Breakbulk Magazine – Issue 5 2016

IRAQ’S WINDING PATH n LEBANON HOSTAGE TO POLITICS n BECHTEL’S PREDICTABLE INNOVATION

ISSUE 5 / 2016

TIPPING POINT Domino Effect of a Coll apsed Carrier

contents

32

16

EMERGING MARKETS

ONE STEP AT A TIME Iraq’s Path to Reinvigoration is Winding

22

EMERGING MARKETS

HOSTAGE TO POLITICS Lebanon’s Hydrocarbon Bonanza Just Out of Reach

26

LOGISTICS PERSPECTIVE

PREDICTABLY INNOVATIVE

Bechtel Aims to Increase Certainty In Project Logistics

08 TIPPING POINT

Domino Effect of a Collapsed Carrier

32

16

52

CARGO LENS

PREPARE FOR LIFTOFF Space Offers New Frontier for Project Business

38

PROFILE

A SHREWD INVESTMENT

How Peter Thorsoe Jensen Mapped Out Martin Bencher’s Success

42

38

OCEAN SERVICES

FLEETING SUCCESS

Ranking Leading Industry Carriers

06 Editorial n 48 Jebel Ali Port Soldiers On n 52 India Eases Cabotage Rules n 54 Managing Digital Disruption n 55 Dealing With Increasing Nationalism n 56 Breakbulk Americas 2016 Recap n 68 Breakbulk Index n 72 Photo Contest Winner n 74 The Last Word On the Cover: Source images via Shutterstock / photo illustration by Catherine Dorrough 4 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 5 / 2016

Project & Heavy Lift Liner Services

editorial

POLLYANNA ’20

T

he November U.S. election crystallizes a pandemic of xenophobia and anti-trade sentiment, creating scapegoats for economic and political woes, rather than the intellectual wherewithal to attack geopolitical crises.

At the very time that world trade needs a post-recession push from open – and, yes, fair – trade, borders are slamming shut. The biggest investment is locally made deadbolts.

It’s oversimplification, but certainly not naïve, to say that free trade is the solution to many of our problems, particularly in the project cargo industry. But this Gary Burrows requires honest relationships with those with whom you may have little else in common.

It sounds easier to “level the playing field” by placing restrictions on potential customers, or removing one’s self from a trade bloc, figuring you’ll thrive isolated from the herd. But this doesn’t work in the Serengeti, and it doesn’t work in the modern, interconnected world, either.

Forget borders – political divisiveness and misguided anti-trade sentiment gets in the way of our own progress. As was presented at Breakbulk Americas, the U.S. Export-Import Bank, a highly successful export credit agency, is handcuffed by party politics, with US$20 billion in project cargo business hung up in the pipeline by political procedure – the inability to approve an Ex-Im Board member – because the 81-year-old agency is seen by Tea Partiers as welfare for the GEs, Caterpillars and Boeings. Never mind that they create knock-on employment for thousands of American enterprises.

Of course the U.S. hasn’t cornered the market on anti-trade xenophobia.

6 BREAKBULK MAGAZINE www.breakbulk.com

Evidence the surprise of Brexit to the previous familiarity of “one Europe.” This was in part a response to the influx of foreign refugees and minorities and growing fears that multinational trade agreements don’t fully benefit local interests.

In a thought piece, Mark Willis points to “a ‘new normal’ of structurally slower global trade growth” over the medium term (“Trade Pains,” page 55).

The world’s markets are constantly in a state of flux, but tireless communication and negotiation is what keeps markets open and trade flowing, and allows countries to recover from destruction and chaos, as in these examples, covered in Breakbulk: • Once a world pariah, Iraq is now a burgeoning bounty for engineering, procurement and construction companies. As noted in this issue (“One Step at a Time,” page 16), the Iraqi government and the private sector are expected to spend about US$1 trillion over the next 10 years on infrastructure, housing and schools. This activity comes despite low oil prices impacting exports for Iraq, which has the world’s second-largest reserves behind Saudi Arabia.

• Located in a brittle region, with a long, volatile political history of its own, Lebanon remains optimistic about tapping into its energy reserves, as Willis reports (“Hostage to Politics,” page 22) • In Issue 4, we highlighted how the lifting of sanctions against Iran has opened the Middle East’s second-largest economy to EPCs and a diversified project market (“Trading Freedom,” Breakbulk Issue 4, page 52).

Poisoning your citizenry with jingoistic rants is self-fulfilling prophecy, as the resulting isolation damages a country far faster than any misperceived trade slights. As Pollyanna says in the timeless children’s book, “When you look for the bad, expecting it, you will get it.”

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 VL Srinivasan Criselda Diala-McBride Mark Willis Lori Musser

BREAKBULK EDITORIAL BOARD John Amos Amos Logistics

Ed Bastian

BBC Chartering

Murray Cooper

McDemott International Inc.

Etienne de Vel Fednav Belgium

Dennis Devlin DB Schenker

John Hark

Bertling Project Logistics

Dennis Mottola Bechtel Corp.

William Moyersoen

ArcelorMittal Antwerp Logistics

Albert Pegg

Antwerp Port Authority

Dirk Visser

Dynamar D.V.

Grant Wattman

Agility Project Logistics

MANAGING DIRECTOR Alli McEntyre / +353 21 477 3808 amcentyre@breakbulk.com ACCOUNT MANAGER Robert Janusauskas / +1 281 763 7231 robert@breakbulk.com SUBSCRIPTIONS To subscribe, email bb.breakbulk@adsg.info, or call from inside the US +1 855 613 8186 between 8:00 am and 5:00 pm CST. A publication of ITE Group plc Transport & Logistics business 105 Salisbury Road London NW6 6RG, UK.

ISSUE 5 / 2016

cover story

TIPPING POINT

Source Images via Shutterstock; Photo Illustration by Catherine Dorrough

BY CARLY FIELDS

BY C A R L Y FIELDS

DOMINO EF OF A COFECT L L A P SE D CA

T

his year may go down as the year that the downward spiral of the shipping industry was reversed, when it reached the floor and got back up from its knees, joints creaking from lack of use.

The catalyst? The collapse of the world’s seventh-largest container shipping line, Korea’s Hanjin Shipping, expected to be the first high-profile casualty of prolonged depressed freight rates.

While as a pure container carrier, Hanjin had no business on the project cargo side, its downfall was symbolic as it rubbished conventional wisdom that no large state-run ship operator would be allowed to fail. It also confirmed just how bad a state shipping markets were in.

As the tower started to topple, the multipurpose, or MPP, sector was not immune. SAL Heavy Lift was undergoing “drastic structural reform” according to owner “K” Line, and family-owned operators Thorco and United Heavy Lift initiated a joint venture, Thorco Projects, to spread the burden of weaker markets.

The fall of the first victim has been a long, uncomfortable time coming. Freight rates at record lows have plagued the MPP market, and

R R IER

attempts to minimize exposure through cost cutting and “sharing of synergies” have been all but exhausted. MPP ship operators have put freight rates down as much as 50 percent on last year in some particularly hard-hit regions.

Freight forwarders and engineering, procurement and construction companies that rejoiced at sliding MPP freight rates at the beginning, are now waking up to the fact that shipping rates below breakeven in many cases are not healthy for the safety or the longer term prospects of the industry.

Ulrich Ulrichs, CEO of Rickmers-Linie, said the shipping line now considers freight rates to be at an historically low level. Compared to the levels of 2011 and 2006, which were roughly similar, freight rates are now 30 percent to 40 percent lower.

“Volume-wise some areas are stronger than others, but freight rates have dropped to the same extent globally. There are no specific regions where we currently can identify sustained, predictable and balanced growth,” Ulrichs said.

FLOOD OF FINANCING

The journey to this point has been characterized by a steady stream of restructured finance that has allowed the shipping sector to be propped up in spite of weaker demand. Kyri-

www.breakbulk.com BREAKBULK MAGAZINE 9

cover story

MPP VALUES ALIGNED | 7,800 DWT MPP

12,800 DWT MPP (HEAVY-LIFT**)

35*

35*

30

30

2007

25

25

2016

20

20

15

15

10

10

5

5

0

0

5

10

15

TAKING CARE OF BOTTOM LINE

Newbuild and secondhand MPP prices flatten.

0

20

Age of Ship (years)

2011

0

5

10

15

20

Age of Ship (years)

*Value in US$ millions / **Heavy-lift has more than 80 tons of gearing capacity / Source: VesselsValue

acos Panayides, AAL managing director, explained how each new tranche of refinancing for distressed vessels beats down traditional operators.

“Over Ulrich Ulrichs the last five Rickmers-Linie to six years the market has witnessed a number of new transactions, either in the form of finance restructuring, or new sale transactions for a single vessel or a fleet of sister vessels. For every new transaction, the buyer, whether an existing ship owner or new entrant, achieves one common goal: a lower breakeven cost level made up of operating expenses plus depreciation plus financing cost.

“Consequently, these new transactions bring a new era in pricing strategy as lower revenues can be accepted for those vessels. Other stakeholders in the same sector with more expensive financing deals and higher asset values on their books are left in dire straits.”

Panayides continued that ship asset values now lean on a cashflow

formula – based on the expected future returns of the vessel – rather than the traditional direct depreciation formula – based on the construction price less the scrap value and Kyriacos divided by the Panayides number of years AAL of expected trade.

“For example, a vessel that was built five years ago at, say, US$40 million had a breakeven level of, say, US$15,000 per day with the owners reluctant to accept anything less than that. Two years later, that same vessel is sold at US$28 million, which brings the breakeven level to US$12,000 per day. Then a year or two later, the market sinks to the lows that we are experiencing today, driving that same ship to default, hence a new transaction takes place at an even lower breakeven level.

“The value of that ship is now US$15 million – you can do the math on the impact. Those that failed to strike or have not yet struck a new refinancing deal will end up with huge losses and eventually default.”

10 BREAKBULK MAGAZINE www.breakbulk.com

There is much to be considered when pricing project cargo moves, not least that cheap freight quotes might hide a multitude of sins.

In pointing up common mistakes, Daniel Cser, agency owner at ICAT Logistics DTW, said that finding a company online with lower freight costs than any other shipper may have made your bid more competitive, but a lack of agents on the ground and insufficient documentation could lead to equipment being warehoused for more than a month while the problems are ironed out.

He added that the time lag between an order for big equipment being placed and the actual delivery date can be many months. In that time, fuel prices and freight rates could have risen leaving the forwarder significantly out of pocket.

Experience also counts for a great deal. If a shipping partner has little experience of moving goods out of a country, they could be held up by customs and sourcing of adequate ground transportation.

“Any international shipment can be tricky, but when you’re moving oversize, heavy machinery from one part of the world to another, the more your shipper is aware of the design of the machine, the production schedule and how it is proceeding and the timetable you need to follow, the more they can ensure that you stick to budget, make a profit and meet your clients’ expectations,” said Cser. “Disassembling a machine for packaging and reassembling it at the port of destination may decrease transportation costs significantly, for example.

Working with a network of trusted partners overseas can eliminate delays and extra charges.”

ISSUE 5 / 2016

The RTM Difference:

When Cargo Requirements Can’t Be Contained

The individualized nature and unusual complexity of Break Bulk cargo requires special expertise. RTM has been a leader in Break Bulk shipping and logistics for over thirty years for the shipping of:

• Cement Drums • Compressors • Carriers • Drills • Engines

• Generators • Oil Rigs • Tanks/TBMs • Transformers • Yachts/Boats

RTM combines in-depth knowledge and expertise with an ongoing commitment to friendly personalized service. For all your trans-ocean Break Bulk and logistics needs, Look to the lighthouse.

SM

SM

RT MLINES. co m • 800. 847. SH IP © 2016 RTM LINES. ALL RIGHTS RESERVED.

BREAKBULK

FCL

HIGH & HEAVY

MILITARY

PROJECT

RO/RO

cover story

MONEY TALKS

As a result of the weak operating market, problem loans are far more common than they were five to 10 years ago, with non-payment of principal and interest, breach of financial covenants and breach of loan-to-value clauses all topping the list of issues.

Jonathan Silver, a partner in the banking and finance team of Norton Rose Fulbright Hong Kong and head of shipping for the North Asia region, said there were still options for multipurpose ship owners facing loan troubles.

“We are seeing more problem loans, but we also see far more restructuring opportunities. Prudent ship owners with short-term cash liquidity problems – caused by the downturn in the market

rather than anything else – may still have recourse to alternative financing, such as sale-and-leaseback lease finance structures, private equity investment, change of loan repayment profiles, and so on. It’s not all doom and gloom,” Silver said.

Ship owners may be able to amend existing facilities to permit or waive short-term breaches and then reschedule repayment of existing debt to help manage cash flow and liquidity. They may enter into joint venture partnerships with experienced private equity players for fresh capital injection. They may entirely restructure their debt, giving them time to regroup, consolidate and trade out of a difficult spot.

Lease finance, where a ship is acquired from an owner by a lessor then

leased back for a set term, is more popular than ever before – particularly with Chinese financial lessor counterparties, all of whom are experienced and can provide partnership opportunities and financial support.

Jonathan Silver “The last Norton Rose Fulbright thing a financier Hong Kong wants to see is a struggling ship owner collapse,” Silver said. “Enforcement of security and the arrest of ships by financiers is costly, both labor and

“THE LAST THING A FINANCIER WANTS TO SEE

IS A STRUGGLING SHIP OWNER COLLAPSE.”

SALARY ROBUSTNESS Interestingly, the project cargorelated jobs market managed to avoid being tainted too much by the depression until 2015.

“It’s only last year and this [year] that salaries have been affected,” explained Stine Martinussen, manager of commercial shipping and corporate services at Faststream. “Up until last year, if someone resigned without hav-

ing another job to go to, they wouldn’t have taken a pay cut.

“That said, we are seeing a very distinct trend in the market at the moment, as more and more people are given redundancies and are active job seekers. Especially in the freight forwarding space, we see a lot of candidates competing for the same jobs.”

She pointed up the example of an appointment of a supply base manager in Asia three years ago.

Back then, the salary budget was US$7,000-9,000 per month plus home

FALLING SALARY EXPECTATIONS | TITLE

– Jonathan Silver

flights, and Faststream struggled to find people within that budget. “I am now working on the same role in the same location and the budget is US$4,000-US$6,000 and we have candidates lining up for the role.”

There are, she said, still jobs in the project cargo sector, and Faststream is still looking for chartering managers and project managers. However, clients are actively looking for commercial people over other roles, so that once the market picks up they have the right sales people in place to come out the other side stronger.

Salaries have succumbed to the weaker market.

2012 SALARY / MONTH

Project Manager (Project Forwarding) Business Development Manager (Project Forwarding) Regional Head of Projects (Project Forwarding) Chartering Manager (BB/Heavy-lift Carrier) 3-5 years experience Operations Manager (BB/Heavy-lift Carrier) Team Manager with more than 10 years experience Chartering Director (BB/Heavy-lift Carrier) Team Manager with more than 10 years experience

US$5-7,000 US$4-7,000 US$20-30,000 US$6-9,000 US$9-14,000 US$17-22,000

2016 SALARY / MONTH US$4-6,000 US$3-6,000 US$15,000-18,000 US$5-7,000 US$8-12,000 US$15-20,000

Notes: The lower end of the ranges are for candidates that are unemployed and are prepared to take a cut compared to their previous salary to secure a job.

The top end is candidates that are gainfully employed, that are headhunted for new positions. Ranges also differ depending on location: they are higher in Asia and U.S, and lower in Europe, where schooling and healthcare is free. / Source: Faststream 12 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 5 / 2016

d ou Pr LN

GP M be em ce in rS 20 09

Es 4 00

2 t.

Membership Available in Selective Markets!

Application: info@gpln.net / www.gpln.net

cover story

time intensive, and may lead to poor levels of debt recovery, particularly in a depressed second-hand vessel saleand-purchase market. A prudent, well informed and experienced ship financier will take steps to support a struggling ship owner, more so where there was a long-term relationship between the bank and its customer before the problems arose. We tend to see a complete collapse such as Hanjin as a last resort, the ‘nuclear’ option.

“Times have been difficult for everybody, not just for the ship owners, but also their investors, bankers, lessors, manag-

ers, charterers and the shipping lawyers working for them all.”

REDUCING THE GAP

Asset values have taken a considerable hit, with secondhand multipurpose ship values now nearly on a par with newbuild prices, and both are considerably weaker than just a few years back.

Commenting on the near meeting of newbuild versus secondhand asset values, Will Bennett, VesselsValue senior analyst, said: “The flattening is down to the fact that obviously newbuildings aren’t worth the high values that they

were worth in 2007 and that modern tonnage of under 10 years is holding its value – although not at the same levels as during 2007, hence it appears that the values have flattened.”

Toepfer Transport counted about 80 western-specified multipurpose vessels of between 5,000 and 32,000 deadweight tons for sale during the last couple of months, revealing the extent of the glut. Nicolas Breiding of the company’s research team said: “Many vessels are on the market at reduced prices while the number of buyers has not increased, which explains the falling price expecta-

"IT REMAINS TO BE SEEN WHETHER REMAINING

PLAYERS IN THE MARKET ACT THOUGHTFULLY."

– Ulrich Ulrichs

Blade lifter Specialist for Green Power Project Transports

FIRST CLASS IN PROJECTS

14 BREAKBULK MAGAZINE www.breakbulk.com

www.dakoworld.com

40479 Düsseldorf | Germany | +49 (0)211 5502640

ISSUE 5 / 2016

tions of buyers. Buyers’ expectations of falling prices are supported by weakening charter rates seen over more than the past six months, and it remains to be seen whether we have already reached the lowest point in this development.

“As a glimmer of hope, we are witnessing fair to relatively high prices being under discussion for well-specified and well-maintained vessels which fit into trades with special requirements, e.g. ice-class, ro-ro ramps and/ or heavy-lift cranes,” Breiding said.

Whether Hanjin’s demise will lead the MPP market to that other side remains to be seen. If that happens, carriers need to keep a weather eye on capacity levels, said Ulrichs. “It remains to be seen whether remaining players in the market act thoughtfully and do their necessary part to keep capacity on a sound level. To kick off a new round

of huge orders for even larger vessels as soon the market picks up would certainly be the wrong signal. An extensive scrapping program is what is required in the container and bulk sectors to improve the situation of the global shipping industry, which would have a positive effect also on the MPP sector.”

In the meantime, there is little that MPP ship owners can do to better compete on costs. Mergers, joint ventures, consolidation … these moves only serve to minimize the pain. The only real action, concluded Panayides, that will help now is to send more ships to the scrapyard. BB Carly Fields has reported on the shipping industry for the past 16 years, covering bunkers and brokering and much in between.

THE DECLINE CONTINUES Time charter rates head further south.

JAN. ‘16 FEB. ‘16 MAR. ‘16 APR. ‘16 MAY ‘16 JUNE ‘16 JULY ‘16 AUG. ‘16

5.8

6.0

6.2

6.4

6.6

6.8

7.0

Time Charter Rate Per Day ($)

7.2

Note: The Toepfer Transport Index is based on a 12,500 deadweight ton MPP/HL “F-Type” vessel for a 6-12 month time charter and represents the monthly assessment from operators, owners and brokers.

Source: Toepfer Transport

SHIP BEYOND THE RAILS. FROM RAIL TO SEA TO ROAD, WE DO IT ALL.

The Alaska Railroad does more than you might expect. We ship freight to and from anywhere in North America. Even places without rail access. And we handle all the logistics along the way. So whatever it takes to get it there - barge, train, truck - you only need to deal with one point of contact and one invoice.

So, next time you need to ship, sit back, relax and let us handle all the weight.

Call for a free quote today: 800.321.6518 | alaskarailroad/freight

www.breakbulk.com BREAKBULK MAGAZINE 15

emerging markets

A crude stabilizer column weighing 30 tons is shipped from the U.A.E. to Badra oil field site in Iraq.

Credit: Fleetline Shipping Services

ONE STEP AT A TIME Iraq’s Path To Reinvigoration Is Winding

BY VL SRINIVASAN

W

ith a military occupation finally over and a democratically elected government in place, Iraq is limping back to normalcy and encouraging agencies like the World Bank and the International Monetary Fund to come forward with finance for mega projects in the country.

As Iraq turns to rebuilding its country after years of strife, the gov16 BREAKBULK MAGAZINE www.breakbulk.com

ernment and the private sector is expected to spend about US$1 trillion over the next 10 years in all sectors, including infrastructure, housing, hotels and schools, making the country a happy hunting ground for engineering, procurement and construction companies.

This, in turn, will generate tremendous business opportunities for project cargo movers in the region and beyond, as Iraq sources equipment for new projects and upgrades for machinery in existing projects.

The World Bank has already entered into an agreement for a US$375 million finance package for an Iraqi-owned power company, while the International Monetary Fund, or IMF, has cleared a US$5.3 billion bailout package. These projects, spread across the country, require large-scale building materials and construction expertise.

EPC ACTIVITIES PICK UP

Iraq holds 145 billion barrels of recoverable oil, the world’s secondlargest reserves after Saudi Arabia, but is exporting less than 5 million barrels per day. According to the International Energy Agency, Iraq also has an estimated 112 trillion cubic meters of natural gas reserves, making it the world’s 11thISSUE 5 / 2016

OUR

CONNECTIONS RUN DEEP In New Orleans, we’re known for letting the good times roll.

But to our customers, our capabilities are as world-class as our food and music.

The Port of New Orleans is America’s most intermodal port.

We connect you to major inland markets and Canada via 14,500 miles of waterways, all six Class-I railways, and a growing number of ocean carrier services, and barge and truck lines. The Clarence Henry Truckway, a dedicated two-lane roadway on Port property, makes fast transit times even faster.

The Port also offers on-dock rail and ship-to-barge services. You can count on use to exceed your cargo handling expectations — and you’ll love our Big Easy hospitality.

portno.com

emerging markets

largest. But recovery infrastructure is outdated and extracting those reserves will take time and money.

Eric Clark, executive vice president for business operations of North America West Asia Holdings, or NAWAH, said that despite low oil prices, increasing EPC activity in Iraq clearly reflects potential. NAWAH handles port operations at Basra, working with Iraqi partners to help re-establish Iraq as a leader in global trade and commerce.

“The demand for the EPC market is on the rise with a spurt in the number of public announcements regarding the revitalization of Iraq’s oil and gas development and with formerly stalled projects coming back online,” Clark said.

Oil companies – having had old accounts settled and arrears cleared by the government – are looking to re-engage EPCs. “As Basra’s port operator and in close proximity to the major oil fields in southern Iraq, we have had an increasing number of queries as companies prepare for an influx of cargo to be required as part this reinvigorated development and production,” Clark added. Cautious optimism is evident with global oil majors returning to the country.

Industry is focused on Iraq’s real and perceived improvements with regards to its financial ability to revitalize stalled projects, and its ability to launch new ones. But it is also closely watching security and political circumstances within the country.

“All these competing dynamics, of course, are juxtaposed to the global commodity markets’ sustained downturn.

Given the drastic reductions in budgets and staff within companies and EPCs in early 2016, it will take some time to return to the US$100-per-barrel dynamics that international players enjoyed in Iraq merely two years ago,” Clark said.

Alastair Caithness, founder and CEO of Ziyen, which offers business intelligence, holds a different view.

IRAQ KEY FACTS

ENERGY PRODUCTION Exported an average of

3.88 million

barrels a day in January 2016 more than

US$90 billion in projects in the gas, oil, and power sectors

$ ECONOMIC IMPACT

US$358 billion

in active infrastructure projects Middle East Gulf’s

third-largest project market

Source: Meed Projects

“Iraq’s EPC work has slowed up due to the low oil price, and as a result new projects have been put on hold. It is not only affecting Iraq, but also the rest of the Gulf region. The continuing fight with the Islamic State in northern Iraq is proving to be very expensive for the government, and that coupled with the low oil price is meaning any new projects have to be 100 percent funded by outside operators,” he said.

There’s also a geographical split for project cargo opportunities. According to Caithness, while the situation in northern Iraq is volatile due to unabated violence, activity in southern and eastern Iraq remains buoyant and

“Iraq’s EPC work has slowed up due to the low oil price, and as a result new projects have been put on hold.” – Alastair Caithness 18 BREAKBULK MAGAZINE www.breakbulk.com

oil exports from there increased in August compared with July this year.

Oil exports from southern ports have risen to more than 3.23 million barrels per day, generating revenues of nearly US$4 billion.

The increase came from fields in southern Iraq with West Qurna 1 field, developed by ExxonMobil, registering record output. Russian operator Gazprom has also said its subsidiary Gazprom Neft Badra has produced 3 million tons of oil over two years from its Badra Oil Field in eastern Iraq.

But the specter of low oil prices continues to cause concern for Iraq, which has to engage international oil companies, and needs an oil price of more than US$60 per barrel to be profitable. And despite a return of comparative political stability, major players remain in a holding pattern until the pendulum swings back to a more comfortable, predictable position on economics and security.

STARTING BLOCK

EPCs aren’t necessarily setting up offices in Iraq, but they have started tying up with local companies to move out-of-gauge cargo to sites across Iraq.

Peter K. Mathew, managing director of Dubai-based Fleet Line Shipping Services, said that with scores of new infrastructure projects in the pipeline, cargo movers can expect a lot of business in 2017.

While many government-funded Peter K. Mathew projects are being Fleet Line Shipping held back, delayed Services or scrapped due to low oil prices, projects such as PetroChina’s Halfaya oil field is going on without any issues. PetroChina and partners Total, Petronas and South Oil Co. are funding the project directly in return for a per barrel remuneration fee above the minimum level of production.

“I feel that there will be many changes in the coming six months, as the government has realized that there is no point in waiting for an upward ISSUE 5 / 2016

!NYK BULK & PROJECTS CARRIERS LTD is the world’s leading ocean carrier of project, heavy lift, bulk cargo and steel products.

Through our advanced maritime know-how, technology and ! !experience, we provide our customers with high quality services around the world.

http://nbpc.co.jp/home.html

emerging markets

LONG DRAWN-OUT BATTLE With an office in Iraq, Kuwaitbased Sham Logistics Services is acutely aware of the difficulties of operating in Iraq.

Capt. Shadi Salama, managing director and partner of the company, described the uphill battle Sham faced in moving project cargo to Iraq between 1990 and 2003 when the Kuwait-Iraq borders were closed. All shipments were moved via Kuwaiti ports and then re-exported to Iraq on a transit basis.

However, the challenges did not lessen once the borders were reopened in 2004. Sham then faced technical problems with height restrictions of five meters on roads and bridges in Kuwait, forcing Sham to flesh out alternate plans for every shipment to avoid obstructions until it reached the Kuwait-Iraq border.

After crossing the border, further challenges included getting clearances from Iraqi Customs officials and moving the cargo on to project sites on poor road conditions that were hampered by a lack of security, Salama said.

Even after Umm Qasr port restarted operations, there was no relief for project cargo companies as they faced continued problems in getting clearances from Customs, and had to wait long periods before they were able to deliver cargoes to project sites across the country.

Despite the challenges, movements of over-dimensional cargo to Iraq have been very strong since 2004 in tandem with growth in the world economy as the country sought to rebuild. “But the global economic slowdown, coupled with the unstable political situation around the same time, had its effect on the ongoing projects in Iraq and reduced government expenditure has reduced the import of oversized cargo,” Salama said.

20 BREAKBULK MAGAZINE www.breakbulk.com

revision in oil prices for resuming the halted oil-related projects. It is reported that the government has identified funding agencies for these projects and this is good news for all stakeholders, especially project cargo forwarders,” he said.

However, moving project cargo within Iraq has its own set of challenges. Getting duty exemption and customs clearance are just two of them.

Since the process involves multiple government departments, obtaining the required permissions on time can be difficult, yet it is important to avoid unnecessary storage charges. A lack of suitable and ready equipment could also be a stumbling block.

“When it comes to heavy-lift, careful planning is required to mobilize heavylift equipment and make it available for handling materials such as cranes and modules. But there are not many of them easily available,” Mathew said.

Additionally, Umm Qasr is the gateway port for receiving project and heavy-lift cargoes, yet it is hampered by

shallow draft and inadequate shore equipment. Also, breakbulk cargo has to be discharged on direct Credit: Fleetline delivery basis and Shipping Services if permissions are not in place, it has to be moved to a temporary storage area resulting in double handling.

“Further, most of the projects sites are located in remote areas and the freight has to travel through mud roads and uneven surfaces. Good local knowledge on many aspects is essential to overcome civil unrest and challenges as well,” Mathew added. BB A pressure vessel weighing 110 tons is transported from India to a site at West Qurna at Iraq.

V L Srinivasan is a senior journalist based in Hyderabad, India, covering finance, infrastructure, energy, shipping, transportation, IT, environment and political and regional developments in India and the Gulf Cooperation Council region.

“Good local knowledge on many aspects is essential to overcome civil unrest.” – Peter Mathew ISSUE 5 / 2016

20,000 feet of docking space HOUSTON CITY DOCKS 8–32 • Best choice for direct discharge or loading of over-dimensional cargo • Strategically located in the U.S. Gulf Coast • Direct rail access and easy interstate highway access • Worldwide coverage via all major carriers • Total of 52 docks in all Port of Houston Authority general cargo facilities

Port of Houston Authority America’s Project Cargo Gateway

Check out our all-water services at

www.portof houston.com/map

| 713.670.2400

emerging markets

HOSTAGE TO POLITICS Lebanon’s Hydrocarbon Bonanza Just Out of Reach

BY MARK WILLIS

F

ollowing the precipitous collapse in global energy markets over the last three years, an increasing volume of high cost hydrocarbon exploration projects once considered economically viable have been scaled down, put on hold, or canceled altogether.

Exploration projects requiring a breakeven point in excess of current oil and gas prices that have already succumbed to cost cutting among international oil companies include the Canadian oil sands, offshore drilling in the North Sea and Gulf of Mexico, and development of deep sea hydrocarbon reserves in the Arctic and West Africa.

While depressed oil and gas markets have continued to defy expectations of a likely rebound over the last 12 months, a number of exploration projects situated onshore or in relatively easy to access shallow waters remain scheduled to come on stream over the coming years.

Given the extent of infrastructure development traditionally associated with the initial upstream phase of hydrocarbon exploration, and subsequent provision of midstream services, these projects present a range of opportunities for the project cargo community, as well as other operators within the global energy sector.

Among the global regions so far largely unaffected by cost cutting and distressed energy markets is the East Mediterranean, with national governments and international oil companies still optimistic about the prospects for tapping into offshore hydrocarbon reserves contained within the Levant Basin, which falls within maritime 22 BREAKBULK MAGAZINE www.breakbulk.com

territories controlled by Israel, Turkey, Egypt, Cyprus and Lebanon.

While a relatively small number of drilling projects in the region have taken place so far, with some success, the exact extent of hydrocarbon reserves remains unknown. However, a 2010 study from the U.S. Geological Survey estimated the Levant Basin has mean probable undiscovered natural gas reserves of 122 trillion cubic feet and mean probable undiscovered oil reserves of 1.7 billion barrels.

As yet largely untapped, the reserves therefore represent extraordinary potential for national governments in one of the world’s poorest regions, and underscore the considerable interest from some of the world’s largest oil and gas exploration firms.

The most significant progress towards eventual large-scale drilling and production has so far taken place within Israeli, Turkish and Cypriot waters, reflecting their relative political stability and reliable business climates within a notoriously volatile and unpredictable region.

MOVE INTO LEBANON

Recent months have also witnessed a more concerted political drive in Lebanon to exploit the country’s wholesale offshore natural gas deposits, raising

hopes and expectations that initial exploratory drilling may take place over the next 12 months.

While a consensus of analysts point to high potential for international oil companies, no official figures for the size of Lebanon’s hydrocarbon deposits are available.

“At this stage, the presence of these resources in commercial quantities is still hypothetical. No wells have been drilled offshore, and in the absence of exploration, these resources cannot be confirmed,” said Mona Sukkarieh, co-founder of Middle East Strategic Perspectives, a political risk consultancy.

However, credible analysis has estimated Lebanese waters may hold up to 80 trillion cubic feet of gas, and an additional 865 million barrels of oil, representing a source of great potential for domestic economic development, international oil companies, and project cargo operators.

Despite the absence of drilling, the government has made concerted efforts to gauge the extent of available recoverable reserves, with geological and geophysical service companies having performed wholesale seismic surveys covering the entirety of offshore waters over recent years.

According to Wissam Zahabi, chairman of the Lebanese Petroleum Administration, the official regulatory body in charge of managing the country’s petroleum sector, this process will pave the way for eventual drilling and gas production.

“The interpretation of 2D [two-dimensional] and 3D [threedimensional] geophysical data shows well-defined structural and stratigraphic traps regarded as prospective, particularly for natural gas,” he said.

“Once drilling activities start, resources that are accessible to exploration

OFFSHORE AND ONSHORE GEOPHYSICAL SURVEYS 2D seismic survey 2D seismic survey acquired by Geco-Prakla 2D seismic survey acquired by Spectrum 2D seismic survey acquired by PGS 3D seismic survey acquired by Spectrum 3D seismic survey acquired by PGS airborne geophysical survey acquired by NEOS

Source: Lebanese Petroleum Administration ISSUE 5 / 2016

emerging markets

will be identified. Further studies will then assess technically and economically recoverable reserves,” added Zahabi.

POTHOLES IN THE ROAD

Delays and setbacks in recent years have blighted efforts to develop Lebanon’s nascent energy sector, largely reflecting an amplification of the type of political instability that has periodically characterized the small Mediterranean country.

The return of factionalism among the country’s largest political groupings has prevented the election by parliament of a new president since 2014, and also the introduction by cabinet of two crucial legislative decrees relating to the delineation of 10 offshore blocks and composition of awarded contracts that are required to advance oil and gas exploration.

Political priorities have understandably also shifted towards managing the unprecedented wave of displaced refugees into

Lebanon from neighboring war torn Syria.

“Lebanon is suffering from the political vacuum caused by the absence of a president. The security situation created in the aftermath of the Syrian Civil War has also caused severe disturbances.

Lebanon’s oil and gas efforts, while of extreme importance, have been put on hold,” said Karen Ayat, co-founder of the Lebanese Oil and Gas Initiative, or LOGI, an independent non-governmental organization seeking to help the country maximize the economic and social benefits of its hydrocarbon wealth.

“Lebanon’s first licensing round has been pending the issuance of two important pieces of legislations … (which) will decide on block delineation … and govern the tender process. They must be passed by the cabinet before any contract is awarded to oil and gas companies,” she said.

The exploration hiatus has been all the more frustrating given consider-

able earlier legislative progress towards eventual gas production, with the government having launched a prequalification round for exploration in spring 2013, from which 12 companies successfully qualified to bid as operators, and another 34 firms prequalified as non-operator partners.

Recent months, however, have witnessed encouraging progress towards ending the deadlock that has so far prevented agreement within the cabinet to passing the two energy sector decrees.

Hopes are that a preliminary agreement between rival political groupings last July will expedite pending legislation and advance the election of a new president.

IMPROVED POLITICAL OUTLOOK

The drive to kick-start exploration of Lebanese waters reflects a combination of greater domestic political cohesion, as

BUILT ON PARTNERSHIPS • 6 Laydown Yards, Rail & Highway Accessible • Three Class 1 Rail Carriers • Heavy Lift Capabilities • Dockside Rail & Storage

Moving America’s Energy

connect with us: portofcc.com

24 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 5 / 2016

well as gas exploration progress made by neighboring countries, according to Ayat.

“The discoveries made in neighboring countries, namely Israel, Cyprus and Egypt … have been a great motivation for Lebanon to search its waters, even more so that it fears it might lose its share of the regional market,” she said.

“While the motivation to search for gas has always been there, the main obstacle has been the absence of a political consensus to launch exploration activities. If something is changing now, it may be the political momentum,” added Ayat.

Notwithstanding optimism that a faster legislative process could see the award of licenses and commencement of drilling within the next 12 months, a number of downside risks to creating a vibrant domestic energy sector remain.

Lebanon’s maritime border dispute with Israel and the ongoing civil war in Syria both have the potential to delay gas exploration or scare off the foreign expertise and investment necessary to commence production.

Another prominent risk is Lebanon’s uncertain political environment, which may yet impede implementation of the recent deal between rival parliamentary parties or create an uncertain regulatory environment for prospective international oil company partners.

According to Sukkarieh, from Middle East Strategic Perspectives, the July 2016 political agreement “should be perceived as a preliminary deal, laying the ground for a broader, national deal. Once this is achieved, we can move forward with the oil and gas file.

“Higher country risk does not conceal Lebanon’s energy potential. Oil and gas companies are used to operating in areas where political and country risks are high,” she added.

Notwithstanding lingering uncertainties, future development of Lebanese offshore hydrocarbon deposits will remain an attractive proposition for international oil companies, with the potential to transform the undeveloped domestic economy through export revenues at the same time.

While requiring much foreign investment, the lack of existing infrastructure may also increase opportunities for the project cargo community, with the need to construct pipelines, LNG processing plants and refineries, as well as other transport

linkages with destination export markets.

“There certainly are various obstacles to the efficient development of our resources, political, technical maybe, and geopolitical, but we are optimistic that the substantial interest in Lebanon’s resources will not go to waste and the recent efforts

to launch the explorations will come to fruition,” said LOGI’s Ayat. BB Mark Willis is a Dublin, Ireland-based freelance journalist specializing in politics and economics.

Vessel: M/V Industrial Skipper

www.breakbulk.com BREAKBULK MAGAZINE 25

Credit: Shutterstock

logistics perspective

PREDICTABLY INNOVATIVE Bechtel Aims to Increase Certainty in Project Logistics

P

BY PAUL SCOTT ABBOTT

roject cargo logistics will always entail its share of surprises, but an innovationencouraging initiative under way at construction industry giant Bechtel is taking aim at significantly reducing the probability – and cost – of unexpected occurrences.

Bechtel’s Engineered Logistics approach deploys such leading-edge tools as 4-D simulation and virtual 26 BREAKBULK MAGAZINE www.breakbulk.com

reality to further improve the certainty in managing project cargo logistics.

“Everyone knows it’s been a tough go for the industry with recent market conditions,” said Stephen R. Spoljaric, who is at the forefront of the Bechtel initiative. “Anywhere we can take out contingency and pin down real probability of risk and pin down schedules helps carriers, Bechtel and clients.”

ISSUE 5 / 2016

Rolling stock, metals, machinery, project cargo, forest products, and more. We’ve expanded capacity with new on-terminal warehousing and rail infrastructure. Couple that with experienced, productive labor and South Carolina is an ideal fit for whatever you send our way.

breakbulk.scspa.com

breakbulk@scspa.com

843-577-8101

logistics perspective

Spoljaric, who wears the dual hats of traffic and logistics manager and procurement innovation lead for Bechtel’s oil, gas and chemicals global business unit, couldn’t be more enthusiastic.

Spoljaric readily recognizes that, as he puts it, “a project can go in the wrong direction quite quickly.”

However, if a potential issue is predicted ahead of time, measures – perhaps as simple as modifying a pipe rack system or adding a ship to the shipping program – can be put in place before a domino effect leads to expensive consequences.

“A one-day arrival delay for a ship to a construction site could be 10 times what the cost for a ship is,” Spoljaric said.

“By our getting smarter and more predictive, clients will have a better sense of what to expect, and so will the carriers, so it takes away surprises.”

ADVANCING TRADITION

Bechtel, certainly no stranger to innovation, has a company catchphrase of “engineering the extraordinary,” and its forward-thinking approach has clearly paid off over the course of more than a century.

Founded in 1898, San Franciscobased Bechtel, which in 2015 reaped revenue of more than US$32 billion, has been the top-revenue U.S. construction and civil engineering company for 18 consecutive years, according to an Engineering News-Record ranking.

means to retain expert knowledge and record historical data for future use.

“This effort,” he said, “is timely, especially for the current business climate of low profit margins, increasing modularization, remote jobsites, dependence on global supply chain and limited transportation resources.”

‘INTRAPRENEURIAL INNOVATION’ Dr. Neil N. Eldin

David Wilson

University of Houston

Bechtel

But to stay at the top of the engineering, procurement and construction industry heap, Bechtel, particularly in challenging times, isn’t satisfied with the status quo.

Thus Bechtel’s Engineered Logistics approach, which since early 2016 has been moving forward through a funded research project with the University of Houston’s College of Technology, is slated to begin implementation with clients in early 2017.

Neil N. Eldin, dean of the college, said he sees practical application of the quantitative, risk-based approach as highly beneficial.

“Expert judgment along with the simulation-based planning can improve on-time deliveries and thus offers tremendous savings to clients,” said Eldin, who holds a doctorate in civil engineering. “This approach provides a systematic

David Wilson, Bechtel’s deputy chief innovation officer, termed the program “intrapreneurial innovation,” noting that any of the company’s more than 50,000 employees worldwide may submit concepts that are preliminarily evaluated by a small team that includes Wilson and two or three colleagues.

Wilson said more than 1,000 concepts have been received and put through a litmus test of whether they are truly disruptive, expandable to broader application, translatable to prototype, testable “in the sandbox” and aligned with corporate strategic objectives.

After an idea is green-lighted for initial pursuit, it may be advanced in collaboration with an existing Bechtel team already working on a similar concept, or, if it’s all-new, the originator may take it to the proverbial sandbox.

That high-tech “sandbox” is the Bechtel Innovation Center in Houston, a lab outfitted with 4-D modeling software, 360-degree cameras, drones and a host of other virtual reality and augmented reality technologies.

“If folks have an idea that can help us deliver in a better, faster, leaner manner,” Wilson said, “we provide the space for prototyping and then, if successful, go to small scale pilots which can then expand across the enterprise.”

The Bechtel Innovation Center in Houston.

From left, seated, are Andrew Young, critical equipment transport subject matter expert; and Stephen R. Spoljaric, procurement innovation lead and oil, gas and chemicals global business unit traffic and logistics manager. Standing, from left, are Nick Crow, chartering manager; Jorge Reyes, senior transportation and logistics estimator; and Trent Legendre, transportation and logistics technologist.

Credit: Bechtel Corp.

28 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 5 / 2016

BreakBulk and project cargo.

Savannah and BrunSwick.

Smart move.

ExpEriEncE, flExibility and rapid markEt accEss makE thE GEorGia ports authority thE pErfEct hub for brEakbulk and projEct carGo. •

Dedicated teams well-versed in the special handling requirements for each type of cargo

•

Rail options: CSX and Norfolk Southern

•

Direct interstate access to manufacturing points throughout the U.S.

•

Established relationship with the Georgia Department of Transportation for overweight and dimensional cargo permitting assistance

For additional information contact Bobby Keel, Manager of Pricing and Logistics at (912) 965-6369, bkeel@gaports.com. gaports.com/breakbulk

ANADA

logistics perspective

TED STATES

Memphis

Tenn-Tom Waterway ATLANTIC OCEAN

Port of Port of New Mobile Orleans

MEXICO

CEAN

GULF OF MEXICO

CUBA HAITI

BELIZE

DOMINICAN REPUBLIC PUERTO RICO

JAMAICA

GUATEMALA HONDURAS EL SALVADOR

NICARAGUA COSTA RICA

PANAMA

Panama Canal

VENEZUELA COLUMBIA

EQUADOR PERU

BRAZIL

4-D MODELING

Spoljaric pointed to fourdimensional, or 4-D, modeling as a particularly helpful tool, with real data, not averages, applied in creating a visual portrayal of a sequence of events for project shipments that can give customers and carriers alike a superior view of what to anticipate.

“We’re not just dealing with drawings on a piece of paper,” he said. “We’re dealing with something that’s a bit futuristic and that’s cool, too.”

The 4-D modeling software enables Bechtel to accurately evaluate risk, cost and schedule in a module shipping program, allowing clients to see probabilities of how the shipping program will operate. For example, with further evaluation of upstream activities, Bechtel can determine the accuracy of readiness dates from the module construction yard.

This can go a long way to reduce or even eliminate the need for contingencies that are frequently included in a project in a not-very-scientific manner to cover “what-if” scenarios.

“The predictive nature of this 30 BREAKBULK MAGAZINE www.breakbulk.com

A screen shot of a 4-D simulation model shows how Bechtel’s engineered logistics initiative aids in visualization of a complex project cargo move.

Credit: University of Houston

innovation will also allow carriers to properly plan to provide transport services without adding unnecessary contingency,” Spoljaric said. “If the simulation model identifies concerns, these can be addressed far in advance

by Bechtel and our carriers to develop efficient solutions.

“For the size of these giga-projects, the freight spend on modules can be in the hundreds of millions of dollars,” he said. “We need to be as accurate and predictable as possible.”

VIEWING HOLOGRAMS

Meanwhile, 360-degree cameras, drones, self-contained holographic computers and other advanced visual technologies can be used to view modules as holograms during preconstruction and then in real time

throughout construction and transport.

“Again, this innovation increases certainty in the plan,” Spoljaric said, adding that it may alleviate unneeded travel by carrier port captains, project managers and Bechtel staff during the fabrication phase.

“Dimensions can be taken virtually and the files will be shared with the carriers – and insurance – far in advance of vessel arrival so that there are no surprises during loading,” he said. “Improved safety and avoiding wasted time will be the biggest benefits.”

Wilson said an initial advantage is likely to come in, speeding the ability to respond to potential concerns before they become costly problems.

“Sometimes, getting from here to there isn’t necessarily different,” he said, “but how quickly we do it may be.”

Spoljaric emphasized that the Engineered Logistics approach is applicable not just to ocean transport, but can be integrated across the full spectrum of modes. This includes trucking, with which he has extensive professional experience from his work prior to joining Bechtel in 2012.

“It’s not going to solve every problem,” Spoljaric said, “but I think it’s going to make things more predictable.”

Indeed, the objective is to reach 95 percent to 97 percent predictability – not quite perfect but considerably better than the current industry-accepted standard.

“Innovation is definitely not a destination,” Spoljaric said. “This is the opportunity to challenge one another in what we’re doing, to get things more standard so we get more creative.

“The traditional way is still there, but now there’s this other way,” he said, “I think we’re just scratching the surface of the potential for some of these things.” BB A veteran transportation writer for the past 40 years, U.S.-based Paul Scott Abbott specializes in maritime topics.

ISSUE 5 / 2016

cargo lens

PREPARE FOR LIFTOFF 32 BREAKBULK MAGAZINE www.breakbulk.com

Space Offers New Frontier for Project Business ISSUE 5 / 2016

The U.S. Air Force and SpaceX launch the Deep Space Climate Observatory (DSCOVR) aboard a Falcon 9 rocket from Space Launch Complex 40 at Cape Canaveral Air Force Station in Florida. The mission, a partnership between NOAA, NASA, and the U.S. Air Force, will place the DSCOVR space weather satellite in orbit approximately one million miles from earth, where it will provide early warning of approaching solar storms.

Credit: Paul Hennessy/Polaris/Newscom

NASA’s John F. Kennedy Space Center, is a hub of activity for project cargo of this ilk. After all, Kennedy Space Center on Cape Canaveral has been NASA’s primary launch center for nearly a halfcentury.

Alberto Cabrera, Canaveral Port Authority’s senior director of cargo sales, sees aerospace cargo playing a growing role in the project cargo Alberto Cabrera arena. “I don’t see it replacing oil and Canaveral Port Authority gas,” he said, “but I honestly believe it is a segment coming to life right now. With the advances in technology, you’re seeing a lot more of these things going up.”

SPACE RACE REIGNITED

BY PAUL SCOTT ABBOTT

S

pace is the final frontier, so tells us the title sequence for the original Star Trek TV series.

And that appellation could well be applicable to the role of space in the project cargo business.

While spacecraft components and related cargoes may be generations away from transcending oil and gas heavy-lifts as the leading provider of project cargo, moves of such out-of-this-world shipments are already a source for payloads and paychecks via sea and air.

Not surprisingly, Port Canaveral, on Central Florida’s Atlantic Coast near

A December 2015 research report from Goldman Sachs cited the reigniting of the space race as one of seven emerging themes for 2016, with the investment firm’s senior equity research analyst for aerospace and defense, Noah Poponak, commenting that “Space is becoming smaller, closer and cheaper, reinventing an industry that has stagnated for decades and making room for new applications, technologies and competitors.”

Poponak said the number of satellites in orbit grew to 1,261 in 2014 from 986 in 2011, while the cost of a space launch in 2015 was 11 times less than in 2010. Dramatic further cost reductions, including those facilitated by reusable rockets, are on the horizon.

Not only are space programs financed www.breakbulk.com BREAKBULK MAGAZINE 33

cargo lens

by various major nations’ governments on the upswing, but, as costs decline and the high-in-the-sky notion of space tourism moves closer to reality, the private sector is increasingly involved.

Government entities such as NASA are being augmented in the space realm by private-sector enterprises, with those at the forefront including PayPal founder Elon Musk’s Hawthorne, Californiabased Space Exploration Technologies Corp., known for short as SpaceX; and Amazon.com founder Jeff Bezos’ Kent, Washington-based Blue Origin.

While executives of such companies are tight-lipped – particularly in the wake of such incidents as the Sept.

1 explosion of an unmanned SpaceX rocket on a Cape Canaveral launchpad – a spokesman for the Aerospace Industries Association, a U.S. trade group, did offer tempered optimism for space components as project cargo.

“With the size of the components and systems that are involved, yes, I could see the space systems industry requiring project cargo transport services,” said Daniel N. Stohr, the trade association’s director of communications.

“Commercial space launches could potentially grow substantially if the commercial cargo and crew programs expand to their full potential,” Stohr said. “More launches equal lower costs and higher demand, so you could see some growth 34 BREAKBULK MAGAZINE www.breakbulk.com

In a Uranus container, a satellite for an SSL project is offloaded from a Ruslan International AN-124 at Cayenne-Félix Eboué Airport in French Guiana, near the Guiana Space Center.

Credit: Ruslan International

there, but predicting where, when and how that will occur is difficult. It seems likely that most of the growth in demand for project cargo services to serve the commercial launch market would be domestic rather than international.”

Still, Stohr concluded: “International sales are dependent on export licensing, and the commercial satellite market is not very large, so the potential for space systems to become a growth market for project cargo transport services does not seem very likely.”

MAKING AIR MOVES

That said, international transport of space components is already taking place, and among those with a proverbial front seat is Michael Goodisman, business development manager for London-based Ruslan International, which is responsible for sales and marketing of a joint fleet of 17 AN-124 freighter aircraft of Ukraine-based Antonov Airlines and Russia-based Volga-Dnepr Airlines.

The commodious AN-124s are particularly well-suited for carrying major

space systems, and, in 2015, Ruslan handled 176 flights of cargo it classified in its aerospace sector, which also includes helicopters and major aircraft components.

According to Goodisman, about 20 percent of those “aerospace” cargo flights actually involved space satellites.

“Every third satellite launched into space has been delivered by us to its launch site,” Goodisman said, adding that, in addition to satellites, Ruslan-marketed AN-124s have carried boosters, rocket engines, fairings and other components and ground support equipment.

One flight route the AN-124s have flown numerous times with space-related cargo is from Northern California’s Moffett Federal Airfield – home to NASA’s Ames Research Center and with 1,000 acres under a 60-year NASA lease to Google – to French Guiana’s Cayenne-Félix Eboué Airport.

The latter airport is a direct haul by specialized flatbed truck from Guiana Space Center, which, due in part to its proximity to the equator, is a favored launch site for the European Space Agency, France’s National Center for Space Studies, the Azerbaijan National Aerospace Agency and French commercial company Arianespace.

When AN-124s have delivered satellites to French Michael Guiana for Palo Alto, Goodisman California-based Ruslan International SSL (formerly Space Systems/Loral LLC), they have been carefully encased in a container dubbed Uranus that provides a controlled environment for transit.

Goodisman said Ruslan International often works with satellite manufacturers at an early stage to ensure such containers will fit into the AN-124 cargo cabin, ISSUE 5 / 2016

Do You Need

A LIFT?

Yusen Logistics provides customized solutions for the complex shipment of heavy and over-dimensional equipment. Let our dedicated Project Cargo team expertly manage your project cargo and breakbulk movements.

We offer multi-modal shipping options, including air, ocean, rail and truck transport and barge services. No job too big for us.

Think Together. Move Together. Success Together.

www.yusen-logistics.com 800.414.3895

Freight Forwarding | Warehousing | Customs Brokerage | Origin Cargo Management | Project Cargo | Cross Border | Supply Chain

cargo lens

taking into account the cabin’s curved profile and additional height from tracks-with-rollers loading equipment.

The shipments require special handling. Goodisman said a suitable cable connection must be facilitated between the satellite container in the cargo cabin – which is not fully pressurized during flight so cannot be accessed – and the cargo attendant flying in the fully pressurized crew cabin. This allows in-flight monitoring of g-force, pressure and temperature that might impact the satellite.

Satellite containers sometimes come with their own generator unit, Goodisman added. “We develop procedures to allow the generator to provide power to the satellite container for as long as possible during the onload and offload activities. The generator cannot be run during the flight.

CANAVERAL EXPERIENCED

The first stage of SpaceX’s Thaicom8 Falcon9 returns to Port Canaveral in June 2016.

we could have cargo moving once a month for the aerospace industry,” Credit: Michael Seeley / Cabrera said.

We Report Space SpaceX has leased an area at Port Canaveral from a unit of the Gulftainer Group that is under a 35-year concession to operate the container terminal at the port.

A typical move involves a reusable rocket that was landed off the Florida coast on a transport module. That bargelike module, with the rocket resting upright, is towed into the Gulftainer terminal, where the rocket is offloaded onto a specialized flatbed truck for transport to Kennedy Space Center.

Of course, the recent SpaceX rocket explosion, “This cargo needs to be handled with white gloves. in which no one was hurt, highlights the fact that, But I must say we handle automobiles just like we do for all the potential the rockets – very carefully.” – Alberto Cabrera space industry may have, it remains a risky business.

Indeed, what the space “We also agree with our customers on The handling of space cargo has yet industry will ultimately mean to the suitable in-flight temperature and presto become an everyday occurrence at project cargo business remains way up in sure conditions in the cargo cabin,” he Port Canaveral, but Cabrera said such the air. BB said. “Such preparations even extend to shipments are moving through at a pace instructions to the pilot to ensure he does of about six a year, with SpaceX having not descend too rapidly as the satellite indicated plans calling for about one A veteran transportation writer for the past and container can have limits to the rate move per month.

40 years, U.S.-based Paul Scott Abbott of pressure change they can experience.”

“I foresee in the next year or so that specializes in maritime topics.

36 BREAKBULK MAGAZINE www.breakbulk.com

Port Canaveral’s Cabrera also made a point of noting the sensitive handling necessary for costly space cargoes, commenting: “This cargo needs to be handled with white gloves. But I must say we handle automobiles just like we do rockets – very carefully. If we can move rockets, we sure can handle paper, lumber, steel and just about any other breakbulk out there.”

Port Canaveral has decades of experience handling space system components, with longtime Port Canaveral terminal operator Ambassador Services Inc. having handled shipments for the U.S. Space Shuttle program as far back as the 1980s.

As Cabrera put it: “We’re in a great location to serve this cargo. This is really neat cargo.”

ISSUE 5 / 2016

PORT OF EVERYTHING If you need a port with a convenient location and built-in efficiencies, the Port of Galveston has it all.

We can handle almost every kind of ship, cargo and traffic, and offer all the support you need. Call today to learn more about our benefits.

CONVENIENCE

• Just 30 minutes to open sea • Efficient labor and competitive rates • No port congestion • An efficient part of your supply chain • Terminals near the Interstate Highway System and the Gulf Intracoastal Waterway • Direct connection to BNSF and Union Pacific • Foreign Trade Zone No. 36

PortofGalveston.com

409.766.6112

Port of Galveston P.O. Box 328 Galveston, TX 77553

profile

A SHREWD INVESTMENT How Peter Thorsoe Jensen Mapped Out Martin Bencher’s Success

W

hen Bo Drewsen and Peter Thorsoe Jensen started Martin Bencher (Scandinavia) back in 1997, they put up a modest DKK100,000 (about US$15,000) to cover their startup costs, traveling and rent. It was, as Jensen reflects, “not a lot.”

With an ingrained sales mentality, Drewsen “invested” the money on China wall maps embellished with a Martin Bencher logo

BY LORI MUSSER so that the duo had some smart giveaways for customer visits. With no money in the bank – but lots of sales materials – the pressure was on to make the company work. Fortunately, the gamble paid off and those wall maps still hang on the walls of many Martin Bencher customers.

Since that humble beginning and on a bedrock of cultural respect, Jensen – now CEO – has cultivated a well-respected global project forwarding corporation of surprising proportion.

Specializing in infrastructureheavy sectors such as energy, mining and construction, and pulp and paper, the company’s growth has been auspicious and it now counts 23 offices in 18 countries.

Speaking to Breakbulk, Jensen said

the success is predicated on “a desire to do well.”

“We are eager competitors and want to win,” he said. “We find the right tools to make that happen. We know it is important to listen very carefully to what customers want.”

Jensen is also one of those rare CEOs who seems able to balance a constant pursuit for better with a ready camaraderie. He is engaging and confident, eloquent and focused. He began to acquire his global savoir faire during the backpacking forays of youth, and polishes it now as he logs 100 days of travel each year.

His cultural sagacity would please even the diplomatic corps. “Even in the beginning we were never afraid to be abroad,” said Jensen. With a sustained enthusiasm to connect, Jensen and his team gather the detailed socio-cultural intelligence that allows the company to provide optimal forwarding solutions to an increasing number of customers in diverse places.

ORGANIC CULTIVATOR

If a necessary supply chain link doesn’t exist, that doesn’t seem to stop Jensen. As his company adds offices, partners and customers – beating a sort of staccato rhythm of progress – he is remarkably humble: “We started up focusing on Scandinavia-to-China cargo, had some lucky breaks, and brought some good customers on board.”

Customers are increasingly looking for engineering solutions in addition to “normal” freight forwarding services. / Credit: Martin Bencher 38 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 5 / 2016

www.breakbulk.com BREAKBULK MAGAZINE 39

profile

He added: “It has been organic growth all the way. We opened first in China, then Sweden, Finland and so on. Traffic flow has changed. Now 95 percent of our turnover is made outside Denmark. If you appreciate and like being in other places, you have an understanding of how things are done differently, you can better develop your global network.”

Jensen recognizes leadership is about moving ahead in a resistant medium. He blazes a trail through new geographies by spotting a need, tying in a solution, and translating intentions to reality.

His point of view is heavily predicated on embracing and understanding diverse cultural conventions, and he agrees with business philosopher Peter Drucker’s famous assertion: “Culture eats strategy for breakfast.”

“To implement a change in the organization, for example, we don’t just email. People in China will read it one way and people in Brazil another way.

We have to be very precise. For example, here in Denmark the youngest employee is encouraged to speak up, but that just doesn’t happen in Germany or Asia.

There is no universal way to approach any one subject,” Jensen said.

Martin Bencher’s global offices confirm the continuing need for complete project management. “We are not just a transportation company. Customers want more than transport from A to B. In a recent offshore turbine project, for example, we moved cargo from Asia to Europe, stored it, rented port facilities and equipment, managed staffing of more than 70 people on site, and more.

We had another project last year in Indonesia that involved 225,000 freight tons and 6,000 containers coming from all over the world, and project management in both Denmark and Singapore. We are increasingly offering full project management,” Jensen said.

Customers also want engineering solutions. “We look at how to get cargo into complicated places. We might, for example, have to design support for the cargo on vessel. Beyond simple transport, project management and engineering are now an integral service.”

Referencing challenges, Jensen reiterated the importance of listening to customers, and offering what they 40 BREAKBULK MAGAZINE www.breakbulk.com

Peter Thorsoe Jensen CEO, Martin Bencher

want. “We look carefully to provide upto-date solutions. Constant innovation is critical. You can’t apply a solution used yesterday.”

FUTURE PROSPECTS

Transporting a mélange of oversized and heavy cargo requires knowledge, capacity and flexibility, along with a level of courage best grown in the trenches.

To continue to advance, in Martin Bencher’s case, means delivering firstclass service provided mostly by its own people and offices.

This decade has offered up a number of record years for Martin Bencher, but, Jensen said, “2016 will be an in-between year. Like others, we are suffering a bit from the crisis in the oil and gas business.”

To address the downturn, the company is diversifying its customer base and grooming talent. “We have a much stronger [organizational] structure today. We have developed strong operational, commercial, compliance and financial departments,” said Jensen.

While passing the baton hasn’t been easy for this hands-on CEO, developing bench strength was an imperative. “When you run a company you eventually hit the ceiling and can’t get any further. The only way forward is to delegate and create a strong backbone in the company.”

But attracting talent can be challenging. “There is a need for qualified people, especially those with a maritime education,” said Jensen. Given the current business climate, talent is more important than ever. “I spend an enormous amount of time ensuring we have the right people in the right places. We empower young people to take responsibility and help them grow in their positions,” said Jensen. He believes that, “if you ship a young guy off to Singapore – if you show people you trust them – they’ll rise to the occasion.”

He also sees value in a mix of generations. Martin Bencher has an average employee age of 35, but also boasts active employees well into their sixties. They are crucial in Jensen’s talent development program. “We like to take in trainees and grow our own talent. That has worked well for us and staff turnover is quite limited.”

Retention is paramount in developing good relationships with customers.

“With huge staff turnover you can’t have good project forwarding. Someone once told me, ‘You hire for personality and you train for skills.’ You have to be positive and be able to get along with stakeholders. It isn’t enough to be a good forwarder,” said Jensen. “We prefer organic growth. We like to be in control, basically.”

Proud of the Martin Bencher team, he added: “We have countless examples of employees going above and beyond.”

In September, global project manager Nico Hellmann ran a marathon in Sierra Leone for the Street Child organization. He finished the marathon, but his GPS watch told him the course was one mile short. “So I kept running,” he said, finishing a few minutes later. “People thought I was crazy,” said Hellman, “but I explained that I work for Martin Bencher and if we promise to run a marathon or deliver something, we always walk or run the extra mile.”

With a flexible management style, and empowering people to make their own decisions, Jensen feels Martin Bencher is well equipped for future growth. “It’s a funny thing – as soon as you have the right people in the right position, growth falls into place,” he said.

Martin Bencher’s four new offices opened late last year are also starting ISSUE 5 / 2016

to bear fruit. “We will see new growth from Southeast Asia, and in the Middle East. I have quite high expectations there, as well as in South America and Latin America.” Jensen also predicts North American market growth, and sees potential in Africa, following a little more work there.

From a sectoral perspective, energy has been both a stumbling block and a starting block. Important growth in the renewables sector is expected to in part offset the oil and gas decline.

CLEARING HURDLES

Expanding on challenges, Jensen said: “We have plenty. No. 1 is very, very tough competition.”

He cited the bankruptcy of big-league container carrier Hanjin, and said that if one of the top carriers in the world can fail, anybody can. “Overcapacity in the market gives low rates. In general, that is not good for the industry,” he said, predicting that slightly higher freight rates would actually be a comfort to the project industry, lending stability, and providing additional assurance that vessel owners’ assets would still be in place when needed.

Similarly, shorter credit terms would be a boon. “They are not 10 days anymore. They are 60-90-100 days,” according to Jensen. There is growing value in managing a project’s accompanying financial supply chain in an efficient manner. Also, Jensen said supply chain connectivity around the world would improve if it were a little bit easier to obtain appropriate paperwork, transportation permits, and so on.

“Clear rules, and quicker responses from authorities would help. They can be a headache,” he said.

But, good industry leaders are not waiting for the challenges to disappear.

Martin Bencher has focused on diversification to keep the wolves at bay. “We are not a courier, not a trucking company. Our core business is project, but we service a wide number of industries,” Jensen said.

That diversification across sectors has proven invaluable in the current market: “We have years when one industry is down, as oil and gas is now, but typically something else comes up.

We have quite a lot of legs to stand on,” he said. Coupled with a pervasive sales culture – “everybody remembers to ask customers what we can do for them” – Jensen is confident in Martin Bencher’s competitive positioning.

Addressing another fundamental of its business model, he added: “A good quotation is not 30 pages long. It is important to present clear, precise quotations with no surprises. And, once we expedite, monitoring transport from door to door also becomes vital. The cargo must get there on time and without damage.”

And when things do go wrong, “you have to be honest and fast in presenting a solution. Customers trust us to transport their cargo and we have to ensure it gets there as they want.”

MAINTAINING BALANCE

“In our industry we have to be ready to assume more roles – project management services, engineering. Embracing new fortes, listening to our customers and being aware of the market are important. And we have a responsibility to play a positive role in society. We want to do the right thing.

“We operate in countries where

bribes and child labor, for example, are commonplace. We can influence this. We can decide how we will do things. We should have the same standards for conditions in all our offices, no matter where they are located, and that is important to us. We can’t change the world.

Politicians can. But we can change what happens inside our offices,” Jensen said.

As an example, the company provides height-adjustable standing desks to all employees. The elevated work stations “are good for your back. We do not want our people to go home at the end of the day as broken individuals,” he said. And, Martin Bencher is better able to retain employees and finds it requires fewer sick days.

As a company it has also received many industry accolades, especially for entrepreneurship and rapid growth, which provide testament to its CEO’s skill set.

Summing everything up, Jensen said: “I like the industry. A new challenge lands on the desk every day. I was part of starting up Martin Bencher and I want to see it grow. It is an important responsibility to do the best I can for the team. It comes down to the fact that it is an interesting job, an interesting world – and I want to do well.” BB Based in the U.S., Lori Musser is a veteran shipping industry writer.

CEO Jensen spends an “enormous amount” of time ensuring Martin Bencher has the right people in the right places.

Credit: Martin Bencher www.breakbulk.com BREAKBULK MAGAZINE 41

ocean services

FLEETING STRENGTH Ranking Leading Industry Carriers

Dynamar B.V.’s biennial study on the breakbulk industry is an exhaustive analysis of breakbulk, heavy-lift and project vessel operators and services.

First in Issue 4 and now here, Breakbulk offers exclusive content from Breakbulk IV – Operators, Fleets, Markets, the latest edition of the study. This issue features a market outlook and a ranking of leading breakbulk operators, written by Dirk Visser, author and managing editor for Dynamar.

T

he deadweight of all ships operated by the 25 largest breakbulk operators in Dynamar’s rankings represents 31 percent of the total deadweight of the world fleet of similar ships and 16 percent in terms of the number of vessels. Those shares are higher for their order books, standing at more than 29 percent and 27 percent, respectively.

Because of their large open-hatch cargo ships, or OHCS, forest products carrier Gearbulk (first), Saga-Welco – the result of a merger between Saga42 BREAKBULK MAGAZINE www.breakbulk.com

Forest and Westfal-Larsen – (second) and Grieg Star (fourth) are among the top spots in this breakbulk ranking.

Two smaller operators are using OHCS as well: GMB Maritime (20th) and Westwood (25th).

Completing the top five are, at third, Coscol, or COSCO Shipping Co. Ltd., part of China COSCO Shipping Corp.

(COSCOCS) Ltd., the result of the recent merger of China Shipping and COSCO; and, at fifth, BBC Chartering of Leer, Germany, part of the privately owned Briese group of companies.

Although the Chinese no longer use older, conventional liner vessels, their

much younger ships are quite a bit larger (averaging 25,900 deadweight tons) than those of the Germans (11,700 dwt).

On the other hand, the latter’s vessels have an almost 40 percent higher-thanaverage heavy-lift capability. Three years ago, the average year of build of Coscol’s ships was 1996, compared with 2007 today; BBC’s fleet was built in 2008 on average.

Other carriers in the ranking operating in more or less the same semi-liner segment as Coscol include: • Chipolbrok (eighth), plying the Europe-Middle East-Indian Subcontinent-Far East routes.

• Rickmers-Linie (13th), with its eastbound Pearl String round-the-world operation.

Typical multipurpose liner operators with (predominantly) scheduled services comprise: • AAL (11th), Far East-Australia and North America West Coast.

• Atlantic Ro-Ro Carriers, or ARRC, (23rd), transatlantic.

• Ethiopian Shipping Lines, or ESLSE (19th), East Africa-Red Sea-Middle EastFar East routes.

• GMB Maritime (20th), EuropeMiddle East.

• MACS (11th), North Europe and U.S. Gulf-South Africa.

• PIL, or Pacific International Lines, (17th), Far East-West Africa.

ISSUE 5 / 2016

PORTOFLONGVIEW.COM

|

T. 360-425-3305 F. 360-425-8650

|

10 PORT WAY, LONGVIEW, WASHINGTON 98632

ocean services

TOP 15 BREAKBULK CARRIERS

Multipurpose ships (including open hatch units) of more than 5,000 dwt, ranked by deadweight capacity and including heavy-lift capability (as of February 2016).

BREAKBULK OPERATOR

EXISTING FLEET Ships

1 Gearbulk Pool 2 Saga-Welco 3 Coscol 4 Grieg Star 5 BBC Chartering 6 Thorco 7 Spliethoff 8 Chipolbrok 9 AAL 10 Swire Shipping 11 MACS 12 Pacific Carriers 13 Rickmers Linie 14 King Ship HK 15 Intermarine TOTAL

TOTAL FLEET

BY VESSEL TYPE

General Cargo Ships Open Hatch Cargo Ships TOTAL Share Top 15

Total dwt

Total HL Avg. age

ON ORDER Ships

Total dwt

Total HL Avg. age

Dwt share

HL RANK

54 2,924,000 2,200 2002 2 108,000 100 2016 3.7% 13 52 2,573,000 2,800 2002 2 104,000 100 2017 4.0% 11 58 1,501,000 15,100 2007 9 276,000 4,800 2016 18.4% 2 30 1,437,000 2,600 2004 - - - - - 12 120 1,400,000 44,200 2008 6 83,000 4,200 2016 5.9% 1 71 965,000 9,300 2009 2 34,000 200 2017 3.5% 7 49 786,000 8,700 2002 - - - - - 8 23 656,000 11,300 2004 3 96,000 2,100 2016 14.6% 5 19 512,000 10,600 2012 - - - - - 6 16 404,000 1,200 2005 - - - - - 20 12 395,000 1,600 2005 - - - - - 16 14 361,000 1,400 2006 - - - - - 19 12 357,000 6,200 2005 - - - - - 9 11 355,000 1,500 1996 - - - - - 18 32 340,000 14,300 2007 21 267,000 14,500 2016 78.5% 3 573 14,966,000 133,000 2006 45 968,000 26,000 2016 6.5%

EXISTING FLEET

ON ORDER

Ships Total dwt Avg. Age Ships Total dwt Avg. Age 3,982 42,655,000 1998 201 2,768,000 2016 297 13,104,000 2001 25 1,182,000 2017 4,279 55,760,000 1999 226 3,951,000 2016 13.4% 26.8% - 19.9% 24.5% -

Share 6.5% 9.0% 7.1% -

Source: Breakbulk IV - Operators, Fleets, Markets, Dynamar B.V., June 2016, www.dynamar.com

• Swire Shipping, the brand of CNCo, (10th), Far East-Australia-South Pacific.

The number of Asian breakbulk operators in the ranking continues to increase. In addition to the aforementioned: • Pacific Carriers (12th), operates two commodity-focused Southeast Asia-U.S. Gulf lines using identical ships.

• The breakbulk part of NYK Bulk & Projects (22th), and Eastern Car Liner, or ECL (25th), jointly represent the Japanese breakbulk/projects contribution with their rather complimentary semiliner services portfolios.

• King Ship of Hong Kong (14th), and Shanghai-based Hong Union (18th), which focus on the Far East-Middle East route, and operate general cargo ships including King Ship’s four 38,000 dwt newbuilds, and Hong Union’s somewhat older 41,000 dwt vessels.

In the tramping segment is BBC (fifth), Danish Thorco (sixth), 44 BREAKBULK MAGAZINE www.breakbulk.com

Amsterdam-based Spliethoff (seventh), Intermarine (15th), Hamburg-based Hansa Heavy Lift (16th) and, new in the ranking, Nordana of Denmark (21st).

AAL is also active in the tramping sector, while most of the trampers also offer semi-liner services.

The fleets of these companies comprise generally young, somewhat smaller multipurpose/project/heavylift vessels with higher-than-average crane capabilities. These fleets average eight years, 13,700 dwt, and 320 tons of heavy-lift capacity. They also account for most of the ships on order: 42 units or 75 percent of all top 25 vessels and 541,000 tons or 49 percent of deadweight.

Two operators stand out for the size of their order book: Intermarine USA with 21 units, constituting a 79 percent deadweight share of their existing fleet; and Nordana with 11 units and 63 percent deadweight, respectively.

HEAVY-LIFT CAPACITY

BBC is the undisputed No. 1 breakbulk carrier by aggregate heavy-lift capability, followed by Coscol, Intermarine, Hansa Heavy Lift and Chipolbrok.

While the OHCS operators with their high deadweight ships and relatively low onboard crane capacities may now have been relegated to lower positions, they still rank 11th to 13th.

There is another way of looking at the above ranking, undoing the effect of the deadweight size of ships: by average heavy-lift capability. Through that ranking, Hansa Heavy Lift would be in the lead with an average heavy-lift capability per ship of 740 tons, followed by AAL (2/560 tons), Rickmers-Linie (3/520 tons), Chipolbrok (4/490 tons) and Intermarine (5/450 tons). Then OHCS operators would be at the bottom of the ranking.

Finally, a ranking could be drawn by average year of build. In that case, AAL comes out as the No. 1 with an average ISSUE 5 / 2016

TOP 10 HEAVY LOAD SPECIALISTS

By deadweight capacity – vessels more than 5,000 dwt as of February 2016.

EXISTING FLEET

RANK 1 Dockwise 2 Zhen Hua 3 BigLift 4 ZPMC-Red Box 5 OHT 6 CoscoHT 7 SAL 8 Jumbo Shipping 9 TPI Mega Line 10 Combi-Lift TOP 10

TOTAL FLEET

BY VESSEL TYPE

Barge Carriers Heavy Load Carriers Open Deck Ships Semi-Submersibles Worldfleet Heavy Load Share Top 10

ON ORDER

Ships Total dwt Total HL Avg. age Ships Total dwt Total HL Avg. age Dwt share 23 1,082,000 0 1995 - - - - 22 915,000 0 1986 - - - - 15 215,000 13,600 2004 - - - - 5 214,000 2,010 2015 1 24,500 0 2016 11.4% 5 207,000 0 1987 - - - - 5 175,000 0 2008 2 138,000 0 2016 78.9% 16 169,000 16,600 2005 - - - - 13 143,000 18,200 2004 - - - - 5 113,000 0 2010 - - - - 5 66,000 1,400 2005 - - - - 114 3,299,000 53,420 1999 3 162,500 0 2016 4.9%

EXISTING FLEET

ON ORDER

Ships Total dwt Avg. Age Ships Total dwt Avg. Age 2 53,000 1998 - - - 45 552,000 2005 2 30,000 2017 41 1,118,000 2000 6 123,000 2016 61 2,191,000 1999 5 178,000 2016 149 3,915,000

2001 13 331,000

2016 77% 84% - 23% 49% -

Share 5.4% 11.0% 8.1% 8.5% -

TOP 10 RO-RO OPERATORS

Conventional roll-on, roll-off ships of more than 5,000 dwt, by deadweight capacity, as of February 2016, (excluding vehicle carriers)

EXISTING FLEET

ON ORDER

OPERATOR Ships Total dwt HL Cap Ramp Avg. age Ships Total dwt HL Cap Ramp Avg. age Share 1 Grimaldi (incl. ACL) 37 1,082,000 1,200 8,800 2005 4 227,000 0 1,680 2016 21.0% 2 NYKBPC 19 414,000 2,970 50 2007 - - - - - 3 WWL 9 376,000 0 3,840 2005 - - - - - 4 Messina 10 375,000 50 3,200 2008 - - - - - 5 Bahri (NSCSA) 6 156,000 1,440 1,500 2013 - - - - - 6 ECL 8 92,000 810 290 2000 - - - - - 7 CMA CGM 4 62,000 40 470 1995 - - - - - 8 Murmansk Shipping 3 56,000 210 140 1988 - - - - - 9 Atlantic Ro-Ro 3 55,000 110 140 1992 - - - - - 10 Kyowa Shipping 5 50,000 210 120 2001 - - - - - TOP 10 104 2,718,000 7,040 18,550 2004 4 227,000 0 0 2016 8.4%

TOTAL FLEET

BY VESSEL TYPE

Ro/Ro Gen. Cargo Ships Ro/Ro Cargo Ships Ro/Ro Multipurpose Ships Ro/Ro Container Ships Worldfleet Ro/Ro Share Top 10

EXISTING FLEET Ships 20 325 123 10 478 21.8%

Total dwt 250,000 3,413,000 2,446,000 368,000 6,478,000

42.0%

ON ORDER Avg. age 1985 1995 2001 1980 1995 -

Ships - 11 - 6 17 23.5%

Total dwt Avg. age - - 117,000 2017 - - 280,000 2016 397,000

2016 57.2% -

Share 3.4% 75.9% 6.1% -

Source: Breakbulk IV - Operators, Fleets, Markets, Dynamar B.V., June 2016, www.dynamar.com www.breakbulk.com BREAKBULK MAGAZINE 45

ocean services

100+ TON HEAVY-LIFT ORDER BOOK | RANK LARGEST BB OPERATORS HL

BY HEAVY LIFT CAPABILITY

Top 6 carriers by vessel count

FLEET ON ORDER

SHIPS BY HEAVY-LIFT CATEGORY

>100 SHIPS

>100 >100 HL AVG. HL

Ships Total dwt Avg. dwt >100 >250 >500 >750 >1000

1 Intermarine LLC 21 267,000 12,700 - - 11 10 - 21 14,500 690 2 Nordana P&C 11 133,000 12,100 - - 11 - - 11 5,500 500 3 Coscol 9 276,000 30,700 3 - 6 - - 9 4,800 530 4 BBC 6 83,000 13,900 - - 2 4 - 6 4,200 700 5 Chipolbrok 3 96,000 32,000 - - 3 - - 3 1,920 640 6 Thorco 2 34,000 17,000 2 - - - - 2 200 100 25 LARGEST BB BY HL (ORDER) 52 889,000 17,100 5 0 33 14 0 52 31,120 600 Source: Breakbulk IV - Operators, Fleets, Markets, Dynamar B.V., June 2016, www.dynamar.com

age of four years (2012-built) for the 19 ships it has operated since February. Following AAL are PIL (2012, but a smaller number of ships), Hansa Heavy Lift (2010) and Thorco and GMB Maritime (both 2009), with Thorco deploying the larger fleet. King Ship and Hong Union are the two only carriers to operate ships built (on average) before the present millennium, with the latter averaging 1995 as the year of build on its seven ships.

HEAVY-LIFT ORDER BOOK

Over the last few years, the Top 25 breakbulk order book has come down considerably, as such reflecting the change of breakbulk fortunes following the 2007-2008 hey days.

YR. SHIPS DEADWEIGHT ‘10 ‘13 ‘16

205 56 61

SHARE

4.6 million 34.0 percent 1.5 million 9.9 percent 1.2 million 6.6 percent

The 52-vessel order book of just six carriers – BBC, Chipolbrok, Coscol,

Intermarine is the breakbulk operator with the largest order book by far, with 21 units with a total heavy-lift capability of 14,500 tons.

Credit: Intermarine

46 BREAKBULK MAGAZINE www.breakbulk.com

Intermarine, Nordana and Thorco – concerns only ships that are provided with a heavy-lift capability of a minimum of 100 tons.

Intermarine is the breakbulk operator with the largest order book by far, with 21 units with a total heavy-lift capability of 14,500 tons, 690 tons on average: 11 ships with 500 tons each and 10 of 900 tons.

A carrier lower (22nd) in the breakbulk rankings is Nordana Projects & Chartering. Four of the ships of its substantial order book have already been delivered, but another 16 are yet to come, forming a share of 77 percent of its existing fleet by deadweight. These 16 vessels have lifting capabilities of 170 tons (five ships) or 500 tons (11 vessels) and are for delivery in 2016-2017. Despite the company’s ambitions, there is little doubt that it will, over the same period, redeliver most if not all of its currently operated chartered ships, 14 in total.

Other well-known breakbulk operators among those ordering new ships

are Coscol (including six with 700 tons lifting capacity); BBC (two of 500 tons and four of 800 tons); Chipolbrok (the remaining three of a larger order, with 640-ton on board cranes); and Thorco with two 100-ton units. All other orders are for ships with crane capacities of less than 100 tons.

Seventeen of the 25 largest breakbulk operators have no order book. Although in part the absence of newbuilding orders will be due to adverse breakbulk markets, quite a number of these operators rely upon the charter market for their vessel needs anyway. This excludes the OHCS operators. Most of these embarked on an OHJC newbuilding program a few years ago which is now on the verge of completion. BB Dynamar’s report provides an overview of important breakbulk and project shipping markets, sorted by major cargo segment, complemented by the main trade areas (destinations), with notes on developments, expectations, facts, findings, options and trends relevant to each cargo segment. The full publication, Breakbulk IV – Operators, Fleets, Markets, is available from Dynamar at www.dynamar.com/publications/159.

Dirk Visser, senior shipping consultant and managing editor of Dynamar BV – Shipping Information and Consultancy, is a 30-year veteran of the liner shipping and forwarding industry in the Netherlands. Since 1999 he has been responsible for the publications and consultancy sections of Dynamar, including the DynaLiners portfolio of news and commentary, and Dynamar’s biennial flagship breakbulk publication.

ISSUE 5 / 2016

High performance service We are operating the world’s first high performance inducement service for any port and any cargo. Benefit from our flexibility, worldwide coverage, performance, and reliability. Experience an unparalleled global service with the world’s most trusted project, heavy lift, breakbulk and general cargo carrier.

www.bbc-chartering.com

port focus

The Jebel Ali General Cargo Terminal roll-on, roll-off facility handled as many as 570,000 vehicles in 2015. / Credit: DP World

SOLDIERING ON

Jebel Ali Port Shrugs Off General Cargo Lull

BY CRISELDA DIALA-MCBRIDE

I

n the United Arab Emirates, DP World has been flexing its adequate muscles to remain a global container-terminal leviathan.

Less celebrated is the operator’s general cargo business on its home turf, which includes breakbulk and project cargo handling. Here too, significant strides have been made, according to Sultan Ahmed Bin Sulayem, group chairman and CEO of DP World.

“General cargo has seen very strong performance over the past years,” he said. “Despite adverse market conditions, we handled more than 5 million

tonnes of breakbulk, and approximately 4 million of dry bulk in 2015.”

The Jebel Ali General Cargo Terminal also serves as a regional roll-on, roll-off hub, handling up to 570,000 vehicles in 2015. That translates to roughly one vehicle imported, exported or reexported every minute of every day.

Bin Sulayem said the General Cargo Terminal recorded a compound annual growth rate of 7 percent between 2004 and 2014. Over the past decade, Jebel Ali Port also moved more than 60 million tons of breakbulk cargoes.

BUCKING THE DOWNTURN

Jebel Ali appears unfazed by symptoms of a much deeper malaise that has hit the global breakbulk and project

cargo industry. While other regional terminals reel from the oil price rut, low freight rates and weak demand, the DP World subsidiary is bucking the trend, thanks to Dubai’s trade-hub status.

In addition to timber, plywood and project cargo, the port’s breakbulk imports also include iron and steel – vital for the Gulf Cooperation Council region’s infrastructure industry, which remains active despite the economic slowdown brought about by shrinking crude revenues.

According to Deloitte, the pipeline of infrastructure projects in the GCC region as of May 2016 amounted to US$2 trillion; the majority of these contracts were in the U.A.E. and Saudi Arabia.

Regional construction represents 52 percent of these projects, followed by transport at 19 percent, power at 11 percent and chemical at 5.5 percent.

Because of the shift in macroeconomic headwinds, Bin Sulayem admits that the outlook for trade growth remains uncertain.

However, he believes Jebel Ali Port, and the wider DP World group, is well posiSultan Ahmed tioned to outperform Bin Sulayem the market.

DP World “We are one of the few ports that have managed to mitigate the impact of the slowdown by seeking newer opportunities and expanding our global portfolio,” he said. “We remain focused on delivering relevant capacity at the right time, through disciplined investment, [improved] efficiencies and [shrewdly managed] costs, to drive profitability.”

“We are one of the few ports that have managed to mitigate the impact of the slowdown by seeking newer opportunities.” – Sultan Ahmed Bin Sulayem 48 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 5 / 2016

port focus

PIPELINE OF INFRASTRUCTURE PROJECTS IN THE GCC According to Deloitte, as of May 2016 the project pipeline amounted to US$2 trillion.

52% R egional construction

19% Transport 11% Power

5.5% C hemical

SCM LINES USA LLC, AS AGENTS Miami Office 7610 Northwest 25th Street, Unit 4 Miami, FL 33122 t +1 (305) 471-0059 f +1 (305) 405-7119 e miami@scmlines.com

SCM LINES USA LLC, AS AGENTS Houston Office 1776 Woodstead Court, Suite 112 The Woodlands, TX 77380 t +1 (281) 292-3124 f +1 (281) 419-4105 e houston@scmlines.com

Jebel Ali Port’s resilhas total storage space of ience is also influenced 1.4 million square meters, “We by its geography. Aside including open storage at from the Middle East 924,499 square meters and continuously market, the facility plays covered storage facilities of strive to a significant role in serv71,501 square meters. enhance our ing the trade needs of capabilities OPERATIONAL other regions, such as the EFFICIENCY Indian Subcontinent and and provide Africa.

Bin Sulayem attributes solutions to Accessible by land, Jebel Ali Port’s recent serve growing sea and air, the port feasuccess to its “unparalcustomer tures 26 berths dedicated leled customer service to general cargo, as well and continuing effort to needs.” as four mobile cranes improve operational effi– Sultan Ahmed and 130 forklifts. It has ciency” throughout the Bin Sulayem thrived by specializing organization. not only in the handling, “[Ongoing] improvebut also in the storing of ments in our processes all kinds of cargoes, including breakand procedures [have been designed] bulk and project cargo. to seamlessly support the business. All The port’s General Cargo Terminal these factors are interdependent; a defi-

PERSONALIZED

CUSTOMER SERVICE The SCM Lines team of highly qualified transportation specialists will provide you with a dedicated point of contact, for a hands-on customer service experience.

TAILOR MADE SOLUTIONS

FOR YOUR BREAK BULK, LINER, CONTAINER, & PROJECT CARGOES

ESTABLISHED AND REPUTABLE

Offering liner, heavy lift, out of gauge, bulk, break bulk and project cargo services.

DELIVERING CARGO SAFELY

ON TIME AND ON BUDGET Inducement and spot cargo services available between east coast Mexico, Central America, Caribbean, North Coast South America and US East Coast and Gulf ports.

W W W .S C M L IN E S .C O M 50 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 5 / 2016

ciency in any one will bring the others down,” he pointed out.

In line with this strategy, DP World continues to invest in the latest technology and in hiring the best-available talent, to raise its ports’ performance levels.

“Over the years our general cargo operations have benefitted immensely from the implementation of a new terminal operating system, sophisticated online services, and the adoption of global best practices,” the CEO said.

He added that DP World’s senior executives were always on the move, traveling to various ports worldwide, to understand best practices within the industry and strengthen the company’s position in the global supply chain.

All these efforts appear to be paying off, as DP World’s financial performance in the first half of 2016 remained robust.

In a recent report, the company noted that strong adjusted EBITDA (earnings before interest, tax, depreciation and amortization) growth during the period resulted in a profit increase of more than 50 percent, to US$608 million.

Cash generation from operating activities during the period was also strong, at US$905 million, compared with US$857 million in the first half of 2015. The company continued to attract investors, as it successfully raised US$1.2 billion through a new seven-year Islamic-bonds, or sukuk, transaction, listed at Nasdaq Dubai. The fund will help DP World refinance US$1.1 billion of sukuk that will mature in 2017.

The financial report added that noncontainer revenue, which includes the general cargo operation, “decreased by 0.9 percent on a like-for-like basis and increased by 17.9 percent on a reported basis.”

DP World’s first half performance is a welcome bright spot amid a gloomy outlook for global trade. According to the World Trade Organization, international trade growth this year will stand at just 1.7 percent and at 1.8 percent in 2017, the slowest pace since the financial crisis.

Bin Sulayem expects breakbulk to remain a significant segment of Jebel Ali Port’s non-container business for years to come.

“We continuously strive to enhance our capabilities and provide solutions

to serve growing customer needs in line with global developments,” he said. “[Our goal is to] push ourselves to ensure that Jebel Ali Port remains the leading port in the region.” BB

Criselda Diala-McBride is a Dubai-based journalist with more than 20 years of experience writing and editing articles on oil and gas and technology.

PUTTING THE

“Y’all” IN

GLOBAL COMMERCE.

THE PORT OF MOBILE Alabama State Port Authority www.asdd.com

www.breakbulk.com BREAKBULK MAGAZINE 51

trade notes

KILLING WITH KINDNESS Easing India’s Cabotage Rules Could Crush Domestic Carriers

BY V.L. SRINIVASAN

I

n September 2015, the Indian government announced a temporary relaxation of its cabotage policy. But a year into the five-year hiatus, over-dimensional cargo and project cargo movers in the country have expressed dissatisfaction and dubbed the decision as a non-starter that only benefits foreignflagged vessels.

India’s cabotage policy aimed to encourage national coastal shipping by reserving domestic cargo for nationally-flagged ships through its interpretation of Section 406/407 of the Merchant Shipping Act of 1956.

The act requires a foreign-flag carrier to seek permission from the Directorate General of Shipping, or DGS, for transportation of goods between domestic ports.

When the relaxation policy came into effect six months later in March 2016, a notification from India’s Shipping Ministry said that the decision to

A pair of DHDT reactors is discharged from the geared vessel that carried them from India’s west coast to Kolkata. Critics argue that the recent relaxation of India’s cabotage law will make domestic carriers uncompetitive.

Credit: ABC India 52 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 5 / 2016

relax the policy for special vessels would allow operators to bring foreign-flagged vessels of this category to ply the country’s coastal routes. With the relaxation, the government hopes to transfer road and rail cargo movement of cargoes to coastal shipping – thus decongesting those other modes. Special vessels include roll-on, roll-off, hybrid ro-ro, ro-ro/passenger ships, pure car carriers, pure car and truck carriers, liquefied natural gas vessels and over-dimensional/project cargo carriers.

Prior to the policy change, Indiaflagged ships had first preference for moving over-dimensional and project cargoes, and when they were not available foreign ships were allowed to move in. In effect, foreign-flagged vessels were already filling the gap in the project cargo and over-dimensional coastal cargo trades. The relaxation of the cabotage laws could see national operators of these so-called “special vessels” dropped completely in favor of foreign tonnage.

The government claims that for ports like Cochin, which is trying to start a ro-ro service for transporting cars from Japan and Europe, the cabotage relaxation will support its efforts. But shipping companies, particularly those engaged in moving project cargo, are less enthused.

They say that suitable tweaking of tax and other policies would work better than a blanket cabotage relaxation.

SECOND TIME LUCKY

This is not the first time the government has relaxed the policy. From 1992 to 1997, cabotage laws were relaxed for container vessels and LASH barges to attract foreign mainline vessels to the Indian ports. But despite this relaxation, only 78 million tonnes of cargo were transported by coastal shipping in India compared with 870 million tonnes by China and 133 million tonnes by Indonesia from 1990 to 2000. In 1997, the government decided to remove the relaxation as the benefits were not as great as anticipated.

Ravi Kumar, J M Baxi Group’s senior vice president, argued that there was no justification for relaxing cabotage restrictions for over-dimensional/project cargo carriers. He believed that the decision worked against national shipping interests because India’s project cargo volumes were limited and there

was already sufficient domestic tonnage available to move them.

“There are at least five vessels owned

by Indian ship owners, including by JM Baxi, which are capable of carrying project cargo. Over and above these vessels, there are close to 20 flat top ro-ro barges which are carrying project cargo continuously within the Indian coast,” he said.

Kumar said that relaxation of cabotage laws was welcome in areas that lacked domestic expertise or sufficient vessel-carrying capacity. Where sufficient domestic expertise and capacity are available, it could adversely affect those existing players, impede their growth, and expose them to the risk of unfair competition from foreign players.

He added that the move was unwarranted because the cabotage regime India practiced is not absolute compared with other countries. “The chartering guidelines provide for granting of licenses to charter in a foreign-flag vessel if an Indian vessel is not available. All licenses are granted within three days of an enquiry being raised by the charterer,” he said.

Shashank Kulkarni, former secretary general of Indian National Shipping Association and Indian Private Ports and Terminals Association, said that the government’s objective to relax the provision stemmed from the fact that it wanted to make more ships available to carry all goods from port to port in India irrespective of the flag.

“The government also feels that policy is hindering the growth of coastal shipping in India and wants to ease the situation in a phased manner by making it easier for foreign ships to operate in Indian waters in certain trades,” Kulkarni said.

PROJECT CARGO IMPACT

However, it appears they have failed to properly consider the impact on the niche over-dimensional and project cargo trades. Since there are very few India-flagged vessels to carry overdimensional/project cargo, it has long been acknowledged as futile to reserve those cargoes for Indian ships. As per the licensing records of DGS, permissions were liberally given to foreign-flag vessels to operate on the Indian coast specifically to cater for the over-dimen-

Ravi Kumar J M Baxi Group

Hemant B Bhattbhatt Hmsa Consultancy Services

sional trade despite the cabotage law.

The relaxation of the legislation will allow more foreign ships to do business in India without registering their ships and approaching the DGS again and again for licenses, a negative for the national project cargo operators.

Hemant B Bhattbhatt, managing partner and CEO of the Mumbai-based Hmsa Consultancy Services, pointed out that the movement of project cargo in India requires complicated route and time planning for transportation between the port and hinterland.

Land-based transportation has its limitations – road traffic, road capacity, on route inspections, potential for accidents – while coastal shipping offers cost- and time-effective solutions for movement of project cargoes. As such, increased coastal transport capacity reduces these challenges to a certain extent.

“However, the current change is unlikely to benefit the over-dimensional and project cargo shippers unless there is an overall augmentation in the coastal shipping capacity and capability of the country. If the policy succeeds, some over-dimensional cargo which moves while lashed and choked on flat racks or open-top containers may benefit,” Bhattbhatt added. BB V L Srinivasan is a senior journalist based in Hyderabad, India, covering finance, infrastructure, energy, shipping, transportation, IT, environment and political and regional developments in India and the Gulf Cooperation Council region. www.breakbulk.com BREAKBULK MAGAZINE 53

thought leaders

BARBARIANS AT THE GATE Managing Digital Disruption in Breakbulk Logistics

E

arly in the fifth century, the citizens of Rome awoke one day to find Alaric, King of the Visigoths, and his forces outside their city’s gates. Rome had by that time stood unassailable for more than 800 years, but not even it could remain oblivious to external forces forever; it fell soon thereafter.

It was an event with a message that still rings true a millennium and a half later; even what seems most impervious to external forces eventually has to

BY ROGER STREVENS change.

In today’s world the Visigoths have given way to “digital disruptors” as the great force for change. On one level this has affected every aspect of business by making communication and access to information easier. However, it’s when it goes a step further and enables business models to be reimagined that the greatest disruption occurs. This is creating a new normal in industries from retail to travel agencies to taxis.

Digitization is already disrupting business models in the shipping industry.

Start-ups, like Flexport and Haven, offer one-stop solutions for procurement of container freight services. Xeneta has let the genie out of the bottle by making container freight rates more transparent to shippers. One could argue that just makes them “me too” players. However, their key differentiator is how the customer experience has been improved though the ultimate sophistication; simplification. This is being achieved by providing a neat front end that handles 54 BREAKBULK MAGAZINE www.breakbulk.com

the many stakeholders involved in the background. They have also been steadily automating more elements of the process, like route selection, through the application of “machine learning” technology to big data.

Though the hype surrounding it might suggest otherwise, digital disruption does have its limits. As long as it remains impossible to send cargo in email attachments – a safe bet for the foreseeable future – there will be a role for ocean carriers. It seems likely though that their relationship to their customers will undergo a fundamental change, and as that happens they may need to adapt their business models. While carriers will at least be partially shielded from digital disruption, the same cannot be said for another major stakeholder in shipping: freight forwarders.

Two factors that make breakbulk freight forwarding vulnerable to digital disruption are that it is an intermediary industry, and one that is not highly automated. Although there are good historical reasons to explain both, digital disruptors tend to view nothing as sacrosanct in their pursuit of more simple and direct business models.

Naturally, some incumbent freight forwarders are trying to bring new levels of simplicity, transparency and efficiency to their platforms, but the jury is still out on how successful they have been. One major player invested several hundred million dollars on software development only to end up writing it off.

Making such far-reaching changes is all the more difficult when contending with legacy systems and a corporate culture not well adapted to rapid change and experimentation. Still, the depth of their experience and breadth of their relationships give the major players some room to maneuver, so it would be unwise to place any bets on their longer term prospects, at least yet.

TOO SPECIALIZED?

Some might argue that the more specialized field of breakbulk freight forwarding is beyond the reach of digital disruption because its non-standardized nature defies automation. That, and its much smaller size compared with container shipping, go a long way to explaining why it has not found itself in the disruptors’ crosshairs so far. However, the combined effects of intense competition in the container market and rapidly developing technological sophistication will compel and enable disruptors to tackle new and more difficult markets, including breakbulk.

It would be an exaggeration to say that the sky is falling on breakbulk freight forwarding. Rather, it is true to say that a great force for change is mounting at the gates of the industry and so it would be prudent to anticipate, adapt to and, most critically, embrace it. Expressed in shipping terms, it is not a question of how to weather the coming storm, but rather how to navigate uncharted waters. Unsettling as it may be to move away from familiar business models, especially when markets are weak, it is better than the alternative.

Returning to Rome in the fifth century, the city dispatched two envoys to negotiate with what they viewed as the tiresome Visigoths. They were taken aback by the ruthlessness of King Alaric’s demands – all gold, silver and anything of value that could be moved. They objected and asked what that would leave them with. Alaric’s answer – “your lives.”

The lesson, albeit dramatic, for the breakbulk freight forwarding industry incumbents is that the core message of recognizing change and adapting to it is dismissed at their peril. BB Roger Strevens is vice president, global head of key accounts at Wallenius Wilhelmsen Logistics.

ISSUE 5 / 2016

TRADE PAINS Increasing Nationalism Not Foreign to Project Cargo

A

fter 70 years of virtually uninterrupted expansion in free trade and global economic interdependency, support for an open international economy is being increasingly undermined by the spread of political nativism, populist protest movements and wage inequality.

Evidence for growing disillusionment with globalization has been perhaps most starkly highlighted by the

BY MARK WILLIS tone of the U.S. presidential election and the UK vote to exit the European Union, both of which are at least partially attributable to concerns over stagnant middle class incomes and erosion of the manufacturing base throughout Europe and the U.S. over recent decades.

As a major beneficiary of the postWorld War II expansion in cross-border trade, most notably over recent decades, project cargo and breakbulk shipping firms appear particularly exposed to this trend.

In conjunction with the slowing Chinese economic locomotive, and a more uncertain global business environment following recent political volatility, the less benign outlook for international trade will represent arguably the greatest challenge in a generation for firms operating across national borders and within global supply chains.

Having comfortably outstripped world aggregate GDP growth during the post-World War II period, international

trade has never fully recovered from the Great Recession in 2008-09, according to a recent publication from the Washington D.C.-based Peterson Institute for International Economics, or PIIE. A similar trend has been evident in foreign direct investment and cross-border capital flows, fueling speculation that globalization may have finally plateaued, and pointing towards a profound deceleration in world economic interdependency.

A key question, therefore, for the project cargo community is whether this global trade hiatus is a temporary, cyclical development, or represents a more structural, and longer lasting phenomenon.

Consistent with research from the World Trade Organization, or WTO, and Global Trade Alert, the PIIE report highlights a pronounced increase in protectionist economic policies over the last several years, most notably regarding the introduction of non-tariff trade barriers by developed and developing economies alike.

While individually small, these measures have collectively combined to significantly undermine cross-border trade.

Another prominent factor behind the recent deceleration of international trade growth has been the absence of new wholesale multilateral free trade agreements since the completion of the Uruguay Round of the General Agreement in Trade and Tariffs, or GATT, in 1994.

While a hiatus in the subsequent WTO Doha Round, that began in 2001, has given way to a stream of bilateral and regional agreements, these treaties have failed to dramatically reduce existing international tariff and nontariff trade barriers, and have been undermined by the recent rise of nationalist economic policies throughout much of the developed world.

The Transatlantic Trade and Investment Partnership, or TTIP, under negotiation between the U.S. and Europe, is unlikely to be concluded anytime soon, while both candidates in the forthcoming U.S. presidential election have pledged to overturn the Trans-Pacific Partnership, or TPP, encompassing 12 Pacific Rim countries.

The global economy is therefore characterized by a rise in protectionist economic policies, widening skepticism towards the benefits of globalization, and an ever more challenging environment in which to negotiate future free trade agreements. Consequently, a “new normal” of structurally slower global trade growth is likely to materialize over the medium term outlook. Project cargo and shipping firms will need to adapt future business models to fit this alternate reality. BB Mark Willis is a Dublin, Ireland-based freelance journalist specializing in politics and economics.

www.breakbulk.com BREAKBULK MAGAZINE 55

breakbulk americas 2016 EVENT COVERAGE

BREAKBULK AMERICAS 2016 PHOTOS

STRIKING A BALANCE

BY CARLY FIELDS

Rickmers-Linie Navigates MPP Supply/Demand

R

TOP TO BOTTOM: Ribbon cutting ceremony, with officials from the Port of Houston; Diego Maldonado, Regional Project Cargo Manager with Expeditors, at Meetup Americas; on the floor at the Port of Antwerp booth; attorney Lawrence W. Hanson speaks during a steel panel; tables were lively at the Breakbulk Career Fair.

56 BREAKBULK MAGAZINE www.breakbulk.com

ickmers-Linie is not blind to the opportunities presented by record-low asset prices. Equally, CEO Ulrich Ulrichs is mindful of the need to balance supply and demand of the multipurpose sector, and that now is not the time to flood the market with new ship capacity.

Rickmers-Linie has settled for a halfway house having created prototypes for new ship designs, ready to place orders when the time is right.

The operator has compared the existing fleet to its current fleet, factored in future needs, talked to clients, looked at traits, and considered restrictions to create a basic design concept.

The final tender document will be put to shipyards when the time is right, leading to the final technical specification.

“Newbuilding prices for these type of ships have come down tremendously since last year, but financing is still an issue and the last thing the market needs right now is more ships. On the other hand, if you order ships now, you won’t get the first one until 2018.”

He acknowledged that RickmersLinie’s current fleet is robust enough to last another five years, and that scrapping isn’t an option for 15-yearold ships. “But we want to be ready when we decide it is the right time to order.”

There is no specific yard in mind, although one in China would be preferred because of Chinese shipbuilders’ openness to bespoke designs.

While its fleet remains static for now, Rickmers-

Linie is looking to build on the services it offers. It is looking to further expand its portfolio with acquisitions – such as Nordana Projects and Chartering – while remaining open to other partnerships.

“NPC Projects has shown us they can deliver quality. If there are other players out there who want to cooperate, we’re open to that. However, we’re not taking multimillion-dollar risks. If it’s reasonable, it makes sense, you have synergies in the market and it expands your overall coverage product- or region-wise, then it’s worth considering.”

TACKLING BOND BLUES While the painful restructuring of a soon-to-mature bond relating to Rickmers Maritime Trust recently made headlines, when Breakbulk met Rickmers-Linie on the sidelines of Breakbulk Americas, Ulrichs was keen to impress the distance between the two companies.

“While Rickmers Maritime is a fully consolidated subsidiary in the Rickmers Group’s consolidated financial statements, financially it is a self-contained, independently acting company due to its listing on the Singapore Stock

ISSUE 5 / 2016

Experienced.

Professional.

Expert.

breakbulk americas 2016 EVENT COVERAGE Exchange. The trust does not own or manage any of the Rickmers-Linie MPP/ heavy-lift vessels, Ulrichs said.

He added that reports on the Rickmers Maritime Trust-related Singapore bond, which matures in May 2017, did not relate to the German bond, which is tied to parent group Rickmers Holding AG and due to mature in August 2018.

Ulrichs pointed out that Rickmers is not the only company having to answer probing financial questions in the current market. “There are many other shipping bonds in the world that have similar issues. For example, there are shipping companies with stock listed in the U.S., for example, that have big issues and they have had to find solutions. Rickmers’ relationships with the banks are good, MARKET OUTLOOK | Supply vs Demand Balance and the group is Demand (million tonnes) Demand (million dwt) very open and 30.0 1,200 transparent with Effective demand (million tonnes) regards to its comEffective fleet (million dwt) 1,150 munication with bondholders and 1,100 other stakeholders.”

Rickmers-Linie 29.5 1,050 has a fleet of nine long-term fixed 1,000 ships which it supplements with 950 anything from five to 10 ships from the 900 29 short-term charter 2014 2015 2016 2017 2018 market to meet speSource: Drewry’s Multipurpose Shipping Market Review and Forecast cific demand. The (www.drewry.co.uk/publishing)

long-term chartered ships come with options to extend, but those will only extend the charters to 2019 at the latest.

Five of those ships are owned by the Rickmers Group, with gives additional security for Rickmers-Linie, but does reduce its influence on time charter rates. “In good times it’s nice to have those ships, but in bad times we’d like to reduce the time charter rates, which we can’t do for most of those ships.”

The chartered ships are aging, with one turning 15 next year and the rest between 12 and 14 years. But age is not an issue, Ulrichs said. “Newer ships of that size are perhaps slightly more efficient on bunker consumption, but with current bunker prices there’s not much of a difference. There’s also not much of a difference in terms of productivity advantages. If we order new ships today for our around-the-world service, they would look very similar to what we already have.

Perhaps they have a smaller engine, but that makes only a two- or three-ton per day difference, which isn’t dramatic.”

More critical is ensuring that the ships are well maintained and that crews are well trained, he concluded. BB

LOW RATES PUSH BACK MPP RECOVERY Multipurpose vessel owners’ ability to invest in new tonnage is “close to zero” as historically low freight rates continue to bite, according to Ulrich Ulrichs, CEO of Rickmers-Linie.

Whether this state of affairs might soon lead to a Hanjin-style collapse in the multipurpose sector was a moot point, he said, as the collapse of a player would not automatically lead to real improvements in rates because the capacity would remain in the market.

Ulrichs saw little respite from the current market situation within the next 12 months.

Ship owner and operator AAL was more downbeat on market prospects, anticipating that the markets that generate project cargoes would not improve until 2018 at the earliest.

Kyriacos Panayides, managing director at the Singapore-based company, told Breakbulk: “The project cargo indus58 BREAKBULK MAGAZINE www.breakbulk.com

try has sunk to new all-time lows over the last six months. Although 2016 was expected to generate the same levels as 2015, we are experiencing more pressure from much reduced project activity.

“Freight rates have dropped from 20 percent to up to 40 percent in some locations, compared with a year ago. Cargo shippers now set the freight ideas, dictated by the lowest bid they can get. It is regrettable that service quality, hardware, capabilities and track record reputation are now not the drivers. They have been replaced by the pricing factor.”

Shippers are unable to resist the temptation of rock bottom freight rates. Speaking on a panel at Breakbulk Americas, Lee Tipton, corporate logistics specialist at FMC Technologies Inc., said she must keep the best interests of the shipper front of mind.

“I have a soft spot for the steamship clients, but it’s not my fault that these

container carriers built Noah’s Ark,” she said. “Am I going to take advantage of the low rates while I can? Yes, of course.”

She conceded that while she did not want her company’s preferred shipping lines to go out of business, there is a constant need to be aware of the market and “take advantage where you can as a shipper.”

Those ‘’advantages” could well continue for some time yet. Panayides noted that even when the market recovers on the demand side, there would be a lag before higher freight rates were accepted.

“Thus, there is no optimism of recovery in the short or even medium term and we expect no change until 2018.”

Ulrichs added that more consolidation is to be expected. “Everybody is of the same opinion, that it makes sense to do something with somebody else. It will be very exciting to see what has happened by this time next year.” BB ISSUE 5 / 2016

www.ssamarine.com

breakbulk americas 2016 EVENT COVERAGE

Credit: Hansa

BREAKBULK AMERICAS 2016 PHOTOS

HANSA FOCUSES ON SHIP SPECIALIZATION

TOP TO BOTTOM: Life’s a beach at Martin

Bencher’s booth; a challenging crane simulator; a Stetson hat was the prize at Boots, Buckles & Breakbulk closing party; networking on the floor; no bull, Breakbulk Americas mixes business and fun.

60 BREAKBULK MAGAZINE www.breakbulk.com

Ship owner and operator Hansa Heavy Lift sees specialization as the key to longevity in the multipurpose sector.

With cutthroat pricing now the norm in the multipurpose, or MPP, sector, ship operators need to look to new strategies to survive the current state of the market, said Joerg Roehl, Hansa Heavy Lift managing director group and chief commercial officer.

“More and more specialization is the way forward,” he confirmed to Breakbulk, adding that the offshore installation market is an area of increasing interest to Hansa. The company already has 10 ships capable of serving that market, but did not rule out further investments to cater to the offshore industry.

“We are looking to extend the fleet more and more to have less

exposure to just one sector,” said Roehl. “We would consider reducing our fleet of ‘F’ Class MPPs to reduce our exposure to the market.”

He acknowledged the glut in the offshore and oil and gas market as a result of lower oil prices, but said that he saw that sector recovering “much sooner” than the traditional MPP sector, which continues to be marred by low freight rates and oversupply of MPP tonnage. More consolidation is urgently needed, he said, coupled with a mass of scrapping of older tonnage.

Roehl added that ship operators and owners are not the only stakeholder that have the ability to turn the sector’s fortunes around. “Banks need to take more responsibility as they are also part of the overall problem of overcapacity in the market,” he said. BB

Go to www.breakbulk.com/americas to view videos and expanded photo galleries from the event.

ISSUE 5 / 2016

| N E W YO R K | N E W J E R S E Y | T E X A S | W W W. R E D H O O K T E R M I N A L . CO M

Red Hook Terminals is a multifaceted terminal operator, stevedore and cross harbor barge operator with two facilities in the Port of NY/NJ complex and Freeport, Texas. With cargo-handling capabilities and productivity second to none, Red Hook Terminals is able to handle any type or size cargo. Whether it is a bulk commodity such as road salt, stone aggregates, steel or lumber, palletized bananas, containers, yachts, heavy lifts, autos, high and heavy (lo-lo and ro-ro), OOG or special project cargoes, Red Hook Terminals has successfully handled it.

OVER 30 YEARS OF EXPERIENCE STEVEDORING & TERMINAL OPERATIONS

breakbulk americas 2016 EVENT COVERAGE

STOP THE LOGISTICS TALENT DRAIN

LIMITING MARKET EXPOSURE

BY CARLY FIELDS

Due Diligence, Contracting Terms Shield Cargo Owners

F

reight forwarders and shippers have limited means to protect themselves from the collapse of an ocean carrier, but thorough due diligence and an eye on proper contracting terms will help shield breakbulk specialists from the worst of any fallout.

Speaking on a panel at Breakbulk Americas, Utsav Mathur, Norton Rose Fulbright senior associate, said that when things go wrong, costs and delays can quickly spiral. He explained that there are stark differences in maritime law versus bankruptcy law, not least because maritime law offers remedies for creditors through the arrest of a ship or seizure of assets.

However, bankruptcy law is designed to protect the debtor, or the bankrupt shipping company, and not necessarily the creditors.

To stay ahead of the curve, shippers and forwarders should undertake due diligence and not deal with companies when there are significant market indicators suggesting the company is not financially strong.

Project cargo movers also need to 62 BREAKBULK MAGAZINE www.breakbulk.com

understand that in a bankruptcy scenario a carrier will file for bankruptcy in its own country and the priority in which the creditors get paid out is determined by the laws of that country.

“In advance of booking cargo, figure out what the home country is, where you would fall within the country’s law on the list of prioritized creditors, and what steps you can take to improve your priority,” advised Mathur.

He added that shippers should do the groundwork at the pre-contracting stage, determining where stakeholders are based and establishing where would be the easiest place to resolve disputes.

“Be proactive in identifying and mitigating these risks up front,” he said.

Dennis Mottola, Bechtel Global Logistics corporate traffic and logistics process owner manager, added: “The big points are knowing who you’re going into business with and staying in tune with the market and the people you have a relationship with. You can’t just go out today, get your bids and pick one based on which looks best on paper. Today, it’s about having a relationship with the carriers, knowing which carriers you can

The project cargo industry needs to make a concerted effort to retain people in logistics roles and keep them from diverting into more popular logistics positions in other industries.

A diverse Shippers’ Panel at Breakbulk Americas was united in its concerns that the continued downturn is pushing talent away from logistics in project cargo verticals and into positions in Amazon, automotive, frozen foods and pharmaceuticals, among others.

“I think that the next generation challenge is a really important one for us to embrace as an industry,” said Gary Sostack, administrator, logistics and services division at Aramco Services Co. “We’re in the middle now of the baby boomer departure and you see now that the best people aren’t coming into this industry; they’re going somewhere else.”

Pascal Ochquee, global director international logistics at Halliburton, said that logistics was built on people and systems. “There should be emphasis on supply continuity and ensuring that you have the right talent in place internally and through service providers,” he said. “One of our biggest worries is people leaving and going to other industries. We need to retain talent both within our own companies and within our vendor base.”

The industry was criticized for poor self-promotion, which was blamed for the increasing inability to retain good staff.

Lee Tipton, corporate logistics specialist at FMC Technologies, said she had worked hard to get the message out that logistics is the foundation of what project people do. “It can really make or break a project,” she said.

Tipton added that this needs to be coupled with more focus on practical training of new employees. “We need to foster an environment where not only are we training the newcomers to the industry academically, but we are training them with practicalities as well.

There are a lot of academic logisticians now and they need to get out with the carriers and see what they do – it will make them earn a little respect.” BB ISSUE 5 / 2016

PORT FREEPORT IS

GLOBAL

See why Fortune 100 companies select FTZ 149 Visit PortFreeport.com or Call 1-800-362-5743

Anchored In

breakbulk americas 2016 EVENT COVERAGE

BREAKBULK AMERICAS 2016 PHOTOS

trust, and finding carriers who are going to be honest with you about their situation and their ability to perform.”

VETTING FOR CARRIERS

The concept of a vetting system for ocean carriers as well as their ships was also mooted, but support for the idea among the panel was underwhelming.

While opaque ownership structures make it difficult to adequately assess carrier risk, Susan Oatway, Drewry associate, warned that vetting of carriers as well as ships could lead to a two-tier system.

Thomas Damsgaard, president of Vimar Global and maritime arbitrator, said that the project cargo industry could learn much from the bunker industry when it comes to financially stress testing companies.

“In our segment, you’ve got to dig into the financials. A financial statement from a company could very well be the financial statement for the management or the agency company and doesn’t say anything about the 80 ships they can shut down the moment they have an oil spill or something happens to the ship,” Damsgaard said.

Dennis Devlin, senior director and head of business development, North America global Projects/Oil & Gas, DB Schenker, pointed out that those carriers

that are willing to share their financial information are generally those that are more solid anyway.

The panel also noted that more liabilities and risk were being passed through the project cargo supply chain, but not everyone was happy with the additional responsibilities.

Sune Thorleifsson, head of projects, SAL Heavy Lift, agreed that if it’s within what the carrier does and the cargo is on its vessels, the risk should be with the carrier. But when there is a delay or postponement in the supply chain that has a knock-on effect at the port, the carrier will find it difficult to mitigate the risk of postponement.

Mottola said that risk in any contract belongs with the party that can best control or manage that risk. “Carriers should accept a little more responsibility for our cargo and our equipment because it is within their care. We do the best we can upfront to make the right decisions but at some point we lose control, so there has to be some ownership to who has got the ball.”

Mottola agreed that there are some challenges with knock-on delays, but this needs to be accepted within the normal ebb and flow of the market. “Sometimes you get the bear and sometimes the bear gets you,” he said. BB

CASH READY TO BE SPENT ON US OIL & GAS

TOP TO BOTTOM: Panelists lobby for the

U.S. Export-Import Bank; consultant Jennifer Ledet leads a micro-seminar; Drewry’s Susan Oatway gives a fleet outlook; armadillo races were a highlight of the closing party; Alain Holtappels of UTC Overseas discusses an Amazon project move.

64 BREAKBULK MAGAZINE www.breakbulk.com

Family-owned businesses in the U.S. that have been sitting on cash and riding out the downturn are showing an interest in domestic oil and gas related investments, according to the nation’s largest and oldest private bank.

Max Schlubach, vice president of commodities and logistics at Brown Brothers Harriman & Co, told attendees of Breakbulk Americas in Houston that those businesses were looking at investments in a range of oil and gas related assets.

Over the past three to four months, companies that have been “hoarding cash” were “coming out of the woodwork,” confirmed Schlubach.

“In the middle market we’ve

had a surge of these family-owned businesses who have access to capital interested in infrastructure, pipelines, tank space, terminal facilities and ship docking facilities,” he said.

Schlubach added that there was particular interest in ship docking facilities in the U.S. Gulf.

However, he did not expect that heightened interest to translate into actual investment until after the U.S. presidential election in November.

“It’s just wait and see until after the election in November – I don’t think anything will happen until then. I would have a hard time seeing a surge preelection because the tax implications are so vastly different depending which way we go,” he said. BB ISSUE 5 / 2016

breakbulk americas 2016 EVENT COVERAGE

SLIP SLIDING AWAY Project Delays Squeeze Procurement, Construction

W

hile the world’s project cargo markets await a rebound from the global slump in commodity prices, particularly petroleum, at least one “uncertainty” will remain once projects return.

Procurement is a critical challenge to large projects moving forward, said Phyllis Kulkarni, director of North America for Independent Project Analysis, or IPA. “It’s one of the most concerning aspects of the project supply chain,” Kulkarni said during her keynote address at Breakbulk Americas in Houston.

In an IPA study focusing on large oil and gas exploration and production, or E&P, projects “about 75 percent of risks are related to procurement,” she said.

Kulkarni, however, said solutions to the procurement dilemma may be farther upstream.

Under current circumstances, projects are “taking 30 percent to 40 percent

66 BREAKBULK MAGAZINE www.breakbulk.com

longer than when the market was better,” she said.

In a down market, suppliers and logistics providers are under increasing pressure and EPCs and cargo owners have suffered layoffs and consolidations.

Add to that a void of mid-level industry professionals and increasing use of outsourcing to contractors, exacerbating procurement problems.

Cargo owners have been tendering delays and putting pressure on the supply chain to force suppliers to cut costs and fight for market share, she said. IPA has witnessed an average of 15 percent to 20 percent lower costs across the E&P supply chain.

Placing further constraint on the process is that the detailed engineering phase of a project lifecycle is increasing, but project owners still adhere to ensuing deadlines, squeezing procurement and construction/fabrication, Kulkarni said.

By its estimate, IPA said the duration of detailed engineering for a project had increased 50 percent from 14 months in 2000 to nearly 20 months by 2014. Those delays cause slippage in procurement, which consequently creates productivity issues in construction.

“The pressure is on the procurement function to keep to original estimates. Constructions slips, work out of sequence, delays and safety issues arise when it’s not done as planned,” she said.

Echoing calls from the industry, Kulkarni said future project life cycles would benefit from early involvement from procurement and logistics, including: • Participating in schedule development.

• Establishing

plans for prequalification, inspections and expediting.

• Aligning risks and how to manage them.

“A good rule of thumb is 4 percent of owner hours during a project should be focused on procurement,” she said.

U.S. GULF ‘BRIGHT SPOT’

While the EPC market has been sluggish for several years, North America has been one of the world’s bright spots over the past few years, despite the petroleum downturn, Kulkarni told the Breakbulk Americas audience.

“There is tremendous capital expenditures, as companies are investing in mega-projects and greenfield projects on the U.S. Gulf Coast for the first time in years,” she said.

Averaged planned capital investment in the U.S. Gulf will be US$48 billion over the next three years, Kulkarni said.

This is despite about US$67 billion of capital spending cuts in the Gulf since October 2014.

“Chemicals is a bright spot,” she said.

“There is a tremendous amount of activity in the Gulf Coast,” including seven ethane cracker projects under construction that will provide about 8.7 million tonnes of new annual ethylene capacity, with about five coming on stream by 2017, according to Petrochemical Update.

And an additional 10 ethylene facilities have been proposed for the U.S. Gulf, Northeast and Mid-Atlantic regions.

Once the crackers are completed, further projects will spawn derivatives projects, she added.

The Gulf’s success has led to a degree of stability in the U.S. According to IPA benchmarks, about US$12.4 billion in projects larger than US$10 million were completed in the U.S. in 2015, while US$16.3 billion in projects were started.

Kulkarni said recent capital expenditures has shifted back to more developed countries, while spending has been reduced in what were “hot” markets over the past five to 10 years, such as Canada, China and Brazil. IPA anticipates that at US$55 per barrel for oil in 2017, there would be a 30 percent increase in capital projects. “There are projects that would be economically viable at US$50 that aren’t at US$40,” she said. BB ISSUE 5 / 2016

BEST THEME

MOST INTERACTIVE BOOTH

TAYLOR MACHINE WORKS

INTERMARINE

CONTACT INFORMATION

CONTACT INFORMATION

650 N. Church Ave., Louisville, MS 39339 USA Contact: Don Woodruff Phone: +1-662-773-3421 dwoodruff@taylorbigred.com www.taylorbigred.com

MOST EDUCATIONAL BOOTH

55 Waugh Drive, Suite 300, Houston, TX 77007 USA Contact: Leah Martinez Phone: +1-281-885-3684, +1-713-294-1672 leah.martinez@intermarine.com www.intermarine.com

MOST WELCOMING BOOTH

BIGGE CRANE AND RIGGING CO.

TRANSPAK

10700 Bigge Avenue, San Leandro, CA 94577 USA Contact: Gedge Knopf, Patrick Settle Phone: +1-510-918-4609, +1-510-504-3176 GKnopf@bigge.com PSettle@bigge.com www.bigge.com

630 McFarland St., Houston, TX 77011 USA Contact: Ron Wordekemper, Mark Wordekemper Phone: +1-713-725-7036, +1 602-763-0544 Ron.wordekemper@transpak.com www.transpak.com

CONTACT INFORMATION

CONTACT INFORMATION

www.breakbulk.com BREAKBULK MAGAZINE 67

bb index

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.

Spreader Beams

Experts in the design and manufacture of standard and custom designed lifting equipment ● Modular Spreader Beams up to 400t in stock and available worldwide for distribution ● Modular Spreader Beams for 2–5000t and spans up to 100m /330ft ● Reduce your rigging weight and health and safety concerns by using the shackle-free Trunnion Spreader Beam system ● Experts in custom lifting solutions and projects requiring high QA standards ● All products fully tested and certified with DNV Type approval as standard

07164_TRUN_and_generic_ad_Breakbulk_178x124_2016_08.indd 1

68 BREAKBULK MAGAZINE www.breakbulk.com

Trunnion Spreader Beams

Spreader & Lifting Frames Lifting Beams For more information contact Head Office: +44 (0) 1202 621511 Email: sales@modulift.com www.modulift.com

08/08/2016 10:19

ISSUE 5 / 2016

FOREST PRODUCTS: PULP INDEX EUROPE

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

150 125 100 75 50 25 0

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJAS 2010

2011

2012

2013

2014

2015

2016

NORTH AMERICA

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

200 150 100 50 0

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJAS 2010

2011

2012

2013

2014

2015

2016

ASIA

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

250 200 150 100 50 0

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJAS 2010

2011

2012

2013

2014

2015

2016

Source: RISI, www.risi.com

EUROPEAN FREIGHT FORWARDING INDEX The index, based on European forwarders’ actual and expected freight volumes, indicates an increase in volumes in October compared with two months ago. Values below 50 on the zero-to-100 scale indicate a decline.

100 90 80

Actual

Forecast

70 60 50 40 30 20 10 0

MJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASON 2010

2011

2012

2013

2014

2015

2016

Source: Danske Market Equities, www.danskebank.dk www.breakbulk.com BREAKBULK MAGAZINE 69

bb index

LEADING NORTH AMERICA INFRASTRUCTURE PROJECTS In CG-LA Infrastructure’s annual ranking of infrastructure projects for North America, total value was projected at US$533 billion. Projects listed below were from among 100 projects selected from nearly 800 projects on the candidate list, and ranked in a two-part approach. This ranks each state and province using latest economic figures, and evaluates their infrastructure needs by sector; then each project is evaluated and ranked with respect to five criteria: competitiveness, productivity, sustainability, business opportunity, and job creation.

# PROJECT NAME PROJECT SPONSOR STAGE SECTOR

VALUE STATE/ ($M) PROVINCE

1. The Gateway Program

Amtrak

Planning

Rail – Intercity Passenger

$23,900

New York

3. MTA Capital Plan: NYC Subway Rehabilitation

New York City MTA

Planning

Urban Mass Transit

$14,200

New York

Conceptual

Water & Wastewater

$15,700

California

Approved

Urban Mass Transit

$5,400

Tennessee

Permitting

Rail – High Speed Rail

$64,000

California

2. Montreal LRT Project

CDPQ Infra

4. California Waterfix: Bay Delta Twin Tunnels

State of California

6. Veracruz Port Terminal Expansion Projects

Administración Portuaria Integral Veracruz

5. Nashville nMotion

Nashville MTA

7. California High Speed Rail (Multiple Components)

California High Speed Rail Authority

8. LA Metro Westside Purple Line Extension Section 2 & 3

Proposed

Late Procurement

Urban Mass Transit – Light Rail

Ports

$5,000

Quebec

Veracruz

Los Angeles County Planning Urban Mass Transit – Light Rail $3,480 California Metropolitan Transportation Authority

9. I-55 Managed Lane Project

Illinois DOT

Planning

Highways

11. Atlantic Gateway

State of Virginia

Proposed

Highways

13. Nuevo Aeropuerto

de la Ciudad de México – 21 projects

Grupo Aeroportuario Early Airports de la Ciudad de México, Procurement S.A. de C.V. Metrolinx

Planning

15. Illinois Inland Waterways P3

US Army Corps of Engineers

Planning & Water & Wastewater – Irrigation Flood Control

10. 3GW Chokecherry and Sierra Madre project

$5,000

Illinois

Wyoming

$1,400

Virginia

$11,258

México D.F.

$10,000

Quebec

$613

Illinois

$3,000

New York

17. Otay Mesa East Port of Entry SANDAG Planning Ports – Inland Ports $300 & State Route 11 Project

California & Baja Calif.

14. GO Transit – Regional Express Rail

16. Penn Station Redevelopment (Empire Station)

NextDecade LLC

State of New York

Permitting

Procurement

Electricity Generation – Wind

$1,677

$5,000

12. Rio Bravo Pipeline & Rio Grande LNG Export Terminal

The Power Company Planning of Wyoming

Oil & Gas – LNG

Urban Mass Transit – Light Rail

Urban Mass Transit

18. Brent Spence Bridge of Governments

OKI Regional Council

Proposed

Highways – Bridges

19. Calgary Green Line LRT 20. Texas Central Railway

City of Calgary

Design

Urban Mass Transit – Light Rail

21. Pacific Northwest LNG

Texas Central Partners Petronas

Permitting

Ports – LNG, Oil and Industrial

$20,000

$2,500

Texas

Kentucky

$995

Alberta

$11,400

B. Columbia

23. O'Hare Airport Improvements: City of Chicago Planning Airports $3,650 Airfield, Terminal, Facilities and Rail Projects

Illinois

Planning

Rail – High Speed Rail

$10,000

Texas

22. Philadelphia International Philadelphia International Planning Airports $6,400 Pennsylvania Airport (PHL) Capacity Airport Enhancement Program

24. LAX Landside Access City of Los Angeles Modernization Program

Late Procurement

Airports

$5,500

California

25. High Desert Corridor

L.A. County Metropolitan Planning Highways – Other Transportation Authority

$6,000

California

26. Zephyr Power Transmission Zephyr Power Proposed Electricity – Transmission $8,000 Project & Pathfinder Transmission LLC Renewable Wind Project

Wyoming

27. Gordie Howe International Bridge

Windsor-Detroit Bridge Authority

$2,140

Ontario

$320

B. Columbia

29. 30th Street Station District Plan

Southeastern Pennsylvania Conceptual Urban Mass Transit $6,800 Transportation Authority

Pennsylvania

28. Port of Vancouver Centerm Expansion Project

Vancouver Fraser Port Authority

70 BREAKBULK MAGAZINE www.breakbulk.com

Late Procurement Planning

Highways – Bridges Ports

ISSUE 5 / 2016

# PROJECT NAME PROJECT SPONSOR STAGE SECTOR 30. I-11 Design Build Project

VALUE STATE/ ($M) PROVINCE

Nevada DOT, Regional Planning Highways $318 Transportation Commission of Southern Nevada

31. Golden Pass LNG Export Project

Golden Pass Products

Planning

Oil & Gas – LNG

City of Chicago DOT

Design

Rail – Intercity Passenger

33. Ottawa LRT – Stage

2 City of Ottawa

Planning

35. BART Silicon Valley Phase II Extension

Santa Clara Valley Transportation Authority

Nevada

$10,000

Texas

$500

Illinois

Urban Mass Transit

$3,000

Ontario

Permitting

Urban Mass Transit – Light Rail

$4,700

California

Georgia Ports Authority

Planning

Ports

$5,000

38. Expansion of Contrecoeur Port Terminal

Montreal Port Authority

Planning

Ports – Container Terminals

40. San Diego Intl. Airport: Airport Dev. Plan (ADP)

San Diego County Regional Permitting Airports $2,000 Airport Authority

42. Complete 540 / Southeast Ext.

North Carolina DOT

Planning

44. Maryland Purple Line

Maryland DOT

Pre-Construction Urban Mass Transit – Light Rail

32. Chicago Union Station Renovation

34. Orlando International Airport: Greater Orlando Aviation Planning Airports $1,800 South Terminal Expansion Authority

36. Jasper Ocean Terminal

37. Huntington Beach Poseidon Water Permitting Desalination Plant

Water & Wastewater – Desalination

Florida

Georgia

$1,000

California

$650

Quebec

39. Miami-Dade Water and Miami-Dade Water and Construction Water & Wastewater $13,500 Sewer Department Sewer Department & Procurement Capital Improvement Plan

Florida

41. South Texas Project – NRG Energy Planning Units 3 and 4

Electricity Generation – Nuclear

43. I-395 Corridor Improvements

Highways

45. Central 70 P3 – Expansion

46. ST3: South Sounder Capital Improvements Program

FDOT

Colorado DOT

Sound Transit Board

Planning

Highways

Planning

Highways

Proposed

Rail – Intercity Passenger

California

$14,000

Texas

$2,200

N. Carolina

$5,600

Maryland

$934

Washington

$600

$1,170

Florida

Colorado

47. Southern California Regional Interconnector Project

LA Metro

Planning

Rail – Intercity Passenger

$350

California

Water & Wastewater – Irrigation & Flood Control

North Dakota

SCT, Port Authority of Altamira

Late Procurement

$2,100

49. Expansion of the Port of Altamira

North Dakota Diversion Authority

$816

Tamaulipas

BC Hydro

Pre-Construction Electricity - Generation – Hydro

$9,000

B. Columbia

48. Fargo-Moorhead Area Diversion Project

50. Site C Dam Project

Planning

Ports

Source: Strategic 100 – North American Infrastructure Report 2017, Eighth edition, CG/LA Infrastructure Inc.

New York City: (718) 392-0800 Long Island: (516) 937-1523 New Jersey: (973) 391-9700

Connecticut: (203) 785-8000 Rhode Island: (401) 349-2755 Massachusetts: (617) 888-8636

www.baycrane.com info@baycrane.com www.breakbulk.com BREAKBULK MAGAZINE 71

photo contest

TREACHEROUS TRANSPORT PHOTO CONTEST WINNER:

Fast Lines Belgium

LOCATION: Port of Gunness, United Kingdom YEAR: 2009 DESCRIPTION: Two fast short-sea vessels discharge deep inland at the Port of Gunness. The cargo was loaded on fast liner service out of Port of Szczecin in Poland and brought via the Humber Estuary to the inland Port of Gunness on the River Trent.

EDITOR’S PICK: Blue Water Shipping LOCATION: Aabenraa, Denmark YEAR: 2012 DESCRIPTION: Blue Water Shipping was contracted to move a crown block compensator from Denmark to Singapore. The inland transport in Denmark required a lot of preparation and planning. From Aabenraa the unit was transported onboard a heavy-lift vessel to its final destination in Singapore.

Next Issue: C razy Cargoes Submission Period: November 1-21 Submit entries at www.breakbulk.com/crazy-cargo 72 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 5 / 2016

* We Offer On-Site & Off-Site Capabilities for Domestic, Air Freight, and Ocean Freight Packing & Crating * * Specializing in all Types of Machinery, Oversized Freight, Coils,Steel Bundles & Sheets, and Automobiles * * Re-locations & Plant moves * Rigging & Dismantling * * Military Packing, Vapor Barrier Packing, and VCI Wrapping for Transportation Protection * * Full-Service Transportation Division contains Van & Reefer Trailers, Flatbeds, Step-Decks, and RGNs * * Fully Insured CFS Station-Bonded Warehouse *

NATIONWIDE SERVICES AVAILABLE

1525 CHASE AVE, ELK GROVE VILLAGE, IL 60007 847-979-8177 | SALES@BASICCRATING.COM

the last word

WHENCE THE PROJECT PIPELINE?

BY JANET NODAR

C Credit: Keith Necaise Photography

“New energy projects are not being brought forward. We see very few authorizations in our client base.”

– Phyllis Kulkarni, Independent Project Analysis

apital projects spending sends its all-important ripple effects down the project logistics supply chain, populating what we characterize as the “project pipeline” – or not.

The Baltic Dry Index is a leading economic indicator, a measure of demand for basic building blocks such as iron ore and forest products. The project logistics industry project pipeline can be considered a lagging indicator, because project pieces cross water and land to construction site or marshaling yard months or even years after the commitment to build was made.

Thus, it took several years for the project pipeline to thin out, post-Great Recession, and the spending triggered by the high energy prices of a few years ago also took a while to dissipate. It’s safe to say the pipeline is emptying now. The commodities slump is roughly seven years old, while the oil slump is well into its terrible twos. Operators, EPCs and other project owners are cutting back on capital spend, saving their cash, consolidating, laying off staff and relying on contractors.

“New energy projects are not being brought forward,” said Phyllis Kulkarni, director North America with Independent Project Analysis, a consultancy. “We see very few authorizations in our client base.”

Kulkarni said that overall they’ve seen at least US$200 billion in capital expenditures deferred until perhaps as late as 2020. Many start dates will hinge on oil prices.

Other than chemical projects on the U.S. Gulf Coast and refining in Asia, the overall growth picture for other sectors and parts of the world is modest at 2 percent to 3 percent annually, she said.

PwC, another consultancy, recently published its 2016 edition of Capital Project And Infrastructure Spending Outlook: Agile Strategies For Changing Markets. The report summarizes the causes of global economic uncertainty as: falling oil and commodity prices, faltering economies in the developing world, China’s slowing growth, a surging dollar, and a range of geopolitical uncertainties.

74 BREAKBULK MAGAZINE www.breakbulk.com

In the report, PwC explores three growth outlooks from 2016 through 2020: • A “baseline” that starts out with a slow trudge upward at about 2 percent, gradually expanding to 5 percent growth by 2020.

• A “China hard landing” in which PwC estimates a slump to less than 1 percent global growth in 2017, with recovery beginning in 2018 to land at just under 6 percent by 2020.

• A “global upturn” scenario that sees things picking up to almost 6 percent by 2017 and staying there through 2020.

In the baseline scenario, PwC estimates global spending on capital projects and infrastructure at US$28.2 trillion through 2020.

The upturn scenario adds US$600 billion to this spending outlook, while the China hard landing scenario cuts spending from baseline to US$27.1 trillion, a paring of US$1.1 trillion.

However, risks for large projects do not all lie at the macro level. One-third of IPA’s clients consider procurement to be their first- or second-most important supply chain vulnerability, Kulkarni said during a keynote speech at Breakbulk Americas in Houston in September. She noted that it is becoming routine for detailed engineering time on many megaprojects to slip by roughly half, indicating that procurement problems may actually often be driven by upstream factors: i.e., procurement running late because engineering is not ready when scheduled.

To cope, it would be wise to plan on longer engineering, she said. To avoid delays and supply chain problems, it would be best to involve procurement and logistics early in the planning and engineering process – in other words, to bring them in at the front of the project pipeline, rather than near the end. Music to the ears of every logistician I’ve ever spoken to, no question.

Janet Nodar Content Director

ISSUE 5 / 2016

F R E E

Harnessing Wind Industry’s Repowering Drive

SECOND

WIND

Lesson In Banking ■ Back To The Future ■ Breaking The Mold ■ Crunch Time

NOVEMBER/ DECEMBER 2015

SUBSCRIBE » The industry’s leading source of information for cargo owners, logisticians and transport specialists.

Breakbulk Magazine is published six times per year. Each issue includes bonus content such as Buyer’s Guide, Annual Industry Directory, Winter Holiday Special, Port Profiles and more.

TAKING THE FAST TRACK ■ TRADING PLACES ■ RIDERS ON THE STORM ■ SHORE SOLUTIONS

ISSUE 1 / 2016

Cargoes Show No Loyalty To Multipurpose Sector

after dark

MUSCLING IN

SPECIAL

2016

SUPPLE

MENT

INSIDE

!

ARCTIC INTEREST MELTS AWAY ■ BRAZIL’S FALL FROM GRACE ■ BREAKBULK EUROPE PREVIEW

ISSUE 2 / 2016

PROJECT CARGO CASE STUDIES REGIONAL REPORTS

A N FOR UBER- ST Y LE SERV ICE IS UP THE CREATED FOR HEAVY LIFTING

CHALLENGE? DRON E S T R A NSPORT WE

OOG CARGO

COULD

PROSPECTING 3 D PR I N TFOR OPPORTUNITIES IN 2016

MARKET ANALYSIS AND COMMENTARY

PROJECT

PORTS & TERMINALS

REAL

C A RG O

A RTIFICIA L INTELLIGENCE ESTABLISHES M A R K E T EQUILIBRIUM

BOOKING IS OPTIM-

WHAT IF...

TIME

IZED BY B I G DATA

MIDDLE EAST BUCKS GLOBAL TREND ■ PROFILE: FLUOR’S JIM BRITTAIN ■ U.S. GULF GAS PROJECTS

N ET-

C A RG O

ENERGY

WOR K S

INFRASTRUCTURE

THE SUPPLY CH A IN

OCEAN CARRIERS

GR APHENE IN C ONST RUCT ION DRASTICALLY REDUCES CARGO WEIGHT

ROAD/RAIL/BARGE/AIR

HANDLING

LINK EVERYONE IN THROUGH

THE

CLOU D

BECOMES

ISSUE 3 / 2016 AU TOM AT ED THROUGH THE USE

OF

ROBOTIC S

TECHNOLOGY & EQUIPMENT BREAKBULK EVENTS

EMBRACE INDUSTRY DISRUPTORS.

To start your free subscription, visit breakbulk.com/breakbulk-subscriptions-2016

DO KEY PERFORMANCE INDICATORS MEASURE UP?

For advertising, contact Robert Janusauskas at robert@breakbulk.com or call him at +1 281 763 7231.