDATION: CARRIERS
Safmarine sells its conventional Southern Africa/West Africa multipurpose service to Fairseas International of Cape Town. The deal excludes ships.
MAY CONSOLIDATION: CARRIERS
Peruvian Amazon Line, operating between the Amazon and Mexico, faced bankruptcy, forcing it to sell its single vessel, a 22,500 dwt/1,300 20-foot-equivalent-unit multipurpose ship.
NYK Bulk & Projects Carriers, or NBP, and logistics operator Licvem Shipping & Trading set up a 49/51 split joint venture Licvem NBP ApS, or LBP, operating three to eight multipurpose ships between Europe and Africa.
JUNE CONSOLIDATION: CARRIERS
Rickmers acquires Nordana projects, keeping the unit separate under the name NPC. It plans to deploy six vessels in January 2017. Speculation mounts that “K” Line is to put its 100 percentowned heavy-lift operator SAL Heavy Lift of Hamburg up for sale. Interest was reportedly high, but “K” Line chose instead to undertake drastic structural reforms of the company.
OCTOBER CONSOLIDATION: CARRIERS
Gearbulk (65 percent) and Grieg Star (35 percent) combine forces in G2 Ocean, operating about 130 ships. Tonnage operated with others, and terminals and transshipment activities are excluded from the deal. CONSOLIDATION: NON-OPERATING CARRIERS
The Hartmann Group and Schulte & Bruns announce their intention to consolidate their multipurpose short-sea business, effective January 2017. The partners hold a 50-percent share each in Schulte & Bruns Chartering, a subsidiary of Schulte & Bruns Group.
DECEMBER
JULY CONSOLIDATION: NON-OPERATING CARRIERS
Zeaborn scales back part of its newbuilding program, takes over the commercial management of Carisbroke’s smaller multipurpose ships and buys the fleet of Hanse Capital.
SEPTEMBER CONSOLIDATION: CARRIERS
Thorco Shipping joins forces with United Heavy Lift, taking over all breakbulk and heavy-lift ships. The merged company is to be renamed Thorco Projects. CONSOLIDATION: NON-OPERATING CARRIERS
Briese, parent of BBC Chartering, becomes a large minority shareholder in Auerbach Schifffahrt.
NOVEMBER FAILURES: NON-OPERATING CARRIERS
Dutch Abis Shipping loses bank support and is forced to sell its 15-strong multipurpose fleet through an Internet auction. Peak Norway buys six ships of 3,800 deadweight tons. Abis functions as technical manager for Amasus Shipping, Ocean7 Projects and Peak Shipping. It is not known if it will continue with those activities.
CONSOLIDATION: CARRIERS
COSCO Shipping Co. (Coscol) is renamed COSCO Shipping Specialized Carriers Co. Ltd., operating some 60 multipurpose vessels, as well as heavy-lift, ro-ro, timber and asphalt carriers. COSCO Heavy Transport (CHT) is a 50-percent subsidiary. CONSOLIDATION: NON-OPERATING CARRIERS
Thorco Holland (21 ships), Navigia (20 ships) and Feederlines (32 ships) form a joint venture, House of Groningen, for the joint technical ship management of their parents’ own fleets and those of third parties, including Peak Norway.
18 BREAKBULK MAGAZINE www.breakbulk.com
Dutch Flinter Shipping is declared bankrupt. Thorco buys nine of its ships at €42.7 million on bloc. Briese and Duoship (MF Shipping Group) agree to operate 12 ships on behalf of the banks. Sweden’s Transatlantic AB is to wound up by its owner Viking Supply Ships, a process which could take up to 12 months. Five roll-on, roll-off ships plus six multipurpose ships are to be sold. CONSOLIDATION: NON-OPERATING CARRIERS
Carisbrooke and Switzerland’s Nova Marine Carriers agree to set up a joint venture capacity pool, Nova-Carisbrooke, effective January 2017. All charter and operational activities of the about 60 5,000-15,000 deadweight-tons multipurpose vessels will be handled from Lugano. ISSUE 1 / 2017
OUR
CONNECTIONS 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, and a growing number of ocean carrier services, and barge and truck lines. The Clarence Henry Truckway, a dedicated two-lane roadway on Port property, makes fast transit times even faster. The Port also offers on-dock rail and ship-to-barge services. You can count on use to exceed your cargo handling expectations — and you’ll love our Big Easy hospitality.
portno.com
outlook 2017
BY KYRIACOS PANAYIDES Managing Director, AAL
2016 SAW THE PRICE of crude oil drop to below US$45 a barrel, which readjusted to a year-end price of US$53.70. This is still not enough for most majors to secure capital financing for some of their larger projects. About US$620 billion of projects through 2020 have been deferred or cancelled since the price downturn started in 2014, and appetites for long-term and complex major capital projects have waned. Having said that, conservative estimates indicate that the average price for a barrel of crude in 2017 could be anywhere between US$54 and US$58. Supply
and demand imbalances are tightening and an adjustment is surely required – especially with production cuts from the Organization of Petroleum Exporting Countries. Focus is also on the U.S. and Iran – two huge markets which have made lots of noise recently about increasing their drilling programs in 2017. Short-term indications are also that new shortercycle oil and gas projects might now be in play – driven by global demand to fill the supply gap. Plus, redevelopment and possible expansion of existing production facilities are forecasted, as oil companies learn how to operate in a lower price environment, returning to a healthier focus on capital and operating cost discipline. Looking at other commodities, steel cargo and the wider capital investments they represent are extremely important drivers for the MPV sector. The global demand for steel in 2017 is expected to grow by up to 1 percent, to reach 1.51 billion tonnes. This forecast comes despite an uncertain global geopolitical climate, and is on the back of better-than-expected
20 BREAKBULK MAGAZINE www.breakbulk.com
forecasts for China, which could see a 4 percent growth in steel demand in 2017; a much-lauded domestic infrastructure development strategy for Trump’s U.S.; and the forecasts of various emerging economies, whose stable macroeconomic policies are linked to consumption-boosting reforms and infrastructure growth. There looks to be another bright spot related to dry bulk carrier pricing. It’s been a rough few years for dry bulk carriers, with recessions among the leading global economies and oversupply driving down commodity prices and trade – especially base metals and industrial commodities. With the outlook now improving and dry bulk prices forecasted to rebound – albeit slowly and towards the end of 2017 – dry bulk carriers will be keen to refocus on their core heartland, capitalize on any growth and profitability and hopefully draw their attention away
from our sector. Potentially good news for the multipurpose market, which has seen freight rates reduced to unsustainable levels for both carriers and shippers who value safety and service quality above all else. Thankfully, the global MPV fleet is at its most sustainable level for quite some time, with newbuilding orders under control, and age and water ballast measures increasing the scrapping of older tonnage. That said, the trend for consolidation will continue and we can see strong opportunity for further partnerships and merger and acquisition activity among multipurpose operators in 2017. Of course, such activity would not just be for space and tonnage sharing, but also to strengthen and optimize teams, networks and resources. The best and most sustainable partnerships will be between carriers who share business philosophies and service cultures.
ISSUE 1 / 2017
MORE BIG CARGO POSSIBILITIES What happens when you combine two of America’s leading ports? The flexibility to handle all of your diverse cargo needs. Benefit from heavy lift capabilities and deep water, on-dock rail, and a dedicated and experienced workforce. Experience the future of big cargo.
253-592-6792 nwseaportalliance.com/bigcargo
The Northwest Seaport Alliance is now a major American shipping gateway formed through the collaboration of the Ports of Seattle and Tacoma.
outlook 2017
WHILE SOME analysts may say the outlook
FOR 2017, I foresee that the
for 2017 is a dark and cloudy one, we see it as one with several silver linings. Even though other industry players have lost jobs and made deep cuts during 2016 – and more specifically within recent months – UTC Overseas Group has been fortunate to have a wide and varied range of projects in our portfolio, which has allowed us to maintain steady growth in 2016, with growth forecast to continue through 2017. At the end of 2016, we saw a clear uptick in inquiries from manufacturers, suppliers, engineering, procurement and construction companies, and oil and gas BY MARCO POISLER project owners to Executive Vice President, secure future projects UTC Overseas Inc. slated for mid-2018 to 2020. This indicates that the volume of cargo for 2017 may still be tough as the industry begins to pick itself back up. But while it will take time to recover fully from such a long period of lethargic market growth, we foresee and predict a positive shift in the near future. Traditional energy production and renewable energy are areas in which we feel there will be steady growth in 2017. While recovery of the oil price looks promising, the gas contracts needed for the multiple liquefied natural gas projects to come to fruition seem more of a challenge. We have seen an increase in requests for budgetary in the various sectors of power, oil and gas (both downstream and upstream), and cement so we expect to have turned a corner.
market will continue to be challenged by oil price fluctuations, which will directly impact fuel prices and sea freight rates. Most carriers will keep pushing back based on rates that were sold when oil price levels were lower. Some of the carriers, however, are driving their offering rates towards more realistic levels. The forwarders; engineering, procurement and construction companies; and other companies within the rest of the industry’s verticals need to have a better understanding of the carriers’ critical situation, as they cannot continue accounting losses even with higher utilization of their own assets. Agility will continue working with our strategic carrier programs focusing on quality of services, project schedule efficiencies, and optimizing our volumes and consolidation among the carriers based on trade lanes, type of services and carrier capabilities. We will continue offering unique services to our customers at realistic prices, while adding value to the carriers and our customers, delivering their material timely as per project schedule. This will have a positive impact on the overall project financials by meeting construction timelines and delivery schedule. Furthermore, the recent mergers between carriers will help improve the quality of services in the overall logistics market by strengthening service consistency levels, space availability and rate stability. Regionally, the Middle East and Africa market continues to offer opportunities in cargo, mainly imports. But the region is also exporting increasingly to the rest of the world, helping carriers improve their space utilization and boosting their margins. Local industries will therefore be able to offer world materials at a more realistic logistics cost, ultimately delivering a more positive economic outlook. China and India remain our major import origins for project
WHILE IT WILL TAKE TIME TO RECOVER FULLY... WE FORESEE AND PREDICT A POSITIVE SHIFT IN THE NEAR FUTURE. 22 BREAKBULK MAGAZINE www.breakbulk.com
BY MOHAMMAD JABER COO, PL - Regional Director MEA, Agility Abu Dhabi
cargo, and we will see growth from the European markets due to the currency exchange rates outlook. Africa will continue to grow and Agility will continue to develop capabilities in the continent. With regards to the Gulf Cooperation Council countries, there are increasing volumes moving within the region, especially towards Kuwait which has many megaprojects ongoing. In terms of trends for 2017, I foresee the construction, oil and gas, renewable energy and food security sectors increasing their volumes, leading import and export dynamics. However, oil price fluctuation, currency exchange rates, risk of war and political instabilities might yet disturb trade. Technology innovations are improving cost optimization and operational efficiencies, balancing the fuel price impact and ensuring positive cash flow. The dip in oil prices can be balanced out by providing verticals with new services in sectors that are relatively unaffected. These verticals include healthcare logistics, data and information logistics, contract logistics, domestic logistics services, innerregional services, petrochemicals, construction logistics, valueadded services and renewable energy logistics. » ISSUE 1 / 2017
High performance service We are operating the world’s first high performance inducement service for any port and any cargo. Benefit from our flexibility, worldwide coverage, performance, and reliability. Experience an unparalleled global service with the world’s most trusted project, heavy lift, breakbulk and general cargo carrier. www.bbc-chartering.com
Visit us at Breakbulk Asia March 13th-16th 2017, Booth #502 / H3 in Shanghai
outlook 2017
Oil price fluctuations aside, managing increasingly complex customer relationships is a challenge going forward. The industry is battling fast-changing cost structures, and escalating labor and property prices amid complex bureaucratic processes and dense and ambiguous regulations. Strong understanding of local regulations, in-house customs relationships, steady infrastructure investment, continuous productivity improvement and succession planning are all helping to mitigate rising costs and red tape. For Agility in 2017, we will continue to invest and expand our owned assets and infrastructure, such as expanding our warehousing activities in Bahrain, the Kingdom of Saudi Arabia and Abu Dhabi, and renewing our asset fleets with technologies that consume less fuel and provide better productive outcome with lower carbon emissions, reflecting our commitment towards the environment.
BUSINESS NEEDS STABILITY and
BY DAVID COLLETT Managing Director, Collett Group President, European Association For Abnormal Road Transport And Mobile Cranes (ESTA)
Introducing the Active Link Spreader Beam with Integrated Load Cells The Active Link Spreader Beam revolutionises load monitoring capabilities when using a Modulift Spreader Beam. It will provide wireless real time data by measuring the load at either end of the spreader beam and is ideal for both weighing and dynamic load monitoring. ● Reduce your rigging and the weight ● Compatible with existing spreader beams ● Saving you time and money on rigging
07427_active_link_ad_Breakbulk_178x124_2017_01.indd 1
24 BREAKBULK MAGAZINE www.breakbulk.com
there is a lot of political and economic uncertainty in the air. Having said that, I am cautiously optimistic about prospects for 2017, and I think that goes for many of ESTA’s members. My gut feeling is that the market is steady. Talking to my colleagues across Europe, the infrastructure, power generation, construction and rail sectors are looking buoyant, as is the wind energy sector – although from a UK perspective I think the wind market is softening. The one major proviso is that increased security and border controls – necessary as they may be – can create bureaucracy, restrict the movement of goods and people, and have an impact on the time taken to do a job. Also, some of my colleagues have been expressing concern about the lack of project finance from the banks. Into 2018, I think the market will strengthen further as more major projects
The Active Link is available in a range of capacities up to 100t based on standard Modulift beam sizes from MOD 12 to MOD 70H For more information call today Head Office: +44 (0) 1202 621511 Email: sales@modulift.com www.modulift.com
02/02/2017 15:10
ISSUE 1 / 2017
come to fruition and the construction and housing markets expand. As for the oil and gas markets, they remain a major cause for concern. There looks to be a lot of scheduled maintenance work coming through, but upstream work is in real difficulty. There is also huge pressure on rates across the board, driven by overcapacity and fierce competition. Rates that are too low restrict the industry’s ability to train and invest – which in turns affects our long-term efficiency and productivity. I don’t see the situation changing in the short term, although we might see some limited market consolidation. A real concern will be if we see costs such as wages and fuel prices rising, against a backdrop of stagnating rates. There is no doubt that the technological developments that are driving huge changes in all industries will have a major impact on heavy-lifting and transport. The only questions are how and when. Personally, I think the heavy transport industry will be a late adopter of major developments such as autonomous vehicles, in part because every job we do is different. We are not going on a regular route from factory to warehouse, for example. Also, safety concerns will mean we are going to be
RATES THAT ARE TOO LOW RESTRICT THE INDUSTRY’S ABILITY TO TRAIN AND INVEST – WHICH IN TURNS AFFECTS OUR LONG-TERM EFFICIENCY AND PRODUCTIVITY.
cautious about being at the cutting edge of new developments. Having said that, we see incremental advances all the time – especially in telematics – leading to improved servicing, maintenance,
fuel monitoring, emissions and so on. In 2017, we will see continued incremental developments – but we will be watching other sectors carefully to see what lesson there may be for ESTA and its members. BB
PUTTING THE
“Y’all” IN
GLOBAL COMMERCE.
THE PORT OF MOBILE Alabama State Port Authority www.asdd.com
www.breakbulk.com BREAKBULK MAGAZINE 25