Breakbulk Magazine Issue 1 2018

ISSUE 1 / 2018

THE PUBLICATION FOR THE INDUSTRIAL PROJECT SUPPLY CHAIN INDUSTRY

OUTLOOK 2018

DÉJÀ VU ALL OVER AGAIN Sustainable Recovery Still Out of Reach

In This Issue: AIR FREIGHTERS CALL FOR FAIRER SLOT RULES CHINA, MALAYSIA DOMINATE BREAKBULK TRADE BOOM TO STIMULATE AUSTRALIAN TRANSPORT DEMAND

A PORT AS BIG AS TEXAS They say everything’s bigger in Texas and as the largest breakbulk port in North America, offering over 20,000 feet of docking space and capacity to accommodate cargo of 1,000 pounds per square foot, Port Houston is ready to accommodate all types of bigger-than-life cargo.

The 52 general cargo and heavy-lift City Docks have put Houston at the pinnacle of industry rankings for steel and project cargo. It’s true everything is bigger in Texas... Better too. Call or visit us online to learn more about Port Houston, The International Port of Texas.

PortHouston.com • 713-670-2400

IN THIS ISSUE Cover Story

27

10

36

10 DÉJÀ VU ALL OVER AGAIN

Sustainable Recovery Still Out of Reach

08 THOUGHT LEADER

30 PORT FOCUS

Playing Catch-up on Logistics Training

China, Malaysia Dominate Breakbulk Trade

TACKLING SKILL GAPS

09 THOUGHT LEADER

ASIAN POWERHOUSES

AGENTS OF CHANGE

36 MARKET SPOTLIGHT

27 AIR

Boom to Stimulate Australian Transport Demand

Weeding Out Supply Chain Risk

PLANE UNFAIR

MINING REVIVAL

Air Freighters Call for Equitable Slot Rules

44

06 EDITORIAL 40 EXXONMOBIL DISCOVERIES SPUR ACTIVITY IN GUYANA

44 C.H. ROBINSON STAKES RENEWABLES CLAIM

46 LEGAL SPOTLIGHT:

REACH FOR THE STARS

48 BREAKBULK INDEX 52 TOWN & COUNTRY

PHOTO CONTEST WINNER

4 BREAKBULK MAGAZINE www.breakbulk.com

BONUS SECTION

BREAKBULK CHINA 2018 PREVIEW ISSUE 1 / 2018

RICKMERS-LINE

EDITORIAL

INSIGHTFUL OUTLOOK

Gary Burrows

Welcome to a new year and a slightly nuanced look of Breakbulk magazine.

Our design refresh reflects our determination to continue to provide clean and clear leading-edge news, features and analysis, serving as “the publication for the industrial project supply chain industry.”

As with our design tweaks, we’re constantly working to expand and improve our editorial product, reaching out to industry leaders and listening to their advice and recommendations. We’re proud of what we’ve accomplished, but ever mindful there’s so much more we can do to serve this unique industry.

We have many plans and ideas to launch in the coming issues based on suggestions of industry leaders and advisers, including a new slate of editorial-driven webinars. But our current cover story is our faithful regular, and a feature that I look forward to – our annual Outlook issue. Our readers look forward to it too, as it has ranked in surveys and personal comments as our most anticipated feature of the year.

Now, year-end and new year prognostications can be annual exercises in navel gazing that despite best efforts can miss the mark. For instance, how many people sat at their computers in December 2013 and anticipated that oil prices would crumble to less than half within months?

It’s often a time of year to venture farther out on a predictive limb than the weight of clarity will support. Predictions for the coming year can be filled with as much whimsy and wishful thinking as our new year’s resolutions.

We’re always enraptured by the individualist that goes against the grain, whose inner voice urges the road less trav-

6 BREAKBULK MAGAZINE www.breakbulk.com

eled, who finds unique and unbridled success. But far more often than not, it’s an exercise in trading upon appearances and predetermined notions.

For our annual feature, we seek a range of expertise, across industry verticals and regions, sometimes with competing viewpoints and vantage points. These collective views arm readers with the weight of contemporaries to balance and contrast with their own.

In three decades of covering the logistics and supply chain industry, I can honestly say the project cargo industry nurtures a unique breed, with leading talents that mold corporate success, yet lend themselves to the advancement of industry-wide support. Respect the wealth of knowledge and experience, and balance their viewpoints against your own to help guide your business plans for 2018 and beyond.

We will dovetail our Outlook editorial coverage with Breakbulk’s first webinar of the year, “Cautious Optimism?

That’s So Last Year,” to be held Wednesday, Jan. 31 at 12 p.m.

EST. The webinar will feature three industry heavy-hitters and members of Breakbulk’s editorial advisory board covering the ocean carrier, freight forwarding and logistics sectors: • Ed Bastian, global sales director, BBC Chartering USA. • John Hark, regional director – North America, chief operating officer – South America, Bertling Logistics Inc. • Grant Wattman, president and CEO, Agility Project Logistics.

Join us for their insights, then participate in a questionand-answer session that promises be lively and engaging.

What better way to kick off the new year?

EDITORIAL DIRECTOR Gary G. Burrows / +1 904 535 5460 gburrows@breakbulk.com NEWS EDITOR Carly Fields cfields@breakbulk.com HEAD DESIGNER Catherine Dorrough DESIGNER Mark Clubb REPORTERS Paul Scott Abbott Greg Borossay Michael King Thomas Timlen

BREAKBULK EDITORIAL BOARD John Amos Amos Logistics

Ed Bastian

BBC Chartering

Murray Cooper

McDemott International Inc.

Dennis Devlin DB Schenker

John Hark

Bertling Project Logistics

Dennis Mottola Bechtel Corp.

William Moyersoen

ArcelorMittal Antwerp Logistics

Albert Pegg

Atlas Breakbulk Alliance

Dirk Visser

Dynamar D.V.

Grant Wattman

Agility Project Logistics

ACCOUNT MANAGER Robert Janusauskas / +353 21 477 3808 rjanusauskas@breakbulk.com SUBSCRIPTIONS To subscribe, email gburrows@breakbulk.com, or call from inside the U.S. +1 904 535 5460 between 8:00 am and 5:00 pm EST. You can also subscribe at www.breakbulk.com/subscribe.

A publication of ITE Group plc Transport & Logistics business 105 Salisbury Road London NW6 6RG, UK.

ISSUE 1 / 2018

THOUGHT LEADERS

AGENTS OF CHANGE

WEEDING OUT SUPPLY CHAIN RISK

G

BY LARS FISCHER SOFTSHIP DATA PROCESSING

iven the large number of tasks that a ship agent performs in servicing a vessel of any type – up to 300 tasks per port call – ship agents take on a significant level of responsibility on behalf of their customers. They play a critical role in coordinating everything from arranging berthing space and handling provisions through to loading and discharging cargoes and delivering spares.

Yet, perhaps more so than any other element of the shipping supply chain, the influence of the ship agent on efficiency and operating costs across each transit is routinely overlooked.

By the same measure, the potential for the hurriedly appointed ship agent to unwittingly introduce risk or vulnerability into the wider supply chain is also overlooked.

While the appointment of an agent for the movement of spot breakbulk cargoes must happen quickly, it should not happen without adequate consideration into how exactly that agent works, and what their appointment means to the safety, security and reliability of the wider supply chain.

In particular, to ensure the integrity of any breakbulk supply chain, critical attention should be paid to how the ship agent organizes, documents and communicates with the vessel and principal as well as third-party suppliers, as there is a direct correlation between the effectiveness of the agents’ administrative processes and the time required to service a vessel in port.

This is pointing out the obvious, but it is also noteworthy that we often make the mistake of assuming that because we now live by our smartphones, that the same is true in how we work.

GAP IN TECH SUPPORT

Despite the advancements made in the development of smarter information technology services for shipping companies and ship agents specifically, there is still a significant disparity in their use among ship agency businesses worldwide. In fact, there is a sizable gap between those digitalized, 8 BREAKBULK MAGAZINE www.breakbulk.com

fully integrated and optimized ship agents that can provide complete transparency and control across their operations; and those who operate a range of disparate, outdated IT software and outmoded computers.

This is not due to an unwillingness to change – adoption rates for IT and software solutions in the shipping industry are encouraging. Where it goes wrong with most shipping companies, and ship agency businesses in particular, is in sourcing the most appropriate digital systems for their business, and making sure that they are seamlessly integrated across all platforms.

We do see many shipowners and agency businesses trying to work with software built for very different purposes and around which they end up having to shoehorn their operations. This, in every respect, defeats the purpose, and invariably exacerbates risk by increasing the likelihood of duplication, rekeying errors, incorrect data entry and mistakes.

It is only by integrating – sewing together, creating automated processes and syncing programs – that software solutions can deliver the efficiencies that they promise. In a fully integrated ship agency business, the IT software should provide a significant buffer against risk (and against the risk of passing on problems to principals), by providing intuitive, automated and networked processes that simplify administrative requirements.

Importantly, by taking care of the complex and complicated administration and back office requirements of every port call, the port agent is afforded more time to tend to the vessel in port. For this reason, owners and charterers should ensure that they take the time to investigate the IT credentials and processes of any ship agent as part of the tender process. BB Lars Fischer is managing director of Softship Data Processing, a provider of software services for the shipping industry.

ISSUE 1 / 2018

TACKLING SKILL GAPS PLAYING CATCH-UP ON LOGISTICS TRAINING

I

t’s probably fair to say that logistics has traditionally been seen as a career that many people “fall into” rather than actively seek to enter.

Until very recently, there has been relatively little effort to promote logistics to post-school and college/ university-age young people as a positive career path, despite degree studies in logistics and supply chain management being widely available across UK academic institutions at bachelor’s and master’s degree levels.

Although there are signs that things may be changing, the reality is that a skills gap exists in the UK logistics industry, and as a result there is plenty of scope for that gap to be filled by individuals – from the UK or overseas – with the right academic or vocational training. But how does the UK logistics arena compare with other parts of the world?

If we’re honest, the logistics sector in the U.S. is probably a couple of decades ahead of the UK in recognizing the importance of getting people with the right level of training into logistics roles at all levels, and the academic and training environment in the U.S. supports that.

From the employer’s point of view, U.S. companies are clearly at a place where they see logistics and supply chain management as important business functions where efficiencies and smart strategic planning can boost the bottom line; it’s no longer just about getting widgets from point A to point B. And as third-party logistics evolves into fourthand fifth-party logistics, filling those vital roles with the right people becomes all the more important.

Logistics education in the U.S. has also changed over the past couple of decades, with a shift in course content from more traditional transportation and logistics topics, to a broader education in total supply chain management, demand forecasting and planning, and so on. The end result is that many

recruiters in the U.S. logistics sector – in which there is a high degree of competition for jobs – seek candidates with at least an undergraduate certificate, if not a graduate degree, in logistics and supply chain management studies.

HARNESSING EASTERN PROMISE

The Far East is another region where logistics is successfully promoted as a viable education-to-career path, and there are good career opportunities for qualified people with national and especially international freight and logistics companies. Many countries in the region are net exporters. Dozens of respected academic and vocational training institutions across the Far East offer qualifications in logistics, supply chain management and related studies.

A good example of attitudes to logistics education and careers in the Far East is the Chartered Institute of Logistics and Transport in Hong Kong (CILTHK), a local branch of the original UK-founded Chartered Institute. In common with other Far East branches in China, Macao, Taiwan, Indonesia, Malaysia and Singapore, CILTHK offers industry accreditation and continuous professional development opportunities for those working in logistics and transportation. CILTHK also runs an annual Case Competition in which teams of students compete to

solve pressing logistics problems under a tight time constraint.

It’s difficult to understand exactly why the UK lags these other parts of the

BY LOUIS PERRIN world in logisHEMISPHERE FREIGHT tics education SERVICES and career promotion, although it is very likely symptomatic of a much wider issue in British education and career guidance; other key industries in the UK such as healthcare, IT and financial technology report similar skills gaps, with many crucial positions being filled by more qualified overseas applicants.

It would seem that rigorous and practical academic and vocational training are the keys to turning this around.

Hemisphere Freight Services has been working with Will Thomas of Suffolk Business School at the University of Suffolk on developing a training scheme for people entering supervisory and management jobs in logistics, ports and shipping, providing a broad base of skills including project management, finance, strategy formulation and marketing.

If the UK logistics industry is serious about helping to build the supply to meet the demand for staff, then we urge similar collaborations between employers and educational bodies, from school age and up, as a core part of the solution. BB Louis Perrin is director of Hemisphere Freight Services, a UK-based company operating internationally in the project cargo sector.

CREDIT: HEMISPHERE FREIGHT SERVICES

www.breakbulk.com BREAKBULK MAGAZINE 9

COVER STORY

DÉJÀ VU T ALL OVER AGAIN

BY CARLY FIELDS

Sustainable Recovery Still Out of Reach OUTLOOK 2018

UPCOMING WEBINAR

For more insights on what’s in store for 2018, attend our webinar “Cautious Optimism? That’s So Last Year” on Jan. 31 at 12 p.m.

EST. Ed Bastian of BBC Chartering, John Hark of Bertling, and Grant Wattman of Agility will present their insights and answer questions. Register at breakbulk.com/ breakbulk-sessions.

10 BREAKBULK MAGAZINE www.breakbulk.com

he cautious optimism from the start of 2017 that it would be the year that marked a turnaround in the breakbulk and project cargo trades has given way to a more reserved, and frankly more resigned, outlook for 2018.

Too many variables – from the slow recovery of the global economy to the frustratingly strong staying power of competing sectors – have left carriers, forwarders and shippers scratching their heads about what the future holds.

In our annual outlook feature, industry specialists weave positives with a healthy dose of negatives. Yet, tellingly, there are few common threads to pull on, and where one observer sees a silver lining, another sees a black hole.

There is agreement, however, that this year will deal out another batch of challenges for the sector: expect President Trump to up the ante on his Chinese trade rhetoric, oil prices to remain subdued, labor availability issues to worsen, and margins to narrow even more.

Technology still offers a lifeline to improve processes, streamline operations, and maximize profits, if that ship hasn’t already sailed.

But, overall, there is no escaping it: uncertainty is now the name of the breakbulk and project cargo game. Cautious optimism was so last year.

ISSUE 1 / 2018

CHRISTOPHE GRAMMARE Managing Director, AAL www.aalshipping.com

Whereas most large carriers have already played their hands in terms of mergers and acquisitions, there is still potential for yet more multipurpose sector consolidation in 2018 – albeit in other ways.

For starters, there will be more MPV fleet redistribution and consolidation to fewer select carriers – in terms of the commercial management of the global fleet – as shipowners look to place their assets into the hands of companies they can be relied upon to deliver the goods (excuse the pun).

In terms of cargo, stronger oil, steel and other commodity prices, and the relaxation in key markets of anti-dumping policies will all contribute to a gradual upturn in global cargo volume in 2018.

However, we are not expecting a fast turnaround. That being said, we will see more projects coming online worldwide in the next two years, especially from sectors that have been in limbo recently: oil and gas, infrastructure, mining and energy.

Renewable energy projects are also building momentum across the world, as consolidated political pressure on emissions levels drives governmental and corporate policy. At the same time, windmills are getting physically bigger – and their components demand more space and engineering capabilities beyond that of most carriers.

But there is still a high MPV fleet capacity out there and external operators, including bulk carriers and container lines, continue to actively pursue volumes. This competition is keeping rates unsustainably low on many cargo types and across all markets. Therefore, savvy carriers need to plan and ensure

SAVVY CARRIERS NEED TO PLAN AND ENSURE THEIR TONNAGE IS IN THE RIGHT PLACE AT THE RIGHT TIME.

A 42-meterlong bridge “leaf” piece for the Johnson Street Bridge is loaded for Victoria, British Columbia.

CREDIT: AAL

their tonnage is in the right place at the right time, to secure the most optimum cargo mix for the profitability of their sailings.

Of course, one size does not fit all and each global market, mature or emerging, demands a tailor-made approach. World trade is operating under a cloud of uncertainty and this is not good for trade and business. What we hope for in 2018 is that nationalism and political unrest does not impact the green shoots of recovery we are seeing in our sector.

Due to the low global cargo volumes of the past few years and pressure on freight rates and liquidity across the MPV sector, investment in new engineering, lifting and general operations technology has been low. However, this will be one of the areas that will turn around very quickly when the market sees an extended upturn, especially in the field of data collection, information and telecommunication.

More importantly, legislation governing cleaner and more fuelefficient vessels is also in place and an impending cutoff date for compliance is close. This is a crucial

deadline and will have a huge impact on carriers with older tonnage that will not make the grade.

For AAL, a merger or acquisition is not on our cards, and we are enjoying being strong, unhampered and independent – a strategy that has helped us to move quickly, seize market opportunity and stay flexible.

That does not mean that we will not entertain short and longerterm cooperations – as long as they benefit our customers and our business plan.

www.breakbulk.com BREAKBULK MAGAZINE 11

COVER STORY

DAVID COLLETT IF I AM CAUTIOUSLY OPTIMISTIC ABOUT MARKET PROSPECTS, I REMAIN WORRIED ABOUT TRANSPORT AND CRANE RENTAL RATES.

Collett built software to identify height limitations, evaluate vehicle movements and accurately represent a vehicle and load’s movement.

CREDIT: COLLETT & SONS LTD.

Managing Director, Collett Group; President, European Association for Abnormal Road Transport and Mobile Cranes www.collett.co.uk www.estaeurope.eu I am cautiously optimistic about prospects for The European Association for Abnormal Road Transport and Mobile Cranes, or ESTA, heavy transport and lifting members in 2018.

There are some major projects coming on stream and market forecasts are reasonably positive. But at the same time there are huge political concerns that could create considerable instability and upset public and private sector investment plans.

From a political perspective, Brexit is a significant worry as is the rise in protectionism in various guises across Europe.

In ESTA’s crane and heavy transport sectors, we see this in the growth of petty national rules and regulations that our members sometimes feel are used in a protectionist way and discriminate against international haulers. For example, in early 2017 we had to ask the European Commission to intervene and tell Spanish authorities to withdraw new regulations that made it extremely difficult

12 BREAKBULK MAGAZINE www.breakbulk.com

for international companies to work in the country. Such unnecessary local regulations make the industry less efficient, less safe and raise costs for our clients and their customers.

As for specific sectors, like many, we are affected by low oil and gas prices and the ongoing volatility in those markets that has led to a lot of investment being put on ice.

On the upside, across Europe there are some major projects and spending plans in the pipeline. In the UK alone, there is the new high-speed rail line, and the Hinkley Point and Wylfa Newydd nuclear power plants.

But if I am cautiously optimistic about market prospects, I remain worried about transport and crane rental rates, which in

general remain far too low for a healthy industry. Such low rates affect the industry’s ability to train and invest – which in turn 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.

Apart from market conditions and the rise of protectionism, three other issues will dominate the 2018 agenda for ESTA’s members – safety, training and working more effectively and efficiently with our clients. If our industry is to develop and progress, then we will want to see progress in all three areas next year.

On training, we are putting the finishing touches to our plans for a European Crane Operators License. The ECOL trial pilot project launches in February, something that will raise standards for crane operators and make it easier for qualified operators to move around Europe.

The need for good communication with our clients has been underlined by our ongoing work in the wind energy sector. We have been increasingly concerned about safety during the transportation and erection of onshore wind turbines, especially given the growing size of the new generation of turbines.

Next year, with the support and involvement of the wind turbine manufacturers, we hope to develop new best practice guides that will set benchmarks for how projects should be managed and which – crucially – will encourage clients to involve transport and lifting companies at an early stage of their project planning.

We are running an Experts Summit in Hamburg on March 6 to discuss these issues and, hopefully, that model will persuade project managers in other sectors that involving ESTA’s members early on in their project planning leads not just to improved safety, but also greater efficiency and productivity. If that happens, then 2018 will be a notable year indeed.

ISSUE 1 / 2018

ANNELISA HUSSEY Associate

MATTEO BIANCIOTTO Associate Director

ED OSTERWALD

Senior Partner, CEG Finance & Strategy https://ceg-fands.com/ In the last three years a notable downturn has occurred in the North Sea oil and gas sector. The sudden drop in the price of crude oil, combined with the maturity of the region and its fields, made for a very pessimistic outlook.

Although it is difficult to imagine the UK North Sea recovering to similar levels of development and production as was the case during its peak, there are several reasons why we believe that a more optimistic outlook may now be justified.

In mid-2014, oil prices started to decline from more than US$100 per barrel. From 2015, they ranged from US$30 to US$60 per barrel. Since the beginning of 2017, however, prices have started to recover.

Although Dated Brent has remained consistently above US$60 per barrel for the first time in two years, we do not believe that current fundamental supply/demand data supports such a price level in the medium term, with a more realistic level being in the range of US$50 to US$60 per barrel.

An additional reason for optimism arises from the sharp decrease in the cost of producing a barrel of North Sea crude in the last two years. The downturn pushed producers into continual rationalization and increased efficiency; this coupled with weakening of Sterling against the U.S. dollar (about 30 percent between mid-2014 and end 2016), has allowed operating expenditure in the region to halve from an average of US$30 per barrels of oil equivalent, or boe, at its peak in 2014 to US$15/boe in 2017.

DEMAND FOR HARSHENVIRONMENT RIGS IS GROWING IN THE NORTH SEA, SO UTILIZATION OF THIS TYPE OF EQUIPMENT IS EXPECTED TO RECOVER QUICKLY OVER THE NEXT 12 MONTHS.

BONUS CONTENT:

See the Breakbulk Index, page 48, for charts that illustrate CEG’s data.

These two significantly positive factors are helping the industry come out of the downturn and allowing for new investments in exploration and field development. For example, a report recently published by the UK Oil and Gas Authority, or OGA, describes the UK Continental Shelf as being still rich in recoverable resources, estimating that 10 billion to 20 billion boe of recoverable hydrocarbons remain. BP alone is planning to drill more than 50 exploration wells in the next four to five years. The OGA has reported, for the first time since 2012, growth in expected exploration and appraisal activities in 2017 and 2018. It is apparent that oil companies active in the area are working to maximize recovery from available reserves and possibly prepare for a new round of development.

Finally, many small firms that focus on upstream exploration and development are taking advantage of the recent downturn period by acquiring interests in currently producing assets, as well as investing in further exploration.

These smaller firms tend to be more cost effective and are capable of capitalizing on smallscale opportunities that would not be of interest to the large international majors or large integrated oil companies.

The industry’s response to the 30th UK offshore licensing round was very

promising. There were almost 100 applications submitted, covering 239 blocks, which represents a turnaround since 2012 and confirmation of confidence in the remaining potential of the North Sea. The downturn has also caused very low utilization rates of drilling rigs, leading to some companies defaulting or selling out, while those with more technically advanced and efficient rigs will probably recover much more rapidly.

Demand for harsh-environment rigs is growing in the North Sea, so utilization of this type of equipment is expected to recover quickly over the next 12 months. Some companies anticipate rig day rates increasing by 50 percent to as much as US$300,000 per day.

This effective upgrade in the rig fleet reflects growing demand and will result in increased specialized shipping, needed to deliver and transport these platforms from site to site.

UK oil production has started to increase from a low point in 2014; it is now more than 1 million barrels per day.

All the data appears to imply that there has not been any noticeable “Brexit effect” on the North Sea oil and gas sector.

The recent changes are more a reflection of increasing crude oil prices, lower operating costs and development of smaller prospects by smaller and more nimble exploration companies.

www.breakbulk.com BREAKBULK MAGAZINE 13

DIRK VISSER

Ocean 7 Projects and Ikonship merge multipurpose fleets

Rhenus Maritime Services (40%) and Arkon Shipping set up Rhenus-ArkonShipinvest

But there are markets facing a downturn, specifically the mining industry. For this sector, the strength of 2016-2017 was too good to last, and both resources and exports are expected to decline over the coming years, albeit not too dramatically. Added to this, investment in mining equipment is badly needed.

Conversely, volumes for metals, down 3 percent in 2017, are forecast to grow 2 percent in 2018. Forest products, another important breakbulk segment, is expected to continue its

Senior Shipping Consultant, Dynamar B.V. www.dynamar.com Beyond doubt, the global economy is improving. The outlook for the coming five years in terms of gross domestic product development and the growth of imports and exports is considerably better than it was for the 2012-2016 period. The breakbulk industry should undoubtedly benefit from this global recovery and enjoy an uptick in volumes.

Leonhardt & Blumberg and Buss Shipping combine mutual fleets totalling 52 ships into Leonhardt & Blumberg Shipmanagement GmbH & Co KG

MAY

Zeaborn acquires Rickmers-Linie, including NPC Projects and MCC Marine; complemented with acquisition of six (of a total of nine) superflex multipurpose ships

APR

Danish Blue Water and Bremer Reederei E&B combine T&L services into Blue Water BREB, focused on offshore and wind energy.

Thorco Projects and MC Schiffahrt set up MTC Pool

FEB

JAN

DYNAMAR’S 2017 CONSOLIDATION TIMELINE

MAR

COVER STORY

AAL and Doehle stop AAL & Doehle Alliance joint breakbulk heavy-lift services

Intermarine and Marguisa set up Med./W. Africa service

The Sept. 2016 merged chartering operations of Thorco Projects and UHL (United Heavy Lift) appear to remain divided

steady growth since 2010, estimated at 3 percent for 2018.

Elsewhere, maintenance to existing oil and gas installations can no longer be ignored. Moreover, this is an industry that has, more or less, gotten used to a lower price level, which has lowered the threshold to spend again. How the extension of OPEC production limits through 2018 will work out on the preparedness to invest remains to be seen.

Investments in shale gas continue, as do investments in alternative energy, offshore wind turbines in particular, and possibly large-scale solar projects.

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14 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 1 / 2018

On the carrier side, we would like to see some operators making some money again, a trend made possible by the effects of the 2016 and 2017 consolidation efforts, the very low order book for multipurpose/heavy-lift tonnage and the expected economic recovery.

It is often said that overcapacity in the sector must be addressed. However, the problem of overcapacity is not purely the fault of multipurpose and heavy-lift vessels operators. Vehicle carrier capacity has become a fixed element in the competition for these markets and deep-sea roll-on, roll-off

We Think Outside the Box

ZPMC Shipping purchases 50% share in Greenland Heavy Lift, subsidiary of GPO Heavylift, building four semi-submersibles

German multipurpose owners Reederei Gerd Gorky and Reederei Hans-Peter Eckhoff close; Concord Shipping scaled down

operators and car carriers are, by definition, breakbulk carriers.

Container liner operators are also open for the carriage of breakbulk cargo. However, for them, the carriage of out-of-gauge breakbulk and projects business is basically a nuisance, slowing down terminal operations. Many of them would be pleased to abstain from breakbulk if they could fill their ships with standard containers at profitable freight rates. Bulk carriers also would reduce breakbulk liftings if they could fill their ships with their core bulk cargoes.

While conventional reefer ships

BigLift and Rolldock Shipping to wind up their joint venture BigRoll

by Jan. 2018

BBC Chartering & Jumbo Shipping form Global Project Alliance for joint bidding on specific projects

DEC

OCT

AUG

JUL

Harren Partner acquires SAL Heavy Lift from “K” Line – Harren’s Combi-Lift semi-submersible fleet shifts to SAL

Breakbulk operator Navemar Naples goes bust

MTL (MTL Liner services) and UAL set up N. EuropeW. Africa service

China Merchants Energy acquires Changhang Shipping Co (six multipurpose ships) from Sinotrans & CSC Holdings

Vineta, parent of MACS (Hamburg) takes over Hugo Stinnes Schifffahrt (Rostock)

are also looking for breakbulk on their return trip to their fruit-loading areas, the number of such vessels has been in decline ever since the turn of this century and is less of a threat to the breakbulk sector’s revival.

The improving economy will increase demand and perhaps reduce competition from bulk carriers, container operators or reefer ships. But as rate levels are set by the demand and competition mix, the effect of this all on breakbulk rates will be subdued, especially in comparison to the recovery in container shipping.

Breakbulk cargo isn’t typical, and neither is the Port of San Diego.

OPEN SPACE FLEXIBILITY EXPERTISE Find out what our special advantage can do for you. portofsandiego.org/cargo

THE SPECIAL ADVANTAGE

www.breakbulk.com BREAKBULK MAGAZINE 15

COVER STORY

MARGARET VAUGHAN A rendering of the Yara Birkeland, the world’s first crewless, fully electric and autonomous container ship with zero emissions.

CREDIT: KONGSBERG

WHILE THERE MAY NOT BE ANY MAJOR DIFFERENCES BETWEEN 2017 AND 2018, THERE ARE SOME DEVELOPMENTS THAT MAY BE IMPACTFUL.

Manager – Transportation & Logistics / Export Compliance, Wood Group www.woodgroup.com At first glance, it would seem that 2018 might end up being a mirror image of 2017, with the shipping industry in general clawing its way out of a prolonged downturn. But while there may not be any major differences between 2017 and 2018, there are some developments that may be impactful.

In 2018, the Yara Birkeland, the world’s first crewless, fully electric and autonomous container ship with zero emissions, will be christened and will initially deliver fertilizer along a 37-mile route in southern Norway. The cost to build the Yara Birkeland is expected to be three times that of a similarly sized conventional ship, but eliminating fuel and crew will save up to 90 percent in annual operating costs.

Although the shipping capacity (100 to 150 containers) of this ship will be minute, its long-term impact on the global shipping industry will not.

16 BREAKBULK MAGAZINE www.breakbulk.com

Another trend, blockchain, is still in its early stages and the main concerns are with cyber security. In maritime shipping it could be used for the transfer and sharing of data, including booking, tracking, shipment status, tracing and communicating with carriers. Not many people know yet how this will really work, but the impact on the industry will be tremendous.

The maritime industry, in an effort to optimize logistics management systems and operations and improve connectivity, has become highly

dependent on computerized systems, information, and communications technology.

As with other industry sectors that rely on such technology, the computer systems on board vessels or in marine facilities face the same risk of cyber-attacks. In addition to hacking, malware, phishing, and the like, cyber security related incidents may also arise from extreme weather events. In such circumstances, security measures need to be in place to ensure data security and systems can resume operations as soon as possible.

Meanwhile, uncertainty in political and policy decisions and the proposed tax cuts in the U.S., could influence future trade flows, foreign exchange rates, and economic performance. If current trade negotiations, such as those taking place around Brexit and the North American Free Trade Agreement, lead to materially higher tariffs and reduced trade, freight transportation companies will suffer.

On the labor front, the International Longshore and Warehouse Union approved an early three-year contract extension with the Pacific Maritime Association that will avoid U.S. West Coast port disruptions through 2022.

While on the U.S. East Coast, the ports and the International Longshoremen’s Association, or ILA, are taking initial steps to replace the Maine-to-Texas labor agreement that expires in September 2018. Talks are in the very early stages, with no negotiations scheduled and no formal proposals on the table.

Both parties are eager to get a contract in place before the current contract expires. If an agreement cannot be reached, however, the threat of strike in 2018 by the ILA in U.S. East and Gulf coasts ports is very real and a threat to project cargo movements this year.

ISSUE 1 / 2018

JOHN HARK

Regional Director – North America and COO, Bertling Logistics www.bertling.com We unfortunately go into 2018 with further cuts announced in the power generation industry. Between GE and Siemens, the number is pushing 20,000 people. That being said, we are seeing increased activity in renewables like solar/voltaic power and renewed activity in wind power.

Of course, the big question is whether the renewable energy opportunities can make up for the drop in the traditional coal and gas markets. Although oil is up a bit, we still see some projects and final investment decisions moving to the right in this area as well. Industry commentary and logic does lean toward the thought that there has been under-investment in recent years in new oil and gas production facilities and this picture should change in the near future as demand will dictate that new projects are sanctioned.

Meanwhile, the shipping market continues to be uncertain. Just as many people talk about an upturn in freight rates as are talking about continued stagnation. This presents a challenge with bidding on new projects and the ability to lock in rates for multiple years.

In theory, consolidation and/or a reduction in carrier options could drive an upturn in pricing. We have been saying for years that it can’t go lower, but the big question is when will we see a rise in pricing and who will get caught on the wrong side. There are more 20,000-plus 20-foot-equivalent unit container vessels being delivered that will undoubtedly have an effect on the market as well. Breakbulk and container lines need to innovate and show where they are moving forward with the industry.

Let’s all keep a positive outlook, though. There will be opportunities for those forwardlooking firms that innovate and show where they add value to the supply chain. Disruptor is the new buzzword in many industries and the project industry is ripe for positive disruptors and disruptions. Project forwarders are well positioned in this regard, and need to capitalize on their unique position in the supply chain.

More so than ever before, we need to work together to continue innovating and investing in the project logistics industry.

This will be key to keeping pace with technology and IT innovation, staff retention and

development, and, of course, bringing young people into this exciting industry. We need to get creative and think outside the box when it comes to collaboration and, more importantly, make it a priority.

With regards to the next generation of project logistics professionals, there are very bright minds ready to enter the workforce and this was evident at this year’s Breakbulk Americas Conference. Young people have been the drivers of innovation in other industries and there is no reason this should not be the case in our area of logistics.

Embrace their eagerness and create opportunities for them within our organizations. This is more important than ever after several years of depressed activity within the business.

Seek out opportunities to speak at schools in your area and get involved with the various trade groups and university advisory committees that are always looking for passionate and committed participants.

The industry is counting on your contribution as the market rebounds, so make 2018 the year that you get involved with bringing the next generation into our business. This should be priority No. 1.

THERE WILL BE OPPORTUNITIES FOR THOSE FORWARDLOOKING FIRMS THAT INNOVATE AND SHOW WHERE THEY ADD VALUE TO THE SUPPLY CHAIN.

The HHL Valpariso discharges six loop reactors at Port Houston’s Barbours Cut Terminal.

CREDIT: BERTLING LOGISTICS

www.breakbulk.com BREAKBULK MAGAZINE 17

COVER STORY

THOMAS GIMBEL

Director Global Chartering, Hansa Heavy Lift www.hansaheavylift.com Over the next year, the heavylift shipping industry will likely not see many drastic changes. Further consolidations among the heavy-lift players is certainly likely, and this will help to improve the industry as it translates into a less crowded market, as well as leading to increased dynamism in an otherwise rigid marketplace. Despite these further consolidations, we believe over-tonnage will be an issue for some time, as it will probably take several years for the market to balance out and become more stable.

One positive piece of news is that some major projects are coming back to life, and this indicates we could see some improvements in 2018. In terms of potential growth markets, the offshore wind market is looking very

promising, which should continue over the course of 2018. A key driver in this has been China, where we are seeing a lot of activity in the offshore windfarm sector. We are also seeing some positive signs in the mining sector, with a lot of projects coming back to life. We believe some of these will materialize in 2018 and perhaps into 2019.

Meanwhile, oil and gas prices are breaking significant barriers, and one could even say they will increase further. This could be a factor for oil majors investing in new projects or projects that have started by now.

Regardless, many oil and gas projects that have been delayed should come back to life, and the oil majors have plenty more of these in the planning phase. That said, I also believe that we must be cautious, as the effects of recovering prices will not be immediate. Even when oil prices do recover, it will take some time – perhaps as long as 18 months – until the market sees the full effects of this.

18 BREAKBULK MAGAZINE www.breakbulk.com

GRANT WATTMAN

President & CEO, Agility Project Logistics www.agility.com Agility Project Logistics is seeing good news for capital projects, with large capital expenditure commitments being made in 2017. This bodes well for the latter part of 2018 and beyond, but did little to help the AsiaPacific, North America or European outlook in 2017.

Middle East/Africa has been performing well, primarily built upon projects receiving investment approval in the latter part of 2016.

Anticipate seeing a drop in activity as this works through, with announcements expected soon on new investment by Abu Dhabi, Kuwait and Saudi Arabia. This will provide additional impetus for late 2018 and into 2019.

Overall, the slow roll to recovery is bumpy, not smooth. The industrial

ISSUE 1 / 2018

supply chain is bumping along the bottom and contraction in global spending in 2015 and 2016 was felt in 2017. While last year’s spending reflected a modest increase over 2016, it was not encouraging, given that it was from such a low base.

I see us continuing to move sideways until mid-2018, with tenders released in the fourth quarter of 2017 and first quarter of 2018 and cargo movement mid-2018 and beyond. I say this for the following reasons: • Oil was trading around US$50 a barrel at the end of last year; investment will be up for some, down for others.

believed there is more than US$30 billion in projects poised to be brought to this board.

• President Trump was considering increased tariffs or quotas on steel last year. This uncertainty placed a dampening effect on many multibillion-dollar projects, let alone the potential impact of retaliation by U.S. trading partners.

That said, there is also a significant amount of positive change and opportunity in our market to leverage and capitalize upon. Agility Project Logistics is looking forward to a strengthening market in capital projects, oil and gas, mining and marine services in 2018. A time to be bold, invest in new markets, strengthen your people and position for growth.

OVERALL, THE SLOW ROLL TO RECOVERY IS BUMPY, NOT SMOOTH. THE INDUSTRIAL SUPPLY CHAIN IS BUMPING ALONG THE BOTTOM AND CONTRACTION IN GLOBAL SPENDING IN 2015 AND 2016 WAS FELT IN 2017.

• Skilled trade labor availability is increasingly impacting project planning time lines, negatively. Look for this to exacerbate schedules more as increasingly more projects receive final investment decisions.

• The U.S. Federal Energy Regulatory Commission, or FERC, was without a quorum from February to August 2017. An estimated US$50 billion in private capital had been awaiting FERC approval for projects in the U.S. • As at the end of last year, the U.S. Export-Import Bank board did not have a quorum and as such could not approve any loan exceeding US$10 million. This is not simply a U.S. issue, but impacts projects in Africa, Asia-Pacific, Middle East and North America. My hope is that by the time you are reading this article, the Senate Banking Committee will have nominated board members, put forward by President Trump, and give us that quorum. It is www.breakbulk.com BREAKBULK MAGAZINE 19

COVER STORY

REBECCA KELLER

Senior Science and Technology Analyst, Stratfor www.stratfor.com As we turn to the next page on the calendar, the new year will bring new challenges for the shipping industry. Consolidation and alliance formation will routinely make the headlines as the sector claws its way out of chronic oversupply and low shipping rates. Meanwhile, the industry will continue to grapple with the consequences of increased digitization and automation. But there is one place where these issues will combine with the shifting winds of geopolitics to create a perfect storm in maritime trade next year: the Asia-Pacific.

When U.S. President Donald Trump took office, he issued scathing criticisms of China’s trade practices. Had the White House made good on its threats to erect more trade barriers or declare a trade war with Beijing, the shipping industry would have foundered. So far moderation has prevailed in Washington, but as U.S. midterm elections approach, Trump will keep putting pressure on China. To that end, the administration will likely double down on the strategy it already has in place, seeking stricter enforcement of regulations and issuing challenges within and outside of

CHINA WILL INCREASINGLY ASSERT ITS PRESENCE ON THE INTERNATIONAL STAGE – A TREND WELL WORTH WATCHING IN THE SHIPPING INDUSTRY AND BEYOND.

Beijing at sunset. U.S. President Donald Trump has criticized China’s trade practices, leading to tensions in trade relations between the two countries.

CREDIT: SHUTTERSTOCK

20 BREAKBULK MAGAZINE www.breakbulk.com

the World Trade Organization.

Though China may respond in kind, an all-out trade war is still an unlikely prospect.

Instead, both sides will target specific sectors including steel, aluminum, technology and agriculture.

The fallout of increasingly tense U.S. rhetoric with North Korea may not be as easily contained. Within the next 18 months, Pyongyang will likely achieve the nuclear deterrent it has long desired. And as Washington’s window to intervene closes, the risk of military conflict on the Korean Peninsula will loom large.

Though war is a less probable outcome than other forms of containment, it would have a more profound impact on global supply chains. In anticipation of conflict, reinsurance rates will probably rise. Disruptions and delays, however, will be temporary and limited unless a clash breaks out.

Across the Yellow Sea, China’s ongoing political and economic evolution will continue to reverberate around the globe. As President Xi Jinping more aggressively pushes his policies, consolidation and production cuts will hit heavy industries while the tighter enforcement of environmental laws may erode minor metal output. Exports will still fuel the Chinese economy, but in the years ahead, its competition

with established high-tech producers will intensify as it climbs the value chain.

China’s One Belt One Road Initiative may alleviate some of the pressing economic and social issues the country faces, perhaps someday shaping international trade patterns in the process. Beijing’s investments in the project span the globe, encompassing traditional infrastructure like ports and rail as well as emerging hightech and high-value sectors. But the ambitious endeavor signals an even more important change underway in Beijing’s view of its place in the global order. Hoping to become a world leader in its own right, through its own means, China will increasingly assert its presence on the international stage – a trend well worth watching in the shipping industry and beyond.

ISSUE 1 / 2018

MICHAEL JUHLER

Head of Special Cargo, Maersk Line www.maerskline.com According to Maersk Line’s data, the global breakbulk market has been contracting for the past couple of years. As the pie gets smaller, container carriers have been increasing their breakbulk capabilities, which is likely to result in further consolidation in the segment, especially within the multipurpose operator group.

Narrow margins and increased regulations for cargo owners means they will continue to look for ways to drive down their costs. Shipping lines that provide innovative supply chain and transportation solutions at a fair price are the ones that will thrive.

Cost remains a dominant factor driving decisions for shippers. Nevertheless, the crippling effects of all-time low freight rates – which drove one of the largest container carriers to bankruptcy – remain top of mind for all. Moving from a cost-centric mindset to one of value-add, OEMs are examining their manufacturing process and end-to-end supply chain management while looking at a more balanced cost.

There are efficiencies that can be reached by increased planning and closer coordination with carriers to leverage the economies of scale offered by carriers with a global network.

From the carriers’ perspective, overcapacity and high operating expenses call for a new way of doing business. A healthy shipping industry is vital for the world economy, and the key to a healthy industry is sustainable freight rates. With bunker price increases comes additional pressure on ocean carriers that have enjoyed some respite.

There is reason for cautious optimism as we begin the new year. Citing an upswing across nearly all of the world’s major economies, the International Monetary Fund last quarter raised its global economic outlook for 2018. Although oil prices ticked upward in the last quarter and could generate some shortterm positive effects such as repairs to oil and gas infrastructure, prices remain well below historic highs, and we are still a long way from recovery.

Mary Maersk in the background with a concrete windmill cylinder lifted by crane and being loaded to truck bed for transport to end of quay for ship loading.

Maersk has invested heavily in developing its project cargo capabilities.

CREDIT: MAERSK

We have been preparing for this breakbulk industry market shift and have invested heavily in developing our project cargo capabilities in order to provide our customers with robust and competitive solutions for their complex projects.

Maersk Line is successfully growing its project cargo business, however the growth is not market demand driven, but is occurring due to shippers increased use of container carriers for their cargo. We see that more customers are seeking to leverage our scale, network and expertise, choosing to move away from conventional carriers.

In the face of a competitive breakbulk market, the continued consolidation of shipping lines and the call for innovation through technology, it’s clear that a continued focus on satisfying the customers’ needs is critical to success.

www.breakbulk.com BREAKBULK MAGAZINE 21

COVER STORY

RAFAEL DE LOS SANTOS Managing Director, Tradelossa www.tradelossa.com

Those of us that have been around long enough know that getting it wrong is a lot more probable than getting it right when forecasting the future. The more certain a pundit is with their predictions, the more I believe he or she will have to deal with unforeseen surprises.

How can we possibly predict what is going to happen in the next 12 months, when sometimes we cannot rightly see events of the coming week?

In a world where some industries develop major trends within quarters, we – the handlers of breakbulk – see trends develop through the years. In Mexico we have a saying that basically translates to: “When you see the beard of your neighbor being cut, start putting yours in hot water.” In other words, when you see those close to you

start to experience pain, prepare for your time, because it is coming soon.

For decades, the main driver of our industry has been the oil and gas industry. While we are all hoping for a renaissance that allows new major projects, sadly, I believe this hope will remain just that: a hope. Multibilliondollar projects will be scarce and remote, and when approved will be very competitive. Not what we have been hoping for.

So, what to do? Where should we focus our time and resources? I believe this is where all of us will need to make a bet. The challenge is to be wrong the least times, and not the most.

I believe that countries like ours [Mexico], that are still behind in terms of services will have an opportunity to develop infrastructure projects for a long time to come. Projects for roads, power generation and distribution, water services, and so on.

The size and number of these kind of projects in ours and other

developing countries will depend of the stability of each market and the capability of each country to develop strategic industries. We need to make that bet on a specific industry in our local market, and invest accordingly.

In more developed countries, “Smart Cities” is a term that I am hearing more frequently, describing the connection of infrastructure with technology. As an example, selfdriven vehicles require roads capable of handling this technology. Road improvements, building adaptations, new arenas, and so on, require the best of the best in our industry. The most talented, and the most specialized, will surely be ahead in this type of market.

Common among all markets is the growing customer expectation to deliver safely, on time, and within the best possible price. Multicultural young executives are moving ahead in our customers’ organizations, and that is driving a major change in expectations.

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ISSUE 1 / 2018

IN MORE DEVELOPED COUNTRIES, “SMART CITIES” IS A TERM THAT I AM HEARING MORE FREQUENTLY, DESCRIBING THE CONNECTION OF INFRASTRUCTURE WITH TECHNOLOGY. Being an expert is now not enough; we all need to develop an expertise in adaptation and constant renewal.

2018 is the year where we need to place those bets. Those that sit back and wait for the world to change will definitely lose. Observe, prioritize, and act as never before – these are our objectives for 2018.

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www.breakbulk.com BREAKBULK MAGAZINE 23

COVER STORY

SVEND ANDERSEN

Chief Financial Officer, BBC Chartering www.bbc-chartering.com The market for project logistics and subsequent demand for global shipping solutions continue to develop at a steady pace – good news indeed. Demand for BBC’s services is being driven by new undertakings and increasing volumes for upgrading, expansion, and replacement investments around the world.

Towards the end of 2017, we reported sound general activity in the market and expected promising opportunities in 2018. An ongoing, strong trend for wind power developments, solid demand for steel products, higher mining activity, and a perceptible upswing in oil and gas related activity will certainly help to keep cargo volumes moving and our ships busy in the coming year.

In addition, mega projects such as China’s One Belt One Road initiative and Saudi Arabia’s

new desert city project, Neom, inspire visions that may translate into interesting business, creating a positive impact to demand for project shipping solutions in the near future.

Towards the end of December, the oil price was trading above the US$60 per barrel mark again; a level that was last seen in July 2015. We at BBC Chartering are curious to see what extent this will drive demand in the sector, keeping in mind that oil once traded above US$100 per barrel in 2014. We’re observing trading activity of pipes picking up again and, with the increased number of rigs coming online, we dare to look optimistically into 2018.

Of course, there is risk and we may see some projects slipping; however, we hear positive sentiments from customers. Interesting projects are lining up and good feedback is coming from the Middle and Far East, Southeast Asia, South America, Africa and Europe.

Over the last few months of

2017, these regions gained momentum that we believe will be sustained through 2018 and, hopefully, beyond.

For the charter market, promising signs are seen for handysize bulk carriers, container ships, and even the container feeder segment.

We’re optimistic that the increased fixture activity in these segments indicates a likely possibility for recovery of freight rate levels in the project shipping sector.

The newly launched F-500, 12,500-DWT eco trader Jan, described by BBC as the next-generation workhorse premium project carrier, with 500 tons combined lifting capacity.

CREDIT: BBC CHARTERING

MEGA PROJECTS SUCH AS CHINA’S ONE BELT ONE ROAD INITIATIVE AND SAUDI ARABIA’S NEW DESERT CITY PROJECT, NEOM, INSPIRE VISIONS THAT MAY TRANSLATE INTO INTERESTING BUSINESS.

24 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 1 / 2018

ULRICH ULRICHS

CEO, Rickmers-Line www.rickmers-line.com Our expectations for the medium to long term are quite bullish, but they are rather bearish for the short term. Having said that, we are of the opinion that improvement in our sector is on its way, but still needs time to firm up.

Drewry and other researchers draw rather cautious scenarios for 2018, which we agree with. Predictions for 20192020 should also be taken with a pinch of salt.

Of course, oil and gas will be the main driver for demand, but we expect renewables to increase their share on a continuous basis. For oil and gas, we anticipate players will wait it out to see how sustainable any increase in the oil price will be, delaying large-scale investments. Any upward movement in the oil price will not translate into an immediate rise in shipping volumes; more likely in

2019-2020. But we also think that any projects related to infrastructure in general will see a more positive development than in recent years, and conventional and nuclear power projects will eventually see an increase.

With consolidation still way behind what is needed in this segment, we firmly believe that there will be more of that in 2018 and beyond. The sector is still far too fragmented. The need for invest-

ment into new fleets will come up sooner or later, and with the banking sector putting the brakes on shipping investment, it will become increasingly difficult for small players to meet financing requirements and secure funding.

Investors without roots in shipping are also expected to pull the plug on their involvement, so it remains to be seen where future financing will come from.

There are numerous financially weak fleets and pools.

Shippers have to be increasingly careful which ship they entrust their cargo with, in view of its technical – and, even more importantly, its financial – condition.

We are optimistic with a glimpse on the order book for the multipurpose heavy-lift sector, which lists a low number of ships for delivery in the coming years.

This will subsequently lead to a pressure on available capacity in the sector once demand picks up and competition decreases from the container and bulk carrier sectors, once these start reporting better utilization and results.

A view from a drone above a mega yacht aboard the Rickmers Jakarta near Lavrion, Greece.

Loading was a challenging operation due to the tight space on the vessel’s weather deck.

CREDIT: RICKMERS-LINE

WITH CONSOLIDATION STILL WAY BEHIND WHAT IS NEEDED IN THIS SEGMENT, WE FIRMLY BELIEVE THAT THERE WILL BE MORE OF THAT IN 2018 AND BEYOND.

www.breakbulk.com BREAKBULK MAGAZINE 25

COVER STORY

DENNIS DEVLIN

Senior Director/Head of Business Development – North America; Global Projects / Oil and Gas, Schenker Inc. www.dbschenker.com In 2016, when I was asked to write a short outlook piece for Breakbulk, I wrote that change sometimes comes slowly. And I think many of us will agree that change is coming way too slowly.

While the oil price has moved around a bit in 2017, it was still hovering around in the upper US$50s per barrel in December.

That’s not a big change, and it’s not going to move the market for project cargo.

The Baker Hughes Rig Count is up a bit too, which is positive.

But it’s still less than half of what it was just a few years ago.

The Organization of Petroleum Exporting Countries will keep limiting production through 2018, but that may only serve to keep the price steady as opposed to driving it up. I’m not sure who coined the phrase “lower for longer” in referring to the price of oil, but it’s a good one.

The mining and metals markets are also fairly weak in

THERE ARE, HOWEVER, SOME BRIGHT SPOTS: NATURAL GAS, LIQUEFIED NATURAL GAS, OR LNG, PROJECTS ...

ARE HELPING THE MARKET WHERE OIL PROJECTS ARE NOT.

comparison with past years, with far less than half of the project spend in 2017 that we saw in 2014.

And although there is work, 2018 won’t be a stellar year for mining projects either. And meanwhile, investors are pouring money into bitcoin instead of silver and gold and other commodities, which is rather inexplicable.

There are, however, some bright spots: natural gas, liquefied natural gas, or LNG, projects – LNG export terminal projects in some parts of the world, and import terminal projects in others – are helping the market where oil projects are not. The same applies to the chemical plant projects, which are being planned and constructed, especially those in the U.S., where the low costs of natural gas feedstocks make these projects feasible.

Gas will also continue to play a larger role in power generation globally, along with renewables such as wind and solar, with coal losing market share. In general, the transition from coal and oil to gas in energy markets will continue, with developing nations leading the demand, and in some cases also the supply, for gas.

Wind energy is also a bright spot, and continues to provide

CREDIT: DB SCHENKER

26 BREAKBULK MAGAZINE www.breakbulk.com

project cargoes for carriers operating in an otherwise relatively weak market.

These factors will drive what demand there is in the market for project cargo transportation.

From my perspective in late 2017, we should expect to see some improvement in the market in 2018, but no major changes. One hopes that 2018 will see final investment decisions being made on new projects for 2019, and an end to the doldrums we have been experiencing.

Despite the relatively weak market, the client base for project cargo – oil and gas, chemical companies, the mining and metals sector, engineering, procurement and construction companies, and others – demand nothing less than stellar performance from their subcontractors in the shipping, heavy haul and rail transport, stevedoring and project forwarding industries.

Shippers put a very strong emphasis on having their subcontractors provide flawless operations from a safety standpoint, cost savings through innovation and deeper project supply chain visibility. Successful operators in our market must focus on these factors, despite a relatively weak market, and despite cost pressures, because that’s what the client base demands, and what it will continue to demand through 2018 and beyond. BB ISSUE 1 / 2018

AIR

PLANE UNFAIR Air Freighters Call For Equitable Slot Rules

S

oaring air freight rates as a result of slot shortages at leading international airport hubs have forced project cargo airlines to look elsewhere for handling facilities – and the ramifications of the shift could be farreaching.

Less suitable secondary facilities do not offer the specialist handling expertise needed to safely shift project cargo, experts warn. Shippers believe regulations should be amended to prevent freighters being squeezed out of airports able to offer the expertise project shipments require.

Air freight rates rocketed in the final quarter of 2017, as demand for chartered and scheduled freighter capacity shot up. One Stifel analyst contacted by Breakbulk playfully

BY MICHAEL KING

suggested forwarders were enjoying “more Air than Michael Jordan.”

Lucas Kuehner, Panalpina’s global head of air freight, said in Asia and Europe the dearth of available space ahead of the holiday season had moved beyond a “capacity shortage.” Rather, he argued it had swollen into a “capacity scarcity” with “overwhelming” demand and freighter and bellyhold space only available to shippers at premiums.

While the short-term demand surge in the latter months of 2017 was a welcome boon for many in the air cargo sector, it also highlighted a problem of long-term importance for project and heavy-lift air freight shippers – the glaring shortage of landing slots for freighter operators at leading hubs, a shortage that most expect to get worse in the years ahead.

CAPACITY AT BREAKING POINT

According to the International Air Transport Association, or IATA, some 177 airports around the world are already capacity-constrained, about 100 of which are located in Europe.

With passenger levels set to double in the next 20 years and strong air cargo growth also predicted, deciding how to allocate limited capacity is a debate that increasingly pits wider economic needs against the desires of voters for affordable and regular leisure options.

Critical to the debate is the system used to allocate aircraft landing slots.

The glare fell on the landing slot shortage most brightly last year at Amsterdam Schiphol Airport, or AMS. The airport can handle a maximum of 500,000 slots per year, but rapid growth

Heavier freight planes need longer runways than passenger planes.

CREDIT: AIRBRIDGECARGO

www.breakbulk.com BREAKBULK MAGAZINE 27

AIR

SLOT REFORMS NECESSARY The air cargo sector is hoping that reforms to slot regulations can prevent freighters being pushed out of major airports in favor of budget leisure airlines.

Slots are allocated by leading global airports under International Air Transport Association’s Worldwide Slot Guidelines, or WSG – effectively a “use it or lose it” system also known as the 80:20 rule. Under WSG, if an airline uses at least 80 percent of its allocated slots it assumes historic rights to the slots for the next season. Should it fall under 80 percent, it automatically loses them. European Shippers’ Council’s Rogier Spoel argues that this system is unfairly weighted against freighter operators.

“When a passenger does not show up on time, passenger airlines will simply close their doors ready for takeoff and will keep their time slot,” he said. “This is not the case for full freighters. When cargo is not ready, they simply cannot take off.

Also, a full freighter flight is much more complex with uploading/ unloading cargo, inspection by customs, safety and security measures.

In this respect, quality, not punctuality, is the key for shippers.

“Also, many full freighter flights have difficult flight schedules with

multiple stops in one flight – a delay at a certain airport affects their entire flight schedule and, therefore, they are much more vulnerable to losing their time slot.”

He would like to see reform of IATA’s 80:20 guidelines. “It all starts with IATA regulation on slot allocation,” Spoel said. “Here, the 80:20 rule is defined, and there should be a 70:30 provision made for full freighter flights.

“Changing the game at IATA would help maintain full freighter operations at the major airports.”

ABC’s Sergey Lazarev takes a similar view. “We really hope that the 80:20 IATA rule can be revised in future and substituted for 70:30, at least for freighter operators that have situations with cargo being late or operational hurdles taking place,” he said.

“From our perspective, the best solution is not in the change of the European legislation in terms of the 80:20 rule, but rather in approaching IATA with the alterations to be made in the counting method of slot performance for freighter carriers.”

Only combined efforts with other freighter carriers and the creation of an IATA working group will facilitate these efforts, he concluded.

Air freighters place more demands on airports than passenger jets.

CREDIT: AIRBRIDGECARGO

saw the limit breached, and cuts had to be made for the winter season. Under “use it or lose it” IATA regulations, this left freighter operators, whose schedules are open to multiple vagaries, at a distinct disadvantage versus budget leisure passenger flights more easily able to abide by schedules. As a result, some 37 freighter flights per week were initially lost by all-cargo carriers at AMS over the winter due to slot restrictions, although this number was tapered somewhat when AirBridgeCargo Airlines, or ABC, with the support of the Russian government – which reportedly threatened to ban Dutch airlines from Russian airspace – reached a code share agreement with Dutch national carrier KLM. Sergey Lazarev, general director of ABC, told Breakbulk that many leading global airports are struggling to find the right balance for cargo and passenger airlines, and priority was generally given to the latter. “With the high growth rates of passenger travel demand, airports started to prioritize passenger over cargo,” he said. “But last year, when demand for both passenger travel and air freight was very high, the problem became more obvious.

“High export/ import demand on certain trade lanes and uplift on international markets have led to congestion, both in the air and on the ground. The Amsterdam situation is not isolated, Rogier Spoel as there are similar overcrowded European Shippers’ Council landscapes in Frankfurt, Shanghai, Hong Kong, Chicago and other major hubs.”

ABC operates a fleet of 18 Boeing 747 freighters, including 11 Boeing 747-8Fs that offer payload capacity of 130 tons on a single flight and can accommodate cargoes of up to 45 meters in length.

SQUEEZED OUT

According to Lazarev, the introduction of new regulations in terms of strict night curfews, on-time performance and other operational restrictions has made it increasingly difficult for cargo airlines to secure and hold slots at the 28 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 1 / 2018

most popular hubs. “With the situation getting worse every year, ABC, being a freighter operator, is trying to find the best solutions in the interest of our customers,” he added.

As freighter operators are squeezed out of preferred airports they are instead relocating to secondary airports. The freight cull at AMS, for example, saw the diversion of services to secondary hubs such as Liege and Brussels. However, Rogier Spoel, air transport policy manager at the Lucas Kuehner European Shippers’ Council, Panalpina said these facilities often face tougher environmental restrictions, a major problem for noisy heavy-lift aircraft. They also often lack suitable infrastructure and equipment, while competition among logistics and handling service providers within these airports is usually limited.

“Secondary airports also often lack expertise and supply chain know-how,” he added. “The customs regime might not be 24/7 or they don’t have state-ofthe-art warehousing. Some don’t have big enough runways for long-distance fully loaded freighters, some face environmental restrictions and others don’t have the right equipment.

“If the trend of cargo operators being forced to these airports continues, shippers feel that a lot of investments need to be made to get them at the same quality levels as major hubs.”

DEALING WITH U.S. ISSUES

Charles “Chuck” Clowdis, a prominent air freight consultant for more than 30 years, said that when freighter operators can secure slots at leading U.S. hubs, they are often at unsuitable times. “There are also issues in the U.S. with ground operations space, especially in places such as Las Vegas and Orlando and even LAX (Los Angeles International Airport) which are popular passenger destinations,” he added.

“Unfortunately, the problem is escalating and we’re seeing a shift to alternative airports which can add to drayage costs,” he said. “It also puts upward pressure for shippers on charter costs.”

Staffing is also a problem at secondary airports and airlines might need to set up a second office, for example.

“Project shipments already have added costs,” Clowdis said. “Diversion from hubs equipped to handle them only exacerbates the time it takes to deliver. It also ups the cost and increases the potential for damages and safety issues. Very heavy-lift aircraft, Lockheed C-5s as an example, require special ground ops to facilitate loading/ unloading and this is not always available at secondary air fields.

“If you are shipping a gigantic girder, for example, you need specialist CREDIT: PANALPINA, COURTESY OF THE logistics support. If BOEING CO. a flight is diverted then this becomes an issue and a new cost.”

Panalpina’s Kuehner added that crew and equipment availability at secondary airports is critical for project cargo, which tends to be more challenging than general air cargo from a handling perspective. “Experienced personnel and special equipment have to be available, which is not a given,” he said.

Many secondary, cargo-friendly airports are urgently seeking to improve airport ground infrastructure and highways access, while also trying to attract the highly qualified logistics specialists required to handle heavy or project cargoes. But, Lazarev added, making upgrades takes time.

“Transportation of special cargoes requires expertise, experience and highly skilled specialists,” he said.

“Secondary airports will need to take quick steps in order to attract skilled staff, adopt handling procedures, purchase specialized handling equipment and develop essential airport infrastructure.” BB Shifts to alternative airports can add to drayage costs.

Michael King is a multi-award winning journalist as well as a shipping and logistics consultant.

www.breakbulk.com BREAKBULK MAGAZINE 29

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PORT FOCUS

ASIAN POWERHOUSES China, Malaysia Dominate Breakbulk Trade

BY MICHAEL KING

T

hirty years ago, when the Cold War was more than just a backdrop for movies, most of the world’s largest ports by tonnage could be found in The West.

Houston, Rotterdam, Antwerp, Hamburg, Los Angeles and New York led the way. All remain sizeable hubs for all types of cargoes including breakbulk and project shipments, but since the late

30 BREAKBULK MAGAZINE www.breakbulk.com

1980s the global port landscape has been transformed.

The unitization and commoditization of shipping has, of course, diminished the relative importance of project and general cargoes to most ports’ bottom lines.

But of more significance has been the astonishing expansion of Asian economies that has seen the global economy pivot dramatically eastwards. With ISSUE 1 / 2018

continent’s ports are expanding.

A key recent driver of breakbulk demand has been expansionist Chinese policies such as One Belt One Road and its related Maritime Silk Road.

At its core, OBOR aims to establish new trading routes, links and business opportunities by further connecting China, Asia, Europe and Africa.

Domestically, China hopes it will boost

WITH MOST ASIAN ECONOMIES IN GROWTH MODE AND TRADING ACTIVITY, PARTICULARLY ON INTRA-ASIA LANES, CONTINUING TO INTENSIFY, THE CONTINENT’S PORTS ARE EXPANDING.

AAL ship in Shanghai. /

major initiatives such as China’s One Belt One Road, or OBOR, driving port development and project shipping demand in Asia, the trend is expected to continue.

Michael Andrews, vice president global projects oil and gas for Asia Pacific at DB Schenker, told Breakbulk the company’s customer base, which predominantly consists of major

CREDIT: AAL

western international oil companies and engineering, procurement and construction, or EPC, companies, had over the last decade gravitated eastwards towards low-cost sourcing and module fabrication in Asia, a shift he said that’s “ongoing.” With most Asian economies in growth mode and trading activity, particularly on intraAsia lanes continuing to intensify, the

its own industries by delivering higher returns on capital and help absorb China’s excess labor and industrial capacity, particularly the cement needed for ports and roads and the steel required for new buildings and railways.

Overseas, the maritime component of OBOR focuses on linking China with Europe via the Indian Ocean. Many also see it as a means for China to further project its growing economic and military might.

Setting aside geopolitics, for the breakbulk industry OBOR is win-win.

With support from Chinese stateowned enterprises, OBOR is boosting project forwarding and shipping demand around Asia via heavy investment in infrastructure projects. On the flipside, its requirement for strategic maritime staging posts is prompting the expansion of Asian ports with the help of Chinese finance and know-how, in the process generating both short-term www.breakbulk.com BREAKBULK MAGAZINE 31

PORT FOCUS

EPC demand and long-term terminal capacity for heavy-lift carriers.

Some of the projects either underway or under discussion include a new deepwater port at Payra in Bangladesh and a new port in Kalimantan, Indonesia. Major investments have also been made in multipurpose port facilities in Sri Lanka, Vietnam and Pakistan by Chinese interests supportive of OBOR.

IMPORTANCE OF MALAYSIA However, critical to OBOR in Asia is Malaysia, not least due to its strategic location on the Strait of Malacca, the key maritime artery linking the South China Sea and the Indian Ocean.

The relationship between the two countries is already well established: China has been Malaysia’s largest trading partner since 2009, and is also its main construction contractor and the largest source of foreign investment in manufacturing. Agreements with China signed by the Malaysian government headed by Prime Minister Najib Razak include the US$13.1 billion East Coast Rail Link, or ECRL, and the Melaka Gateway Multipurpose Deep Sea Port.

The Melaka deal, part of the

32 BREAKBULK MAGAZINE www.breakbulk.com

A C3 Splitter transported from Malaysia to Singapore for the SPT Olefins Recovery Project. Mammoet-Singapore performed this roll-on/barge/roll-off operation.

CREDIT: SHAW E&C PROJECTS

US$10.4 billion Melaka Gateway megadevelopment, was signed in 2016 and will see three Chinese state-owned companies build and manage a deepsea port and Maritime Industrial Park on three reclaimed islands off the city of Melaka on the west coast. When completed, ECRL will run from Port Klang, Malaysia’s leading port located near the capital Kuala Lumpur, up to Tumpat on the border with Thailand via the strategic port of Kuantan.

China is also investing in the port of Kuantan and the nearby MalaysiaChina Kuantan Industrial Park, or MCKIP, the first industrial park in Malaysia jointly developed by the two countries. The remit of the 3,000acre park is to support heavy industry and manufacturing, and tenants will rely on Kuantan port for imports and exports. Already, 710 acres of the site is occupied by a new integrated plant operated by Alliance Steel, a joint

stock Chinese and Malaysian company established in 2014. When completed, the plant will produce high-speed wire rod and bars and boast an annual production capacity of 3.5 million tons.

MCKIP is also expected to attract additional Chinese investment from companies seeking to expand into Southeast Asia and beyond using Kuantan Port as their ocean gateway. According to MCKIP, Guangxi Zhongli Enterprise Group and ZKenergy (Yiyang) New Resources Science and Technology Co will be two prime investors, while a new aluminum component manufacturing facility and a new concrete panel plant are also expected to be constructed at MCKIP. Kuantan Port already handles breakbulk cargoes including steel pipes, sawn timber and plywood as well as various dry and wet bulks.

However, the port can only receive ships of up to 40,000 deadweight tons.

A port expansion project – NDWT Phase 1A – funded and managed by a joint venture Malaysian/Chinese consortium is scheduled for completion in the second quarter of 2018. It will add a basin depth of 16 meters, 400 meters berth and 20 hectares of cargo yard, enabling ships of up to 150,000 deadweight tons to be received. The development of Phase 1B will add a further 600 meters of berth and 22.5 hectares of yard and is due to open in the second quarter of 2019.

With ports on either side of Peninsular Malaysia linked by the ECRL, some see the developments as China’s means of reducing its reliance for imports on the Strait of Malacca by creating a landbridge.

The two countries have also formed the China-Malaysia Port Alliance, or CMPA. With the pending additions of the ports of Tianjing, Qingdao, Kuching and Sabah, CMPA will soon bring together 21 ports from both countries. The ultimate objective of the port alliance is to facilitate trade by using ports in Malaysia and China as gateways. CMPA initiatives will be aimed at improving information exchanges, establishing joint training programs to enhance operational skills and knowledge, the encouragement of joint ventures between port members, and the removal of customs bottlenecks.

ISSUE 1 / 2018

HEAVY LIFT LEADERS.

PORT FOCUS

COMPETING WITH CONTAINERS

Yet despite the heady number of port investments around Asia, at some key gateways pressure is growing on space, and this is creating problems for project supply chain stakeholders. As port managers seek out higher returns and less exposure to rising labor costs by automating operations, the pressure is on general cargo terminal operators to provide suitable facilities and to hold onto the skilled personnel required to stow and handle non-unitized cargoes safely and efficiently.

“We are seeing the same thing happening in Asia as has been happening for years in the U.S., Europe and Christophe Australia — the Grammare common theme is breakbulk taking AAL more and more of a backseat,” said Shanghai-based Christophe Grammare, head of region in China at AAL. In short, ports are selling or developing prime real estate, or investing in new container terminals in place of general cargo facilities.

“This is now happening even in Asia where we haven’t seen it much before,” he added. “Breakbulk facilities are becoming smaller and smaller.”

Grammare cited the part closure of Terminal 10 (Zhong Gong Lu) in Shanghai in 2017 as one example. This, combined with a summer heat wave, resulted in lengthy delays for ships at the port’s Luojing terminal. “If you can imagine, out of three main breakbulk terminals one was reallocated to container operations, so over July/August there were some vessels waiting 10 days or more for a berth,” he said. “With all the traffic being pushed through one terminal it created immediate congestion – Shanghai is one of the leading hubs for breakbulk and we went from three main terminals down to two.”

This is something that’s being seen throughout the region, he said, with the focus predominately on investment in containers, not so much on breakbulk. “Breakbulk is usually slow to 34 BREAKBULK MAGAZINE www.breakbulk.com

handle compared with containers and ports built more container terminals or it’s very difficult to automate, or it’s developed space for retail, so far at least actually impossible to automate as it’s the same trend was not immediately very labor intensive, and everywhere apparent in Asia, except for Hong Kong. in Asia the labor cost is increasing as “In Hong Kong, midstream discharge well,” Grammare said. “I think every and loading from lighters and barges for port terminal is seeing that it’s very bulk cargo – either project, out-of-gauge difficult to make money with breakand general cargoes – has been a longbulk. So, everyone focuses on investing established practice,” he said. “Moreover, in container infrastructure, which you as low-cost sourcing in the project world can automate and then secure a very places more and more emphasis on Asian predictable financial outcome.” economies, we are not seeing a depreciaThis results in a constant pressure tion in skill sets from major ports. between what the cargo can pay and what “If/where that occurs, the workthe stevedores get paid, which has led to a around will be to use geared tonnage/ move by skilled staff towards better payvessels crews to handle the hook on/ ing industries and a resultant loss of skills. hook off and LSD [lashing securing “We see experienced people moving to dunnage] procedures and from an ondifferent industries because the rates carriage perspective – as distinct from on the breakbulk a pre-carriage perside of things are not spective – discharge particularly great. to barge or tempo“WE SEE Low-paying cargoes rary jetties, material EXPERIENCED and low productivity or module offloading generally result in facilities, purpose PEOPLE MOVING low-paying jobs,” he built material/ TO DIFFERENT said. module offloading However, port facilities, beach landINDUSTRIES ... charges in Asia had ings and the like.

LOW-PAYING remained reasonably “Indeed, this is steady when comthe practice today CARGOES AND pared with western many locations LOW PRODUCTIVITY in countries where throughout Asia, GENERALLY RESULT particularly the annual price hikes at specialist terminals Indonesian archiIN LOW-PAYING were common. “I pelago where there JOBS.” think it has become is no suitable port standard practice in infrastructure to – Christophe Grammare, AAL western countries to handle the cargo.” hike up prices every According to year because of the lack of competition,” Andrews, customs in Asia is also not genGrammare said. “If you look at certain erally an obstacle when shipping major developed countries, you don’t have project cargoes. “It should also be borne many options for exporting your cargo. in mind that many project sites are either But in China, for example, technically located too far from a suitable terminal Shanghai is competing with about 10 to make commercial sense out of utilizdifferent terminals in the Yangtze River ing the facility and/or the bottleneck isn’t Delta. Most manufacturers in China the terminal and services/expertise per also have their own berths for exports, se but more the restrictions outside of the although they are generally limited in terminal on route to site. size which does create issues for us.”

“In these cases, either customs are cleared in a main port, cargoes disCAPACITY ‘NOT A CONCERN’ charged to barge or landing craft and DB Schenker’s Andrews, looking at taken round to site or, customs is perproject ports in Asia from a forwardformed at site.” BB ing perspective, said he had, so far at least, encountered few capacity issues at ports. While in Europe and the U.S. Michael King is a multi-award-winning multipurpose general cargo and project journalist as well as a shipping and logistics terminals were squeezed for space as consultant.

ISSUE 1 / 2018

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MARKET SPOTLIGHT

MINING REVIVAL Boom to Stimulate Australian Transport Demand

BY THOMAS TIMLEN

O

ne could be tempted to look at the Adani Carmichael mine, rail and infrastructure projects planned for Queensland as the linchpins to an upswing in Australia’s mining sector.

All of them promise opportunities for those servicing the project’s heavy-lift and project transportation needs relating to the import and positioning of mining equipment and components.

The Carmichael mine is expected to produce 60 million tonnes of coal a year at its peak, with an output of 2.3 billion tonnes over its 60-year life. If it comes to fruition it will be the largest coal mine in Australia and one of the largest in the world. It’s also being seen as the catalyst for further large mine development in Queensland’s Galilee Basin. The new mine and railway will also create demand for new equipment to be imported by sea and hauled to its final destination by road.

But project cargo specialists do not need to lump all their eggs in one Adani-sized basket when it comes to Australian mining prospects. These projects will undoubtedly create demand for transport service providers and other stakeholders, but they represent only one driver among many that have improved the outlook for mining across Australia; mining that looks beyond coal. Australia also mines and exports alumina, aluminum, bauxite, copper, gold, lead, silver and zinc.

36 BREAKBULK MAGAZINE www.breakbulk.com

ELECTRICITY COSTS

While the market ultimately determines the level of demand for such commodities, factors that impact their extraction and sale cannot be overlooked. Find a cheaper way to bring your product to the surface, and you can sell it at a lower cost. One such factor is electricity.

In its latest State of the Sector report, the Queensland Resources Council, or QRC, remarked that as wholesale electricity costs rise, the industry cannot simply pass on these increases to customers. The QRC understands that the Queensland resources sector is trade-exposed and must remain globally competitive. Unchecked high electricity costs will price Queensland projects out of global commodity markets.

The QRC report points out what some would call the obvious: in the face of increases to electricity costs, energy-intensive operations are forced to reduce costs or they go out of business. “This is what we saw at the Boyne Island aluminum smelter earlier in 2017, where 100 workers were stood down and production was cut by 14 percent,” the QRC report states.

The cost of electricity is a concern that, if left unchecked, could stymie mine sustainability. However, other developments, including cost reduction initiatives, show that stakeholders in this sector have been proactive when it comes to identifying sustainable avenues to move forward.

RGP6 Jimblebar mine project in Port Hedland, Australia. ALE was tasked with the receiving, storage and land transportation of 230 modules, with weights ranging from 5 tons to 240 tons. The 230 over-sized and over-mass modules were used to construct the RGP6 Jimblebar Iron Ore project.

CREDIT: ALE

The latest edition of PwC Australia’s Aussie Mine report concludes that Australia’s mid-tier mining sector has an opportunity to prosper in this new, more positive environment. PwC Australia notes that the recovery in the coal price and other factors, such as flat operating costs (the electric bill did not tip the scale nationally), all set the stage ISSUE 1 / 2018

for the mid-tier mining sector’s first profitable year since 2012.

PwC Australia added that gains from technology could be pursued, ranging from data management and storage systems to the use of bots, drones and automation wherever it is feasible. Investments relating to data have already been made, while there is room for further investment aimed at automation, in particular with robotic process automation, or RPA. Larger players have implemented RPA, with mid-tier companies now taking an interest.

These developments help to explain other drivers and indicators that bolster optimism, such as an increase in exploration, a noted

decrease in unemployment of mining professionals, as well as new investments in infrastructure.

CYCLICAL TRENDS EVIDENT

Paul Kelly, director for ALE’s Australia branch, attributed the present signs of improvement to the cyclical nature of the sector’s performance.

“The mining industry in Australia follows a cyclical trend,” he said. “There are certainly good opportunities forecasted in the years to come, as the major miners develop new reserves and as potential new entrants to the market set up new mining infrastructure.

There has been a trend for new infrastructure to be preassembled, either offshore or in Australia, and

transported by sea and road to remote mine site locations. ALE has been involved in numerous projects, such as the Jimblebar and Roy Hill projects in Western Australia.”

Kelly’s views align with several Paul Kelly indicators includ- ALE ing strengthening commodity prices, reduced unemployment in the mining sector, and an increase in spending and exploration by mining companies. Together, all www.breakbulk.com BREAKBULK MAGAZINE 37

point to expansion of existing mines and development of new mines.

Existing and reactivated equipment will likely be inadequate, necessitating the purchase, import and fabrication of new equipment, stimulating increased demand for heavy-lift and project transport services by ocean and road.

New equipment is sourced primarily within Asia, with onward movements involving several regions in Australia. Kelly said equipment “tends to arrive from an offshore origin, for example China or Thailand, via local ports like Port Hedland or Karratha typically in Western Australia or Mackay in Queensland, to the mine site locations. Alternatively, we also transport modules from local fabrication facilities to mine site locations. The modules are typically transported by road using modular hydraulic trailers.”

The distances covered by road haulage, however, are kept to a minimum, with forwarders preferring sea transportation instead.

“A lot of the mining equipment work is coastal shipping from local manufacturers trying to get closer to the mining center ports and not utilizing long-haul land transport to their customers in the mines,” said Garry Scanlan, CEO of the Greater Whitsunday Mackay Queensland Economic Development Board. The board is part of the Greater Whitsunday Alliance, an independent economic development body to represent and advocate for the Mackay, Isaac and Whitsunday region.

ALE is familiar with mining equipment projects in Australia, having 38 BREAKBULK MAGAZINE www.breakbulk.com

ALE was contracted to receive and perform the land transportation of 3,500 mining equipment modules for construction of the Roy Hill Mine in Western Australia. ALE received the modules at Port Hedland.

The modules ranged in size and weight, as heavy as 320 tons and measuring up to 15 meters wide, 17.5 meters high and 54 meters long. The modules were transported 540 kilometers to the Newman Pilbara region utilizing 30 axle lines of widening trailers and four block trucks. Because of the items’ size, they were delivered one at a time.

CREDIT: ALE

transported hundreds of oversized and over-mass modules for numerous projects for BHP Billiton, Rio Tinto, Roy Hill and Fortescue Metals. Kelly noted that modules tend to be preassembled and are received and transported from Port Hedland to staging areas, before making their way to the mining sites.

A DOSE OF REALITY

But before project cargo specialists get ahead of themselves, it has not been plain sailing for the Carmichael project and there is no guarantee that the project will ever see the light of day. Obtaining the required financing has proved to be a major stumbling block for the Adani Group. The delayed launch of Adani’s Carmichael mine in October 2017 bought Adani time to work on Chinese financing. But by early December hopes of obtaining Chinese funding were dashed when two of China’s “Big Four” banks ruled out any funding for the Adani projects.

The Chinese banks said they were

shifting their focus on to investments in renewable energy initiatives.

While the news was welcomed by groups in Australia that oppose the Carmichael projects, Adani did not see it as the death knell for the project and continued to pursue financing solutions. The group expected to have financing in place by March 2018, at the end of the Indian fiscal year.

Adani’s optimism is shared by specialists. “In relation to the recent news about the Chinese Banks and Adani we feel that Adani has proven to be an extremely patient and resilient organization that is committed to the Galilee Basin development,” Scanlan said.

“Therefore we are confident they will continue to use their best endeavors to make the project a reality.”

And Scanlan is not the only one maintaining that Adani will overcome the recent setbacks.

“The critical mass of Adani will allow them to succeed,” Ian Macfarlane, CEO of the Queensland Resources Council, said, adding that there is more Ian Macfarlane to the situation than financing Queensland alone. “The crazy Resources Council thing is if they don’t get the coal from Australia they will get it from somewhere else and it will be dirtier.”

Scanlan said the project will also bring welcome jobs to the region, as well as economic opportunity.

Regardless of the outcome of Adani’s efforts to secure financing for its Carmichael projects, there are sufficient indicators to conclude that demand for Australia’s transportation providers should increase in the short term, with a welcome enhancement should Adani’s efforts succeed. BB Thomas Timlen is a Singapore-based freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

ISSUE 1 / 2018

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ENERGY UPDATE

Noble Corp.’s Noble Bob Douglas drillship is anticipated to begin work for ExxonMobil off the Guyana shore by mid-2018. / CREDIT: NOBLE CORP.

Guyana G Boon ExxonMobil Discoveries Spur Offshore Activity

BY PAUL SCOTT ABBOTT 40 BREAKBULK MAGAZINE www.breakbulk.com

uyana has long been regarded as an impoverished Britishinfluenced enclave on South America’s Caribbean Coast, perhaps best known globally for the 1978 poisoning deaths of more than 900 followers of San Francisco cult leader Jim Jones at his Peoples Temple commune at Jonestown.

But the republic of fewer than 800,000 citizens is now emerging in a much more favorable light, as home to one of the world’s most impressive new offshore oil and gas developments. That means abundant opportunities for the subsea project

sector and the Guyanese economy, while some observers believe it may also breed political concerns.

With total production possibilities pegged at as many as 400,000 barrels per day by the mid-2020s, a series of five ExxonMobil discoveries off the Guyana shore are slated to see development drilling begin in 2018, with a production startup on target for 2020.

Although such production levels are a fraction of those of some other Latin American nations, the Guyana resources are particularly noteworthy as they are being realized in a country that up to now has had zero ISSUE 1 / 2018

oil and gas production, and thus lacks the infrastructure and political policies associated with such activity.

nese. Obviously, technical training programs may provide further opportunities for EPC firms.”

GAME-CHANGING BLESSING?

OPPORTUNITIES ABOUND

The offshore Guyana discoveries, including the fifth, dubbed Turbot-1, found in August 2017, are “a game changer” for the small country, according to Anthony T. Bryan, senior associate of the Americas Program at the Washington-based Center for Strategic & International Studies, and professor of the Institute of International Relations at the University of the West Indies.

“Guyana, one of the poorest countries in the Caribbean, could soon become the Anthony T. Bryan wealthiest if it plays its cards Center for Strategic & International correctly,” said Bryan, who holds Studies his doctorate in Latin American history.

However, “it faces major hurdles including inadequate infrastructure, an unresolved territorial dispute with Venezuela, environmental protection issues, wealth management challenges and potentially disruptive domestic ethnic and political rivalry between Afro- and Indo-Guyanese,” he added.

“Primarily, the national leadership must try to avoid the ‘resource curse,’ which can transform abundant natural resources from a blessing to a burden.”

Bryan said he sees “a wealth of opportunities” for engineering, procurement and construction, or EPC, services firms with Guyana embarking on a US$164 million infrastructure initiative to upgrade roads, bridges, ports, river transport systems and telecommunications.

“In addition,” he said, “a local consortium, Guyana Shore Base Inc., is developing a logistics hub to cater to the potential oil and gas industry and to provide local content for Guyana and employment industry training and employment opportunities for Guya-

Reggie Thompson, Latin America analyst for the Austin, Texas-based Stratfor geopolitical intelligence firm, said he believes there are “definitely going to be opportunities in Guyana” for EPCs and project carriers alike, not just directly related to the oil and gas finds and exports, but also in other sectors that experience growth with the discoveries’ contributions to the overall Guyanese economy.

Such a boon is seen by Thompson even though his projection is for eventual Guyanese production of 200,000 barrels Reggie Thompson a day, about half that put forward Stratfor

by Bryan. Whatever the ultimate flow, it is, according to Thompson, expected to be far less than the barrels-per-day figures for Venezuela (nearly 2 million), Brazil (about 3 million), Colombia (almost 1 million) and Mexico (nearly 3 million).

Thompson also shares the view that Guyana’s godsend may have a dark lining.

“What we’re looking at is definitely increased political corruption in Guyana,” Thompson said. “They’re going to be getting the windfall even before they’ve got the institutions in place to properly manage it.”

Observers with the global research and consultancy firm of Wood Mackenzie, who estimate Guyana’s offshore oil production to reach 350,000 barrels a day by about 2025, also see challenges.

Pablo Medina, Houston-based Latin America upstream senior research analyst for Wood Mackenzie, said the finds represent “huge news for Guyana,” but he questioned whether there would be an avenue for commercialization of the gas reserves that accompany the oil.

Wood Mackenzie colleague Paul Main, the firm’s London-based manager of research for upstream supply chain data, added: “This is a real boon

Kaieteur

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G U YA N A SU R INA ME

B R A Z IL

Source: Stratfor

Oil and gas blocks off the Caribbean shore of the South American country of Guyana hold rich reserves being tapped by ExxonMobil.

for Guyana. It’s just a matter of how they handle it.”

Main said pipelining gas to nearby Trinidad & Tobago would likely prove cost-prohibitive, and political disagreements stand in the way of the product heading to neighboring Venezuela.

However, he said, Trinidad & Tobago is apt to benefit as it offers the most likely service hub location for the activity off the Guyana shore, while much of the needed pipeline, umbilicals and other subsea infrastructure is probably going to come from such countries as Mexico and Brazil.

GUYANESE ENGAGED

ExxonMobil officials note that hundreds of Guyanese people are already involved in the endeavors and that fruitful cooperation is taking place with the nation’s government.

More than 400 Guyanese nationals are already employed in marine operations, catering, security, transportation, housing and other project support activities, as well as in the ExxonMobil office established in the Guyana’s capital city of Georgetown, according to ExxonMobil spokesperson Rebecca Arnold. www.breakbulk.com BREAKBULK MAGAZINE 41

SIGNIFICANT REVENUE

ExxonMobil and DAI Global LLC, an international development company, opened the Guyana Business Development Center in July to promote the establishment and growth of small- and medium-size businesses in Guyana. An online supplier registration website has attracted some 300 companies, about 100 of which are Guyanese.

ExxonMobil has worked closely with partners Hess Guyana Exploration Ltd. and CNOOC Nexen Petroleum Guyana Ltd. to achieve full alignment on the development plan, according to ExxonMobil officials, who added that the in-country team is also building a long-term, trusting relationship with the Guyanese government to gain its continuing confidence and support.

“Without an established oil and gas industry, everything was new to the government,” said Rod Henson, ExxonMobil’s Guyana lead country manager. “The intensive effort and due diligence they exercised on the review of our production license application and environmental impact assessment was impressive.”

CONTRACTS AWARDED

A number of key contracts have been awarded in connection with the offshore Guyana finds, including one with Amsterdam-based SBM Offshore for a floating production, storage and offloading – or FPSO – vessel designed to produce as many as 120,000 barrels of oil a day. A second FPSO is to eventually be in place.

Also awarded are contracts with 42 BREAKBULK MAGAZINE www.breakbulk.com

CT Khoo, ExxonMobil’s Guyana project executive, left, discusses the plans for the FPSO Liza Destiny vessel with Raphael Trotman, Guyana’s minister of natural resources.

London-based TechnipFMC for subsea equipment, and with Italian oil and gas contractor Saipem for work including EPC functions such as installation of CREDIT: EXXONMOBIL risers, flow lines and associated structures and jumpers. In addition, officials of London-based offshore driller Noble Corp. have reported a three-year contract with ExxonMobil that includes deployment of the Noble Bob Douglas drillship.

Pending assessment of the latest Turbot-1 discovery, the gross recoverable resources for the Stabroek Block off the Guyana shore, including Liza and other successful exploration wells at Liza Deep, Payara and Snoek, are now estimated at 2.3 billion to 2.8 billion oil equivalent barrels, according to ExxonMobil’s Arnold.

The vast Stabroek Block encompasses 6.6 million acres or 26,800 square kilometers. Esso Exploration and Production Guyana Ltd. is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest, while CNOOC Nexen Petroleum Guyana Ltd. holds 25 percent interest.

“We remain on target for a production startup by 2020 – less than five years after the initial Liza discovery in 2015,” Arnold said. “Development drilling is planned to start in 2018.”

According to energy scholar Bryan, the current production sharing contract with ExxonMobil will provide Guyana with half of the revenue after costs, plus a royalty of 2 percent on gross earnings.

Guyana’s earnings, based on the current price of US$50 per barrel, are likely to reach at least US$1 million per day.

“This is significant revenue for a nation of less than a million – 780,000 – inhabitants,” Bryan said. “Full monetization of Guyana’s oil and gas resources could take place in five to 15 years time if all goes to plan.”

Bryan cautioned that the future of such energy projects depends upon the global market and the price of oil, as well as whether exploration and production is worth the investment at the time.

“At this stage,” Bryan said, “Guyana is fortunate to have a close working relationship with a major IOC [international oil company] such as ExxonMobil. The relationship may not necessarily be as smooth in years to come depending then on the domestic and international political and economic environments. But, at present, Guyana has little choice but to continue to negotiate the best terms for the nation and its people.”

Bryan said that, whereas the production of oil in the Caribbean off the coast of Guyana is not apt to go on forever, the proper parlaying of the profits could lay the groundwork for lasting benefits for Guyana.

“In the future,” he said, “the global movement toward renewable energy, or RE, in order to mitigate climate change could emerge as the low-profile elephant that eventually stomps on Guyana’s future oil and gas development.

“Fossil fuels will be around for quite a while, but RE is the future,” Bryan continued. “So, this presents Guyana with a golden opportunity to use some of the largesse from oil and gas to finance the development of RE resources.”

As an opportunity that did not exist for most of today’s mature oil and gas producer nations when they were still oil and gas “frontier” provinces, Guyana should make the most of it. BB A professional journalist for nearly 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late

ISSUE 1 / 2018

WEBINAR: OUTLOOK 2018

cautious optimism? that’s so last year.

Wednesday, January 31 at 12:00 p.m. EDT

Uncertainty is now the name of the breakbulk and project cargo game. Following on Outlook 2018 – Breakbulk’s most anticipated feature of the year – we kick off our slate of webinars with renowned project industry executives from the logistics, freight forwarding and ocean carrier sectors.

Join us for a lively discussion on what to expect in 2018, and participate in a question-and-answer session with our panelists. Breakbulk Magazine editor Gary Burrows will moderate.

Register at breakbulk.com/breakbulk-sessions

PANELISTS

Ed Bastian Global Sales Director, BBC Chartering USA

John Hark Regional Director – N. America, COO – S. America, Bertling Logistics Inc.

Grant Wattman President and CEO, Agility Project Logistics

PROFILE

Renewed Energy C.H. Robinson Stakes Renewables Claim

F

reight transportation services provider C.H. Robinson is no stranger to the usual project cargo-hungry sectors of upstream oil and gas and mining. But the hottest sector for the Fortune 500 company’s project logistics department at the moment is power generation – particularly wind energy.

In an exclusive interview with Breakbulk magazine, Frank Guzman, senior director of project logistics at the company, says: “For the next three years, we are expecting an increase in freight spend in that sector due to the safe harbor law benefits, so we’re adding resources in our wind space and ensuring we have the right team.”

Under the safe harbor clause, wind projects in the U.S. are allowed Production Tax Credits if a minimum of 5 percent of the project’s total capital cost was incurred before Jan. 1, 2017 and the project is placed into service before Dec. 31 of the fourth calendar year after which construction began.

But while wind-related business is expected to boom, there are capacity con44 BREAKBULK MAGAZINE www.breakbulk.com

BY CARLY FIELDS

cerns for shifting wind components when it comes to haulage. Not only are units increasing in size, challenging truckers and forwarders, the number of skilled drivers is not increasing commensurately.

“That’s going to be a major challenge and so we’re going to really rely on our strategic carrier relationships to secure capacity to make sure that we meet our customers’ demands and construction schedules,” Guzman said.

UNDERSTANDING MILLENNIALS

Staffing can be an issue in-house as well, especially with more millennials moving into international trade. Guzman is learning how to manage this demographic.

“They are getting the job done, but they’re very tech-focused,” he says.

“It’s all about texting and sending an email, and they are learning that there are situations when you have to call the customer.”

What’s important, he adds, is establishing a rapport and creating

that sense of being a trusted advisor. It’s also about making that connection so that trust can be established for the next project on the pipeline.

“I’m for human interaction, face-to-face Frank Guzman and calling the customer when C.H. Robinson there’s a problem, instead of focusing on email,” he says. The solution is all down to training, explaining that it is OK to send an email, but noting that that email will likely need to be followed up with a call.

On the flipside, Guzman underscores the energy that millennials bring to the business of project logistics. “They see things differently, they come up with creative ideas,” he said.

To capitalize on this, C.H. Robinson hosts an innovation program, ISSUE 1 / 2018

THIS SPREAD:

Pipes from Japan being transported via ocean vessel and rail to oil sands in Canada.

CREDIT: C.H. ROBINSON

whereby people send in their ideas to be voted on by the company’s corporate leadership team.

“We’ve had some great, wild ideas out of the box – thinking that actually has turned into policy internally,” he said. But, in the project logistics space, it is still about spreadsheets and having human interactions.

“We have a very robust online tool for cargo tracking and our customers love it, but at the end of the day, it’s still about human interaction,” Guzman said.

The company’s propriety software, Navisphere, analyzes behavior and uses analytic metrics to measure inefficiencies and gaps in its customers’ supply chains.

“That’s really the trend right now,” Guzman says. “When our customers ask how they are going to make money at US$50 per barrel oil, we come in and say: ‘Let us analyze your data. How did you spend? Where are you operating?

Who are the carriers that you’re working with?’ We’re not trying to replace carriers, we’re just trying to qualify them, put them in the right space and allocate the right resources.”

He claims that the savings are impactful, with one customer saving in excess of 20 percent over 18 months of operation after a C.H. Robinson audit explained how to cover exposed inefficiencies and gaps.

POSITIVE OUTLOOK

Generally, Guzman is expecting an uptick in the project cargo sector next year, but there are pockets that may fare less well.

“We keep a close eye on customers’ industries,” he says. “As marketplaces and economies shift, we ensure we are putting the right focus and effort into any particular industry.”

Once deriving much of its business from the oil and gas sector, C.H. Robinson has focused on diversifying away from upstream dependence. Guzman sees this diversification to a broader cargo base as a positive, bringing with it new cargo types outside of the spaces in which it has traditionally worked.

However, the company’s surface transportation division continues to help oil and gas companies improve their supply chains in the upstream space. “Technology’s a big thing when it comes to oil and gas right now,” Guzman said.

Additionally, the group as a whole has invested in the food and beverage industry, allowing the project logistics department to get involved in turnkey projects such as large-scale production facilities.

“We get to participate in those deal teams – that’s one of the luxuries we have in being part of such a vast company like C.H. Robinson,” Guzman

said. While the project cargo logistics department might now be servicing a different sector, Guzman points out that it is still handling “high, wide and heavy” cargoes.

C.H. Robinson is a non-assetbased company, relying on its people, processes and technology to secure business. However, Guzman has noted competitors investing in project logistics assets – a trend, he said, that cannot be ignored.

“We have competitors that are operating vessels. We have competitors that are operating heavy-duty railcars.

We have competitors that own their own self-propelled modular trailers, or SPMTs. We have competitors that are really investing in their engineering.

So, at C.H. Robinson we really have to have an answer to that trend.”

Guzman points out while an asset-based company has to put those assets to work, meaning that its cash is tied to them, a non-asset-based approach allows C.H. Robinson to “stay nimble” so that it can focus on managing its carrier base, rather than having to be dependent on certain assets. BB Carly Fields has reported on the shipping industry for the past 18 years, covering bunkers and broking and much in between.

www.breakbulk.com BREAKBULK MAGAZINE 45

LEGAL SPOTLIGHT

Mauna Kea telescopes on Big Island, Hawaii.

CREDIT: SHUTTERSTOCK

BY GREG BOROSSAY

Reach For The Stars Doing It Right The First (And Only) Time THE SCENE:

The Parties: • A German container shipping line.

• A Hawaiian container shipping line.

• A California-based heavy-haul truck Line.

• NASA and Corning.

• French Government Surveyors.

THE FACTS:

The most expensive lens ever built with the capability at the time to reach deeper into space than any telescope on the globe needed to be safely delivered to the top of Mauna Kea on the Big Island of Hawaii without a scratch.

A joint program funded by the British, French and U.S. through the National Aeronautics and Space Administration had designed and 46 BREAKBULK MAGAZINE www.breakbulk.com

custom-built aspheric mirrors with an 8.5-meter diameter in Corning, New York. The mirrors would serve to form focused images over the largest possible field of view through the telescope lens. The lens had shipped successfully to a facility outside Paris, France, where it had been polished for nearly two years.

After successful loading in a single hold in Greg Borossay a German container shipping Attorney At Law line vessel in Le Havre, France, the lens successfully made the journey to Long Beach, California.

There, given Jones Act regulations, the lens had to transfer to a U.S.-flagged Hawaiian container shipping line for eventual movement to Honolulu, Hawaii. From Honolulu,

the lens was to move by barge to the Big Island and then by air, riding low boy equipment to the top of the mountain.

The lens was protected by a high security case much like a case for holding a contact lens with legs. This custom-designed case was protected by 16 evenly spaced sensors that would sound an alarm at the slightest sign of rough treatment. Accompanying the lens were two French surveyors, Pierre and Rene, who made their job clear to all involved: “Wherever the lens goes, we go!” The British, French and NASA had taken every precaution to insure the safe transportation of the lens because it was not only priceless, but it was also uninsurable.

The lens arrived and discharged safely at the international container terminal utilized by the German shipping line. It waited four days on a heavy-haul truck under the constant supervision of Pierre and Rene. Finally, when the Hawaii-bound vessel arrived, the lens was lifted gently into the empty hold ISSUE 1 / 2018

LESSONS LEARNED:

CREDIT: NOAO/AURA/NSF

of the vessel. Not sensing that the lens case had not yet touched down into the hold, the crane operator let the lens case go, causing a loud boom and setting off two alarms. Thankfully, the stress point was not reached as that would have set off four alarms. In fact, the story of this unusual project cargo ended well, as the lens belonged to the Gemini North Telescope, which has been sending back some of the most amazing photos of deep space to astronomers for nearly 20 years now.

THE CASE LAW:

The above case ended well and represents an example of the most extreme precautionary measures being put in place to insure safe transport for uninsurable pieces of breakbulk cargoes.

Highly specialized breakbulk projects often involve very valuable or priceless cargoes in moves that can scare even the most highly competent global transportation providers and send legal departments within these companies running for the doors. Rather than being overwhelmed or dismissing such moves, self-insured and detail-oriented transportation providers can take calculated risks to handle such cargoes even when the underwriters refuse to insure the cargo. The key is careful planning.

An uninsurable risk is a hazard or condition that has either a high likelihood of loss, or in which the insurer is legally precluded from providing insurance. The top six uninsurable risks are: • Reputational risk.

• Regulatory risk.

• Trade secret risk.

• Political risk.

• Risk of pandemic outbreaks.

• And, in this case, the risk to insure a priceless and irreplaceable item.

In the past, courts have ruled – with only a few exceptions – that a cargo owner may not seek damages from transportation providers for delay, damage, extra charges, fees or other assessments unless gross negligence in cargo handling can be shown. Thus, a careful and prudent transportation provider may consider such moves provided that all reasonable precautions are taken, and proper equipment and expertise is utilized in the conveyance.

Further, case history has established that certain types of conveyance are, per se, uninsurable due to the inherent risk involved in the transportation.

High value and not easily replaceable breakbulk cargos fall into this category, specifically when such cargoes are moved using tows at open sea, tugs in rough waters or ultra-large pieces with multiple transfers between different transportation modes.

When accepting an uninsurable load, loss avoidance is preferable to seeking recovery from transportation providers.

Cargo owners need not spend an inordinate amount of money – as NASA and the manufacturers of the Gemini North telescope lens did. Reasonable loss avoidance is always preferable to litigation, and settlement values will be suppressed by the courts given that insurance providers have already rendered such cargo projects uninsurable prior to any claim.

Transportation providers need to plan carefully for such pieces and build in all necessary costs to ensure that a claim does not result.

Use of proper conveyance equipment is a must and video and/or photographic documentation of each step of the transportation is highly recommended.

Cargo owners need to engage qualified surveyors with intimate knowledge of the proper care and handling of an uninsurable cargo to minimize the risk of loss or damage at each stage in the transportation conveyance. Hiring two French surveyors to stay with the cargo at all times may be a little extreme, but NASA had the right idea.

Revisiting policy restrictions for standard breakbulk cargo moves with the insurance provider post-move may provide a basis for re-evaluation of the uninsurable status of future similar moves thereby reducing the risks to all parties in the future. BB Greg Borossay is an attorney specializing in admiralty and transportation. He recently joined the Port of San Diego as principal, Marine Business Development, and can be contacted on gborossay@gmail.com, +1 949 633 9158.

www.breakbulk.com BREAKBULK MAGAZINE 47

INDEX Breakbulk 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 heavylift 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.

EUROPEAN FREIGHT FORWARDING INDEX The index, based on European forwarders’ actual and expected freight volumes, forecast reduced growth for December and January. Values above 50 on the zero-to-100 scale indicate an increase.

100 90

Actual

Forecast

80 70 60 50 40 30 20 10 0

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 A S O N D J 2013

2014

2015

2016

2017

2018

Source: Danske Market Equities, www.danskebank.dk

48 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 1 / 2018

OIL AND GAS OUTLOOK IN THE UK For a detailed analysis from CEG Finance and Strategy, see page 13.

OIL PRICES ARE PROJECTED TO FLATLINE 120 100 Actual

Forecast

US$/BBL

80 60 40 20 0 2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Source: CEG Finance & Strategy

UK EXPLORATION AND APPRAISAL DRILLING 2,000

NUMBER OF WELLS

Exploration wells

Appraisal wells

E&A Expenditure

60

1,600 1,200

40 800 20

400

NUMBER OF WELLS

80

0

0 2010

2011

2012

2013

2014

2015

2016

2017

2018

Source: CEG Finance & Strategy

UK OIL PRODUCTION RECOVERY 1.4 1.3

MILLION BBL/D

1.2 1.1 1.0 0.9 0.8 0.7 0.6 2010

2011

2012

2013

2014

2015

2016

Source: CEG Finance & Strategy

www.breakbulk.com BREAKBULK MAGAZINE 49

BREAKBULK INDEX

OIL AND GAS OUTLOOK IN THE UK (CONTINUED) NORTH SEA OPEX DECLINE

STRONG INTEREST IN UK LICENSING

35

250 US$/boe

£/boe

30

200

25

150

20 100 15 50

10

0

5

26th*

27th

2010/11

0 2013

2014

2015

Source: CEG Finance & Strategy

2016

2017

28th* 2014/15

29th*

30th

2016

2017

* Licensing Round based on two application sessions. The data reports the sum of the applications submitted in the two sessions.

Source: CEG Finance & Strategy

the world’s largest event for the project cargo and breakbulk industry

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2012

For more than a decade, Breakbulk Europe has served as the networking hub for industry professionals who do business in Europe. Here, leading energy and infrastructure companies, EPCs and industrial manufacturers source their suppliers, resulting in more robust supply chains.

Exhibitors include cargo owners, ocean carriers, freight forwarders, ports/terminals, heavy haulers, equipment companies and more. Breakbulk Europe offers exclusive industry intelligence through its conference programming, hands-on workshops for professional training and a special program to introduce today’s university students – our next generation of leaders – to the industry.

JOIN US: 29-31 May 2018 Messe Bremen • Bremen, Germany

REGISTER NOW: breakbulk.com/bbeu2018

ISSUE 1 / 2018

TIME CHARTER RATES TOEPFER TRANSPORT MULTIPURPOSE SHIPPING TIME CHARTER INDEX

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

TIME CHARTER RATE PER DAY

$7,250 $7,000 $6,750 $6,500 $6,250 $6,000 $5,750

Dec 2016

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2017

Source: Toepfer Transport, www.toepfer-transport.com

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www.breakbulk.com BREAKBULK MAGAZINE 51

PHOTO CONTEST

TOWN & COUNTRY PHOTO CONTEST WINNER: J. Supor LOCATION: Lower Westside Manhattan, New York, NY YEAR: 2016 DESCRIPTION: Segments of a US$150 million statue being built in Hudson Yards. J Supor unloaded them from a barge on the Hudson River onto their trailers and transported them to a staging ground to be stored until ready for assembly. The 15-story statue weighs 600 tonnes.

EDITOR’S PICK: Transport Chainé Inc. LOCATION: Havre St-Pierre, Québec, Canada YEAR: 2017 DESCRIPTION: Two 80-tonne water inlet sections with a 6 meter diameter headed to the Romaine-4 Generating Station 150 kilometers north of Havre St-Pierre.

52 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 1 / 2018

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N THER SOU

OVES DM WIN PE’S EURO

L STIL CTS OJE n PR

ER POW YDRO n H

RY GLO THE AND

/ 2017

E3 SUPPLY CHAIN ISSU SECURITY n APPALACHIAN PETROCHEMICALS n BOOSTER FOR PROJECT CARGO

ISSUE 4 / 2017

I N D UST RY DIRECTORY

2018

Breakbulk Magazine Print Edition

OFF ING TAK

ND S N DE A TRA ULATIO B I r e R T m Yet Anobthuff o Re ulis Pop ct Carg je Pro

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Containers Shouldn’t Dominate Commodity Discussions

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