Breakbulk Magazine Issue 6 2017

CHINA’S CUSTOMS CLOUT

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EVOLUTION OF TRADE TERMS

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PUERTO RICO IN DESPAIR

ISSUE 6 / 2017

BLENDED APPROACH Old-school Relationship-building Strategies Are Outdated

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contents

20

14 TRADE NOTES

CHINA’S CUSTOMS CLOUT

Unintended Security Consequences of Trade Explosion

20 REGIONAL REVIEW

CLIMBING DEBT MOUNTAIN President Xi’s Delicate Balancing Act in China

24 MARKET SPOTLIGHT

FUNDING FIX

China Funds to Boost Brazil Infrastructure

08 BLENDED APPROACH

Old-school Relationship-building Strategies are Outdated

44

52

28 EXECUTIVE SUMMARY ‘NO CENTER OF GRAVITY’

Balance of Global Powers, Nationalism Reforge Trade

34 RULES & REGULATIONS

TRADE TERMS EVOLUTION

48

Incoterms 2020 Come Into Focus

38 LOGISTICS PERSPECTIVE

ISLAND IN DESPAIR

Puerto Rico Faces Protracted, Multibillion-dollar Rebuilding

Editorial 6 n Wind Components Are Upsizing 44 n Up-and-coming European Ports 48 n Metalwork Expertise Energizes Thai Exports 52 Thought Leaders 56 n BB Americas Recap 58 n Rickmers-Line Feeling ‘Bullish’ 63 n Best of 2017: Photo + Video Contest 64 n Index 74 ON THE COVER: Source images via Shutterstock 4 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2017

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editorial

‘TRANSFORMATIVE MOMENT’

T

hose who attended Rodger Baker’s keynote address at Breakbulk Americas were led by the senior Stratfor analyst through a quick – though penetrating – overview of the shifts in political and trade powers since the cold war.

Having an explanation of uncertain times may bring clarity if not comfort for those in the business of moving goods. Events of the past few months have further fueled uncertainty.

Baker said the world is in a “transformative moment” in power and relationships among nations, as he described the balancing among leading powers Gary Burrows China, the U.S. and European Union (“No Center of Gravity,” page 28).

That moment may have been represented by China President Xi Jinping during the Communist Party’s five-year, week-long congress in October, where Xi proclaimed a “new era” in global politics, in which China would move “closer to center stage.” Publications from The Economist to Time took note of the moment with cover stories, questioning the future U.S. role as a global power with China’s ascension.

As Baker explained, China has been drawn from isolationism to “push out and become a more activist player economically, politically and, in the near future, militarily.”

Central to China’s coming-out party is the ambitious Belt and Road Initiative, as it forges global trade routes to source vital resources and grow markets for China’s goods. Project cargo stands to eagerly benefit from China’s efforts throughout the world. Andrew Willis explores one of China’s global infrastructure initiatives, 6 BREAKBULK MAGAZINE www.breakbulk.com

with the launch of a joint China-Brazil investment promotion fund to increase productive capacity with an initial US$20 billion to finance investment projects in Brazil (“Funding Fix,” page 24).

U.S. President Donald Trump spent nearly two weeks meeting heads of state in Asia, one country at a time. Trump claimed to come away from China with trade deals topping US$200 billion, though most were in the form of memoranda of understanding, which could be only as valuable as the printed MoU and ceremonial pen used to sign them.

Beyond trade, China’s political role rises as well, beyond taking a seat at the head of the table among Asian nations with the Trans-Pacific Partnership, and globally through initiatives such as the Paris Climate Agreement. Abdicating those options, Trump instead talks of cobbling bilateral deals nation by nation, while espousing an “America first” approach to the world. However, Trump also seeks out China to play a potential military role in getting North Korea to fall into line.

It’s looking like China’s economy could pass the U.S. well before 2030, as Price Waterhouse Coopers forecast earlier this year. India and Indonesia wait in the wings.

Of course, not all is rosy in China. While Xi further cements his powerbase following the Community Party’s congress, he is forced to perform a balancing act between maintaining China’s ambitious growth at home and abroad, and managing spiraling debt, Michael King finds (“Climbing Debt Mountain,” page 20).

At home, China’s years of trade growth have forced it to implement programs and develop regulations to facilitate transport while enhancing supply chain security regulations on project cargo travelling through the country. And, as Thomas Timlen reports, movers either jump through hoops – or face the consequences of failing to comply (“China’s Customs Clout,” page 14).

As world project markets look towards late 2018 to early 2019 for more positive signs of a turnaround, a transformative moment couldn’t come soon enough.

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 Lori Musser Alan M. Field Thomas Timlen Michael King Andrew Willis Felicity Landon

BREAKBULK EDITORIAL BOARD John Amos Amos Logistics

Ed Bastian

BBC Chartering

Murray Cooper

McDemott International Inc.

Dennis Devlin DB Schenker

John Hark

Bertling Project Logistics

Dennis Mottola Bechtel Corp.

William Moyersoen

ArcelorMittal Antwerp Logistics

Albert Pegg

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

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

ISSUE 6 / 2017

cover story

BY CARLY FIELDS

BLENDED APPROACH

I

Old-school Relationship-building Strategies Are Outdated

t’s an undeniable fact that relationships make the breakbulk world go around. But in an increasingly connected and digitally maturing sector, is it the physical or virtual relationships that count the most? Mega projects bring together the broadest range of expertise imaginable. Building and maintaining relationships across sometimes disparate channels can challenge successful supply chains.

The old-school approach of vendor selection based on long-forged connections, back-of-the-napkin calculations and intuition has made way for a new age relationship-building strategy, grounded in potential vendors’ search results on the Web, their amount of social media hits or even the vendor with the most impressive booth at one of the global breakbulk conferences.

Breakbulk legal expert Greg Borossay conceded that the reality, of course, lies somewhere between the two extremes and that neither method provides a solid legal and operational foundation for assessing whether a particular vendor or partner should be the choice for your company’s important project.

Rob Gardner, divisional executive for Marine Tech at Sturrock Grindrod Maritime in South Africa, added that the relationships you keep are just as important as those you make.

“Breakbulk and project cargo require skills that are unique to this sector of 8 BREAKBULK MAGAZINE www.breakbulk.com

The outer circle shows responses from participants born in the 1980s. The inner circle shows responses from participants born in the 1990s.

Respondents who said face-to-face is their favored preference for networking.

Physical business relationships are: as important as virtual ones. more important.

Better connectivity via email and social media has: diluted the importance of physical relationships. enhanced it.

Results of an exclusive poll of 45 attendees of Education Day at Breakbulk Americas.

the industry, and it takes a number of years to build up these skills. So, if you are looking to develop your skills or you require assistance with the cargo in a port that is unknown to you, it’s the contacts and relationships that you have developed that will be the ones that you will come to depend upon.”

FULL OF COMPLEXITY

Fundamentally, the complexity of project cargo moves means that stakeholders need to know that everyone knows what they are doing.

“When you look at the complexity to fix a charter party or the specific requirements of organizing a heavylift transport, it becomes obvious that you need the right people that know what they are doing,” said Alexander Hellmers, CEO for Project Logistics Alliance. “These competences are not the core activity of the companies that deal with the products that are transported. In addition, most of the time the services requested are an absolute niche in which only a few companies have the knowledge.”

Matthew Luckhurst, vice president – liner at Bahri Logistics, made the point that the breakbulk and project cargo sector is much more specialized and niche than its containerized sibling, hence stakeholders require a greater degree of trust – they want to know who can perform.

While he agreed that technology has changed the industry on a ISSUE 6 / 2017

Q:

What comments would you give with regard to relationship building?

Comments from attendees of Education Day at Breakbulk Americas.

A:

“I would like to see an emphasis put back into building face-to-face relationship building, rather than a virtual one.”

“Relationships take time to develop, and from a student’s perspective, many of us don’t take the time to foster them.”

“We need to break the idea of ‘gimme, gimme, gimme’ and instead ‘give, give, give’ – I promise you it comes back to you, threefold.”

“You get what you put in.”

“Smiles go a long way.”

“I still like to be able to put a face to a name.”

“Be there, make it personal, tell the truth.”

“Building relationships takes time and is ever-evolving.” www.breakbulk.com BREAKBULK MAGAZINE 9

cover story

transactional and day-to-day level, he said there is still a need for face-to-face interaction for closing deals. For the past two years, Bahri’s top-level management has dedicated a part of its regular meeting to calling a customer to ensure that its standards are being upheld.

Yet the success of professional, rather than digital, networks has been fueled by that need to get closer to the customer.

Indeed, many small to medium-sized companies have built their own relationships through logistics networks, allowing them to offer an agile, global service.

“Small and medium-sized companies are often willing to tailor services exactly to the needs of their customer, which has led to a trend of clients/customers using logistics companies more often as their ‘own’ arm for fulfilment,” Hellmers said.

Alexander Hellmers Project Logistics Alliance

RISE OF DIGITAL PLATFORMS

Digitization is bringing both opportunities and challenges for relationship-building and maintenance.

Increasingly, breakbulk companies need to consider the digital competence of staff as well as management. But no digital tool will ever be able to replace a good relationship with a customer, Hellmers said.

“The more complex a product or service, the more know-how is needed to do the job right. At the same time, the more complex a process is, the more effort it takes to automate and standardize it.”

Hellmers believed that the level of effort and investment needed to standardize and automate every aspect of project logistics cannot be justified.

“The profit potential does not justify the money you need to spend on automation,” he explained. “Therefore, we believe the industry will continue to rely on the know-how of individual teams and companies and the personal relations that these people/companies have.”

As an industry stakeholder with his

“What are the values you aspire to in your future industry relationships, and what do you expect from others?”

From an exclusive poll of 45 attendees of Education Day at Breakbulk Americas.

respectful responsible energetic respectful professional open accountable

personal

helpful

loyal thorough friendly strong

integrity trust communication

understanding

consistent

encouraging

collaboration

flexible patient

genuine

transparent

honest reliable

10 BREAKBULK MAGAZINE www.breakbulk.com

dedication

Alexander Varvarenko ShipNEXT

feet firmly in the digital world, Alexander Varvarenko, founder of digital platform ShipNEXT, acknowledged that relationships and human interaction have formed the backbone of the shipping industry for centuries. Varvarenko believed that, rather than diluting physical relations, some digital platforms can in fact free more time for personal interactions and improve physical relationships in the shipping industry. Automating myriad routine tasks allows online platforms to be helpful relationship-building tools – not replacements. Varvarenko stressed that human qualities such as creativity, charisma and emotional intelligence cannot be automated.

NO STANDARD WORK DAY

Better connectivity also presents pros and cons. Gone are the days of preparing the yellow ticker tape in order to send a telex message or getting nervous testing your typing skills by going “live” on the Telex. Nowadays, breakbulk and project cargo employees comfortably chat on WhatsApp, LinkedIn, email and other similar tools and get the answers they need almost instantaneously. However, the key here, Gardner noted, is that you are still dealing with people, and you still need to build your relationships with them in order to get the job done.

Emails and greater digital connectivity have served to speed up the pace at ISSUE 6 / 2017

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cover story

which we work. Customers now expect replies within minutes and the concept of standard working hours is virtually nonexistent. “At that pace, knowing the right people becomes even more vital,” Hellmers

said. “For small and mid-sized companies, speed and agility are two of the key sources of competitive advantage in our industry.”

“Everyone wants an instantaneous reply,” Gardner agreed. “With both our

clients and our suppliers, we strive to respond within two hours, but respond with good, relevant information.” Hammering this point home, he said that those in the breakbulk and project cargo industry need to avoid making an electronic “knee jerk” reaction. “It is important to pause and think about what is being asked and what the client actually wants. I tend to point to the telephone when I see that there is clearly a miscommunication between the two parties.”

Still, saying: “Why don’t you speak to him? It might be easier,” does get some surprised looks from younger staff members, he said.

YOU WORK WITH PEOPLE BECAUSE YOU HAVE DEVELOPED A BOND OF TRUST AND YOU KNOW YOU CAN DEPEND ON THEM,” – Rob Gardner Sturrock Grindrod Maritime

PUTTING SOCIAL MEDIA TO WORK

Social media has a role to play, specifically in gaining exposure of and demonstrating a proven track record of projects handled and know-how. Getting that message out might previously have been done via physical networking and extensive marketing efforts. But social media cannot create its own content.

“Social media, in our opinion, will not be the deciding factor that enables you to win projects. It is more a supporting tool that enables you to create awareness among your customers,” Hellmers said.

Gardner added that it’s all about trust and dependability, not the number of followers you have on social media.

“You work with people because you have developed a bond of trust and you know you can depend on them,” he said. “It 12 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2017

does help if you can call on them for a contact or a company to help you with a particular problem.” This has always been the case, he said, but the industry has simply moved the contact from Rolodex card holders to LinkedIn networks.

However a relationship is built up and nurtured, the core values remain the same: trust, honesty and transparency from both sides of a project, facilitating fast and accurate responses. But a parting cautionary tale from Gardner demonstrates the risks of relying on just one channel to build that rapport.

“We had a guy work for us by the name of Christie, who was communicating with a person called Kelly on the ship. From the email chain, it was clear that both Christie and Kelly thought the other was of the opposite sex. It was fun watching their faces when they finally met on the quay and discovered they were both guys.”

BASIS FOR LEGALLY SOUND RELATIONSHIPS Breakbulk legal expert Greg Borossay gives his pointers for building successful and legally strong relationships.

• Establish your own internal vendor selection criteria, or VSC, before you decide upon your vendor or partner. This will allow for proper vetting of various companies in a rational way.

• Utilize competent local counsel to review criteria and your boilerplate contract before starting negotiations.

This will be a nominal fee, usually three to five billable hours. A small

price to pay to get your VSC firmed up in advance of large projects.

• Decide upon a blend of the old school and new age methodology that works for your organization. Use the internet, but don’t discount the phone or, better yet, face-to-face. Utilize your attorney and insurance provider to assist in this preparation again before you decide on your vendor or partner.

• Engage in the global breakbulk community including breakbulk conference activities. Do so with a plan. Have your VSC ready and bring your internal operational experts to the conference so that you can take advantage of having all major players on site at the same time. BB

www.breakbulk.com BREAKBULK MAGAZINE 13

trade notes

Unintended Security Consequences Of Trade Explosion

14 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2017

BY THOMAS TIMLEN

CHINA’S CUSTOMS CLOUT Unintended Security Consequences of Trade Explosion

I

n China, years of growth have brought with them the challenge of maintaining the capacity to handle the expanding flow of commerce, affecting the movement of all cargo types by all modes of transport. Adding a supply chain security dimension to traditional tasks has exacerbated the situation.

Some stakeholders have made improvements in response to market pressures, and there have also been government-backed efforts to implement programs and related regulations to facilitate transport while enhancing security. However, these have presented their own issues.

Bosco Lau, vice president and CEO of Winning Logistics Services, said bottlenecks are a result of the Customs department increasing the frequency of inspections, but for a short while they did not have sufficient manpower to cope with the increased inspections. “This resulted in long delays of cargo clearance, and uncertainty regarding when the cargoes will be cleared,” he said.

Insufficient manpower is not the only cause for concern for project cargoes in China; regulatory hurdles are also a factor.

“Any parties involved in a China-based supply chain of heavy-lift or breakbulk cargo, should be very careful about the local customs system,” cautioned Zhao Jin Hai, AAL’s general

Carriers have to overcome bottlenecks in cargo inspections in China. / Credit: AAL

www.breakbulk.com BREAKBULK MAGAZINE 15

trade notes

Protranser metro export to Singapore. / Credit: Protranser Cargo Operations

manager for China. “If their cargo needs to transship within a China port/inland location – in other words, if same needs to be custom cleared at the ‘inland place’ – it must be carried on from the port to that place under a bonded service requiring the use of bonded vehicles. However, such a bonded service permit is only possible with the support of the party that’s going to clear the customs.

“Under some to-order bills of lading, it is sometimes very difficult to know who’s going to do this and whether they will cooperate,” Zhao added.

In a bonded service, transportation Zhao Jin Hai equipment such as a barge or truck must AAL be registered and approved by the Chinese Customs authority. Each bonded service also requires a hefty security deposit as guarantee, money that’s held by Customs to prevent a possible breach of customs duties.

To make matters worse, Zhao added that a bonded service is expensive, and waiting for protracted communications and procedures to be completed can be very costly and time consuming.

16 BREAKBULK MAGAZINE www.breakbulk.com

“To date,” he said, “I do not see any simple solution except detailed checking in advance, although even then some details are not possible to obtain prior to getting a shipment confirmed.”

MAINTAINING COMPETITIVENESS

While such challenges hamper the efficiency of Chinese Customs, some improvements might be in store. Global Project Logistics Network member Protranser International Logistics Co. Ltd. has seen some market-driven improvements.

Leo Liu, Protranser’s Shanghai-based marketing manager, noted that China’s supply chain stakeholders have taken proactive steps. “After many years of development – from shipper and warehouse to trailer companies – they have all updated not only hardware but also software to increase efficiency and safety.”

According to Liu, such improvements have not necessarily been the result of a need to comply with specific supply chain security regulations, but rather to meet a desire to maintain competitiveness in a tough market.

Having acknowledged areas of improvement, Liu recognized that there are still particular issues to be mindful of when moving project cargo through China’s supply chain.

“For river transport for project cargo

in southwest regions of China, we suggest that it is necessary to pay more attention to management and coordination of all related subcontractors,” Liu said. Failure to do so can result in unwanted delays and/or additional costs, such as barge detentions.

“In short,” he said, “China developed too quickly.”

He felt that the time has come for a period of reflection during which systemic inadequacies can be addressed, thereby allowing companies to pay more attention to commercial consequences and sustainability.

He also emphasized the need for coordination: “The key point is to coordinate different subcontractors to manage any barge or truck detentions. First, engage partners that have a rich knowledge in management of project cargo; second, engage reliable subcontractors and; third, maintain a good relationship with the shippers and arrange experienced staff to supervise the operation.”

MYRIAD OF SUPPORT

David Zhou Yi, a senior partner at Co-Effort Law Firm LLP in Shanghai, takes a holistic view. He pointed out that as the administrative agency with law enforcement competency, Chinese Customs clearly plays an important role in supply chain security.

ISSUE 6 / 2017

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trade notes

IMPROVEMENTS ON THE WAY Chinese legislation has improved to enable movement of breakbulk and heavy-lift cargo.

Credit AAL

But among Chinese government agencies, Customs is not alone in terms of supply chain security-related initiatives. Yi explained that other competent government agencies are also actively putting effort into construction, innovation and application of supply chain systems, evidenced by a number of highlevel regulations recently issued. These include an official notification from the Ministry of Commerce and the Ministry of Finance on the Construction of China’s Supply Chain System. This involves three areas of focus: standardization of logistics, a platform of supply chain and tracking systems for important products, and a list of key national standards.

Meanwhile, the State Council has issued official guidelines known as Actively Pushing Forward Innovation and Application of Supply Chain. “This is the first time the State Council has made specific deployment for innovative development of the supply chain with particular inputs on the tracking system, intellectualization of supply chain and supply chain finance,” Yi said.

Turning to practical advice for project cargo movements, Yi felt that while choosing the carrier for land transpor18 BREAKBULK MAGAZINE www.breakbulk.com

tation, qualification of the enterprise should be carefully verified, which according to the relating regulations, is classified into five grades.

“Consignors should appoint qualified and suitable carriers to transport the cargo,” Yi explained. “Prior due diligence and on-site checks of the special transport vehicles and technical equipment are necessary. Cargo owners and EPCs are suggested to look into the carrier’s insurance inter alia the maximal amount of the liability insurance, and if appropriate to coordinate with the carrier to set down a complete supply chain plan.”

Yi also pointed out that while, according to Chinese Highway Safety Protection Regulations, only one permit is needed for transportation of project cargo in China, it takes some time to process and obtain such a permit in practice.

“When the vehicle and cargo combined exceeds certain dimensions, escort planning should be in place with escort personnel engaged for each segment of the transport. So, the time required and the expenses involved in this regard must be taken into account well beforehand,” he said.

Turning to water transport, Yi explained that national and local authorities have issued some carriage transportation regulations covering reporting and approval systems for carriage of project cargo, and joint administration by maritime and fairway authorities, among others.

“In 2016,” Yi said, “the Ministry of Transport and the National Development and Reform Commission of the PRC published 16 demonstration projects of multimodal transportation, each of which has highlights for reference by the cargo owners and EPCs in procuring safe and quality services. PRC local counsel’s advice should be sought for avoiding legal or compliance exposure purposes.”

Is there any room for optimism that improvements will be made to address today’s concerns? Jack Zhou, AAL’s planning manager for China, believes that there is, in view of legislative and infrastructure initiatives. “In the last 20-plus years, there has been significant reform and opening-up of Chinese legislation to enable movement of breakbulk and heavy-lift cargo. In addition, the Chinese government has also taken heavy-lift inland transportation into consideration when building roads and bridges and, for example, advertising boards, traffic lights, highway interchanges and so on, all of which have over 5-meter clearance.

“Highways and bridges are also built to have sufficient weight capacity to meet the requirements of the transportation of heavy-lift cargo transport vehicles. Meanwhile, shipping terminals also now have vast experience with breakbulk cargo and are willing to offer support. In addition, government at all levels encourages the trade of same.”

Knowing what to expect, practicing due diligence, and heeding the advice of experienced professionals can mitigate potential time consuming and costly difficulties. BB Thomas Timlen is a Singapore-based freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

ISSUE 6 / 2017

Celebrating 20 years of excellence Founded back in 1997, we set out to build the world’s highest performing global project carrier which serves any port for any cargo. Today, 20 years later, we are proud and pleased that this mission continues to make us the carrier of choice to project customers all over the world.

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BY MICHAEL KING

CLIMBING DEBT MOUNTAIN President Xi’s Delicate Balancing Act in China

P

resident Xi Jinping secured another five years leading China and further cemented his already substantial powerbase when he was appointed general secretary of the Communist Party at a week-long congress in October.

Ahead of what was in effect a rubberstamping ceremony for the current leader, who The Economist recently hailed as the world’s most powerful man, Xi also received a boost from the International Monetary Fund, or IMF, which raised its growth forecast for the world’s second-largest economy.

The IMF now expects China’s economy to expand by 6.8 percent this year, up from its previous estimate of 6.7 percent. It also raised its 2018 GDP growth forecast from 6.4 percent to 6.5 percent.

The IMF’s upwardly revised forecasts bode well for the region’s project 20 BREAKBULK MAGAZINE www.breakbulk.com

industry. The upgrades were predicated on the belief that Xi’s government would continue the policy of investment-fueled growth – designed to double real GDP over 2010-2020 – which has generated a large chunk of the demand from Asia enjoyed by carriers and forwarders this decade.

However, there was a sting in the IMF’s tail, one of direct relevance to anyone in freight. The fund warned of a serious and rising risk to China’s economy due to its spiraling debt, and called on government to accelerate “recent encouraging efforts to curb the expansion of credit” or face a “heightened probability of a sharp slowdown” in GDP growth.

“A growth slowdown in China would have adverse repercussions for other economies through weaker trade, commodity prices and confidence,” added the IMF.

Photo illustration: Catherine Dorrough; source images via Shutterstock

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Creating chains of trust.

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ON BORROWED TIME

Economists are in broad agreement that China’s economic chickens will, at some point soon, come home to roost.

As exports fell after the global financial crisis in 2008, China stimulated its economy with high levels of infrastructure investment, which saw local governments and state-owned enterprises, or SOEs, borrow at unprecedented levels as they flung huge sums at major capital projects. According to one estimate, from 2011 to 2013 China used more cement than the U.S. did in the entire 20th century.

China’s investment-led growth during the last decade benefited the rest of Asia and, indeed, the world. But the pace of credit growth was alarming, as China’s debt load as a percentage of GDP expanded on average more than 10 percent per year since the global financial crisis. By 2016, the IMF found that the ratio had ballooned to 234 percent of GDP. Earlier this year, ratings agencies Standard and Poor’s and Moody’s both cut their sovereign rating on China, citing rapidly accumulating debt.

So what happens next? China’s economic priorities are difficult to decipher with any certainty – more insight from Xi’s administration is expected in the coming months once his second term policies become clearer. But, based on previous pronouncements and initiatives, it seems likely he will take steps to stabilize debt and refocus investment priorities, moves that will have direct repercussions for the project industry.

Indeed, investment levels already appear in decline. Japanese financial company Nomura estimates that real investment growth has slowed significantly since the second quarter of 2016, falling into negative territory in the third quarter of 2017 for the first time since comparative data became available in 2004.

“China is making progress in shifting from an investment-driven growth model to one more reliant on consumption,” said Chief China Economist Yang Zhao. “However, the weak investment momentum does highlight downside risks to economic growth. We maintain our view of an economic slowdown in coming quarters.”

22 BREAKBULK MAGAZINE www.breakbulk.com

Xi Jinping at the 19th National Congress of the Communist Party of China at the Great Hall of the People in Beijing, Oct. 25.

Credit: Xinhua Xinhua News Agency/Newscom

MANAGING THE DEBT PROBLEM

Reducing China’s debt problem will eventually involve tackling its hugely indebted SOEs, a challenge intelligence provider Stratfor believes has been on Beijing’s to-do list for some time. But forcing them to take a more commercially focused approach has, for the most part, taken a back seat to the SOEs’ chief objective of serving the government’s investmentdriven growth strategy and keeping employment levels up.

“Though these goals have routinely led to inefficiency and corporate bloat, the companies’ central role in Beijing’s economic and political policies has guaranteed them unfettered access to funding and government aid,” said a recent Stratfor report. It concluded that SOE debts were “a house of cards” and a growing threat to China’s economy.

Beijing’s efforts to address the issue have thus far focused on allowing some “zombie companies” to go bankrupt, but the overriding political aim has been to retain and strengthen government control of the country’s

most critical sectors, rather than root out and address the sources of SOE inefficiency.

Zhixing Zhang, senior east Asia analyst at Stratfor, told Breakbulk that President Xi’s government was well aware of its debt risk, and in recent months had slowed down credit expansion to deleverage structural financial risk, while also balancing this against the need to maintain social stability and employment. “In the long term, we expect the Chinese government will continue to rebalance, or reduce, its reliance on investment in capital projects, but also use targeted credit expansion,” she said.

This could see more focus on development of western provinces, as well as further investment overseas as part of President Xi’s One Belt and One Road, or OBOR, initiative, which comprises the land-based Silk Road Economic Belt and the ocean-going Maritime Silk Road. Zhang also said that SOEs could gradually take a more profitdriven approach to investments at home and abroad.

FEW SIGNS OF SLOWDOWN

Yet, although it seems certain that at some future point China’s economy will need to cut debt by weaning itself off capital investments as a means of stimulating growth, the project industry is seeing few signs of a slowdown, with any notable reining in of domestic investment more than offset by China’s global ambitions – and its willingness to spend heavily to support them.

Li Jiang, head of industrial projects, China and global bulk chartering at DHL Global Forwarding, said that although domestic projects commissioned by Chinese SOEs had dropped off in line with supply-side reforms by central government, overseas project investment was increasing in accordance with President Xi’s “Go Global Policy,” a blueprint he believes will guide SOE and government investments in future.

“The demand for project forwarding services is booming in China at the moment, mainly driven by SOEs’ leading projects under China’s Belt and Road initiative,” he said.

“We foresee an upward trend in ISSUE 6 / 2017

demand for conventional power plants, onshore and offshore wind farms, chemical plants for ammonia and urea, and railways, especially Chinese high-speed trains.”

James Che, head of energy and project solutions for Greater China at Panalpina, also highlighted the impact of China’s global outreach efforts, which he said were opening up “considerable” business opportunities.

“The country has become the world’s biggest manufacturing powerhouse and the most successful exporting country of integrated engineering, procurement and construction solutions,” he added.

“All of this has created a strong demand for logistics covering all kinds of cargo types and trade lanes.”

Panalpina entered the China projects market in 1999 and now also offers consulting services to help customers with EPC bidding and project logistics management. According to Che, in more recent years capital projects demand has been strongest for infrastructure (ports, roads, bridges, tunnels, railways), public service and government projects (metro and highspeed trains) and energy (nuclear, wind, solar, coal-fired). Overseas shipments from China that Panalpina’s energy and project solutions division has either controlled or supported recently also include mining and minerals shipments to Latin America and Africa, and petrochemical shipments to the Middle East.

“Although China is in a long-term structural adjustment phase towards lower GDP growth, it maintains worldleading growth levels, and China is still the single largest contributor to global economic growth,” he explained. “In recent years, the Chinese government has pushed ahead with the reform and restructuring of SOEs as well as reforms on the supply side.”

But while SOEs remain the executors of China’s desire to make its presence felt more keenly on a global scale, their collective modus operandi is expected to evolve. “We expect to see explosive growth in the coming five to 10 years in infrastructure, energy and manufacturing sectors,” Che said. “However, domestic and overseas investments will become more rational and prudent due to tighter risk control and stricter industry guidance by the government.”

FAVORING HOME GROWN

Yet while China’s support of OBOR and other global initiatives designed to meet its geopolitical aims are helping support project demand, there are suggestions that if the Chinese government is going to foot the bill, then Chinese companies will be favored when contracts are dished out.

Shanghai-based Christophe Grammare, head of the China region at AAL, said demand for shipments linked to OBOR had “exploded” in the last two years, as Chinese businesses invested heavily abroad, particularly in Southeast Asia. But he doubted whether many of these projects were being pursued for profit, an approach that has ramifications all along the supply chain.

Explaining his point, he told Breakbulk that if a project that should cost US$10 billion was instead given a nominal paper value of just US$2 billion, then the rates available to shipping companies were also, by necessity, far below realistic valuations. “These projects are, in my view, being built at below-market cost if you compare them with similar Japanese or European projects,” he said.

“So, what we’re seeing with a lot of Belt and Road initiatives is that all the cargo is being carried by Chinese carriers and operators at rates which I would expect other carriers cannot compete. We have a lot of large forwarders we visit and they offer us freight, but not at rate levels we operate at. I doubt anyone can operate at this kind of rate level. But Chinese carriers are, so the losses being generated are being covered by someone up the ladder.”

In short, Grammare believes that Chinese supply chain providers are essentially being subsidized to support government policy overseas. “China is very efficient,” he said. “When they decide something, they usually have the means to do it. So, what we’re witnessing is the execution of that policy, which can also basically be understood as: it’s Chinese money, it’s Chinese investment, we’ll use Chinese operators so the money stays in the loop.”

Henry Woo, director and head of APAC region at Hansa Heavy Lift, also reported increased recent competition from Chinese carriers. “What has taken us by surprise on several occasions is how aggressive Chinese carriers are in setting

their rates,” he said. “It can make one question the philosophy of the Chinese carriers’ organization and how can they possibly sustain themselves in the long run.”

GROWTH OF CHINESE CARRIERS

The ascendancy of Chinese carriers has become evident at the port of Shanghai, where Luojing terminal is the main breakbulk gateway terminal.

“From the statistics I’ve seen, 50 percent of the trade now from Luojing is driven by the Belt and Road initiative, and there is also a fair amount of intraAsia traffic which is relatively new and which as a foreign carrier we are not entitled to carry,” Grammare said. “Volumes at the port are rising, but if we look at the share of cargo from the port, less and less of that cargo is available on what I would call the open market cargo that international carriers can access.”

The upshot is that AAL’s own volumes have remained steady, but the carrier’s share of cargo handled at Luojing has fallen as Chinese carriers have secured larger shares.

Woo, however, maintains that the encroachment of Chinese carriers into the market will only be possible up to a certain point, at least in the short term.

He argues that as China’s manufacturers move up the technology tree and take on more complex projects, they will need ever more sophisticated supply chain solutions. “We are seeing Chinese yards and fabricators maturing, particularly for the oil and gas and mining industries,” he said. “It would take some years for other developing countries to meet China’s competitiveness and production levels.

“So, in the short to mid-term, Chinese companies will still require the expertise of foreign companies to support deliveries of finished products – particularly if Chinese companies are advancing to more sophisticated, bigger, and heavier fabrications.”

All eyes will be firmly fixed on that latest policy pronouncements of President Xi in the months ahead. BB Michael King is a multi-award winning journalist as well as a shipping and logistics consultant.

www.breakbulk.com BREAKBULK MAGAZINE 23

market spotlight

FUNDING FIX

China Funds to Boost Brazil Infrastructure

BY ANDREW WILLIS

T

he Brazilian government has received several applications for money held in a new development fund, as the struggling South American country seeks to kickstart a series of infrastructure projects in a move that could aid project cargo shippers.

The US$20 billion China-Brazil Cooperation Fund for the Expansion of Production Capacity opened for applications in June 2017 and is largely being financed by China. Better Brazilian ports, roads and railways will help the Asian powerhouse economy secure the raw materials it needs at home at a lower cost, as well as facilitating the return of manufactured goods.

By November, officials had already received four applications for financing from the China-Brazil fund, with a further 21 “on the way,” according to the Brazilian Planning Ministry Foreign Affairs Secretary Jorge Arbache.

“There is a lot happening,” Arbache said to Breakbulk. “And it’s going to have a positive influence” on many sectors throughout Brazil and further afield.

The China-LAC Industrial Cooperation Investment Fund will provide US$15 billion to the new fund, with the rest mainly coming from the Brazilian Development Bank and the state-owned Caixa Economica Federal.

Private banks in Brazil are not excluded from also providing some of the funding for projects.

TIMELINE FOR FUNDING

Civil servants and banks in both countries will evaluate the project applications in the coming months, meaning disbursements to the more developed projects could start as soon as next year.

Loans to less mature projects will take longer.

“We are accepting applications from projects that have already been developed,” Arbache said. “If a given project in these circumstances gets funding it will start borrowing very soon; depending on their circumstances, perhaps the second semester of 2018.”

The system of financing and decisionmaking by both sides distinguishes the new fund from many others involving China. Winning projects are likely to focus on upgrading Brazil’s ports, airports, roads and railways.

As well as these infrastructure projects, officials expect some funding applications from manufacturers and agribusinesses, especially as China is keen to ensure the food security of its citizens, and is a key buyer of Brazilian agricultural commodities including soy and corn.

ABOVE: Brazilians queue at a branch of the Caixa Economica Federal in Brasilia on March 10. Thousands of Brazilians lined up to withdraw the money of their guarantee funds, which can only be used in the event of unemployment. / Credit: Joédson Alves/EFE/Newscom

24 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2017

market spotlight

LONG ROAD TO RECOVERY Despite Brazil’s recent emergence from recession following modest growth in the second and third quarters of 2017, many sectors in Latin America’s most populous country have yet to benefit from the gradual uptick in economic activity.

“It takes time to reach all the connections in the chain,” said Roberto Lovesio, managing director in Brazil for shipper and freight forwarder Martin Bencher. “We expect something better next year.”

Martin Bencher established an office in Brazil in 2011 and mainly focuses on the transportation of breakbulk to the country’s wind power industry, as well as some airfreight cargo. The company operates out of Suape port in the northeastern state of Pernambuco and Santos port in the southern state São Paulo.

Brazil is the largest producer of wind power in Latin America, providing a lifeline to many shippers transporting turbines and other machinery needed for renewable energy generation after global oil prices collapsed in 2014 and drilling ground to a halt.

According to a ranking released by the Global Wind Energy Council, an international organization specialized in wind energy, Brazil expanded its wind power installed capacity by 2,014 megawatts in 2016, placing it fifth in the world ranking of installed capacity growth for the year.

“IT TAKES TIME TO REACH ALL THE CONNECTIONS IN THE CHAIN. WE EXPECT SOMETHING BETTER NEXT YEAR.”

– Roberto Lovesio Martin Bencher

26 BREAKBULK MAGAZINE

Corn production in Brazil is forecast to reach a record 97.7 million tons in the 2016-17 growing season, up 46 percent from 2015-16. The increase stems from an expanded area and improved yields for the crop, according to the Foreign Agricultural Service of the U.S. Department of Agriculture, or USDA. The bumper output is expected to lead to record exports, placing a strain on Brazil’s network of railways and ports, in need of expansion and modernization.

On top of this, greater soybean supplies available for export and a weaker local currency, coupled with strong demand from China, mean soybean exports are also on track to hit a record for the growing year 2016-17, according to the USDA.

While logistics companies may benefit from transporting these bumper crops, they stand to gain more if new infrastructure building goes ahead and closer ties develop between Brazil and China, both members of the BRICS association of emerging economies that also includes Russia, India and South Africa.

POLITICAL TIES

For Arbache, the new cooperation fund’s benefits certainly go beyond the first list of projects that are ultimately successful in securing funding.

“This fund will, above all, improve the Brazil-China relationship from the business, but also from the political perspective,” he said. “It will create the ISSUE 6 / 2017

OPPOSITE PAGE: A recent job for

Martin Bencher involved the transportation of presses to mold car aluminum from Brazil to the U.S. Credit: Martin Bencher Group RIGHT: Brazilian Planning Ministry’s

Foreign Affairs Secretary, Jorge Arbache (center left) discusses the new fund with business representatives earlier this year.

Credit: Brazilian Planning Ministry

environment for Brazil and China to get together and develop projects in different sectors.”

Many will be hoping the former World Bank economist is correct.

Brazil’s unemployment rate hit a record high 13.7 percent in the first quarter of 2017, as the nation reeled from its deepest recession in more than a century. Since then, growth and jobs have gradually returned, although many industries remain fragile and accusations of corruption continue to swirl around President Michel Temer.

A series of national problems have added to global economic weakness to make matters worse for Brazilian businesses.

State oil company Petroleo Brasileiro SA, or Petrobras, became the center of a large corruption scandal that saw executives go to jail and contributed to the downfall of former President Dilma Rousseff in 2016. Another scandal erupted the same year, this time at Brazilian construction firm Odebrecht, which subsequently admitted in a U.S. court that it had paid at least US$785 million in bribes in more than a dozen countries to win construction contracts.

“Nothing is happening in the Brazilian economy with all the scandals and corruption. Petrobras is broken,” said Roberto Lovesio, managing director in Brazil for shipper and freight forwarder Martin Bencher. “I really hope this fund will come soon.”

China’s willingness to be the chief financier in bilateral and regional funds of this nature is driven by its desire to extend its zone of influence beyond Southeast

Asia, said Livio Ribeiro, a researcher at the Brazilian Institute of Economics at the Fundação Getulio Vargas.

China’s Belt and Road initiative was unveiled in 2013, a development strategy that focuses on connectivity and cooperation among Eurasian countries, creating a trading network with China at the center.

The new China-Brazil fund should be seen as an extension of this, Ribeiro said, and is not without risks.

“There are a lot of prejudices against not only Chinese, but all foreigners entering our business here,” Ribeiro said. “It’s something that people do have in mind in Brazil. It will be a very big challenge for many foreigners getting into infrastructure, energy and transportation here.”

Rather than projects failing to get off the ground, this uneasiness in dealing with foreigners could see some of the infrastructure and agribusiness projects develop more slowly than government officials and business executives initially planned.

LOST IN TRANSLATION?

“The money came to Brazil. It will be used. The big risk is that it could take more time,” Ribeiro said. “The Chinese are used to doing things their way, but Brazilians are also very stubborn. So, you need someone to do the translation.”

It remains to be seen who will perform this interpretative role. Chinese companies have earned a reputation for completing large infrastructure projects in parts of Africa in very short periods of time, frequently using Chinese labor and materials. Some charities, however,

have been critical of environmental and human rights standards on China-coordinated projects there.

“Brazil is not the same as a small African country,” Ribeiro said. “Here in Brazil you have labor market conditions, you have the legislature. In every single municipality you have to work with the local board, you have to understand which are the needs, which are the compensations. So, Brazil is much harder than going to a small country.”

Despite these potential hiccups, the China-Brazil fund is a welcome development, filling a budgetary shortfall that could potentially support Brazil’s nascent economic revival after several tough years that many of its citizens are keen to leave behind them.

Embattled Brazilian President Temer, who has announced a wave of sweeping privatizations back home, urged greater investment in his country during a visit to Beijing in September.

“I am quite sure that having more money will help us,” Ribeiro said. “Obviously we understand what are the costs, because this money is not coming for free.

But Brazil lacks internal savings, so any big infrastructure project needs money coming from abroad so it’s totally welcome.”

China is undoubtedly aware of this leverage and keen to take advantage, especially when U.S. President Donald Trump has alienated many in Latin America. BB Andrew Willis has worked as a journalist for more than a decade in countries including Argentina, Belgium and Colombia.

www.breakbulk.com BREAKBULK MAGAZINE 27

executive summary

BY GARY BURROWS

‘NO CENTER OF GRAVITY’ Balance Of Global Powers, Nationalism Reforge Trade

T

he world is in a “transformative moment” in power and relationships within and among nations, which is guiding trade patterns, and potentially reducing globalization and broad-based supply chains, said Rodger Baker, vice president of strategic analysis for Stratfor.

“The world system is not stable.

There is no center of gravity” among the leading powers of the U.S., European Union and China, he said during a keynote address at Breakbulk Americas.

Baker framed his discussion looking at the balance of global power at specific, recent times. He noted that the Cold War was ironically a period of great stability, as the two major powers of the U.S. and Soviet Union competed, but also balanced the globe and held together unstable parts of the world between them.

“With the end of the Soviet Union the world was tipped completely out of balance,” Baker said. “The U.S. was a sin28 BREAKBULK MAGAZINE www.breakbulk.com

gular power, it was dominant politically, economically and militarily.”

While viewed optimistically through the leftover cold war lens that the singlelargest economic and military power would maintain peace and stability, the idea of a “unipower” world was unrealistic, he said. Enter the European Union, which became the single-largest economic entity, and China, which became the driver of single-source manufacturing for exports to the U.S., Europe and the world.

This three-pillar balance shaped international trade and economics and politics around the world. Then came the global financial crisis and “the system started to fracture,” Baker said.

While the U.S. market fell and then recovered, Europe’s economic decline “pulled the rug out from underneath China because Europe had become the single-most dominant space for Chinese exports by that time,” he said.

Cracks began to form in China’s more

Russian President Vladimir Putin, U.S. President Donald Trump, Vietnamese President Tran Dai Quang and Chinese President Xi Jinping at the APEC Summit in Danang, Vietnam on Nov. 11.

Credit: Adrian Wyld/ZUMA Press/Newscom

traditional East Asian economic system – export- and growth-oriented – as companies started operating at negative margins just to keep employment going and growing. As exports fell, China tried to stave off crises by ramping up infrastructure development.

At China’s latest party conference in mid-October, “one of the big issues there was the concept of redistribution of wealth,” Baker said. “It’s taking the money from the rich coastal areas that have grown faster and … shifting those resources and that attention to the interior,” reaching 900 million people that aren’t currently part of the active Chinese economy.

ISSUE 6 / 2017

HEAVY LIFT LEADERS.

executive summary

Rodger Baker, vice president of strategic analysis for Stratfor, speaking at Breakbulk Americas 2017.

DIS-INTEGRATION

Baker said Europe is moving towards “dis-integration – not disintegration” and he did not expect a complete removal of the European Union. Rather than living up to the dream of a pan-national entity based on trade and shared values, the EU is experiencing pushback.

That response is realistic, he said.

“You can’t expect, for example, Greece to be able to manage its economic problems based on a German economic model.”

As those systems have started to break down, migrant flows have exacerbated the nationalist mindset. “There was the sense internally in Europe that nations needed to start consolidating and thinking about themselves. If you’re the chancellor of Germany in the end you are answerable to the German people, not the Greek people, not the Italian people, and that’s one of the biggest weaknesses of that European system.”

In the dis-integration Baker predicts, certain blocs will remain – the EU and the euro may still exist, “but the concepts of tighter and tighter integration are going to break apart,” not just in Europe but globally.

CHINA’S CHANGES

While China’s history reflected a country that could isolate itself when it needed, “it can no longer afford to do so,” Baker said.

China has gone from self-sufficiency in natural resources to importing two to five times its own production of natural 30 BREAKBULK MAGAZINE www.breakbulk.com

resources. Its economy has become too tightly linked internationally “and China is being forced to push out and become a more activist player economically, politically and, in the near future, militarily.”

The purpose of the ambitious Belt and Road Initiative is in part to alleviate the Cold War concept of containment, Baker said. One is to “find redundant trade routes so that the U.S., the naval power, can’t block you in.”

The goal is to create multiple connections to countries to reduce the ability of countries to be used as pressure points against China. The country’s infrastruc-

not living as long, reducing the amount of available labor, he added.

Showing a Russian map turned upside down, he explained that Russia is trying to create space around its borders to increase security. “It doesn’t feel secure until it’s pushing out all the way to the Carpathians. It doesn’t feel secure until it’s pushed down to the Caucasuses.

The Ural Mountains don’t even provide security; that’s why they have to push all the way down to the Tien Shan.”

As Russia continues to be aggressive and assertive in its periphery, it is also increasing its attention on the Far East, specifically Japan and China, as its European opportunities decrease.

Asian investment in Russian mineral and energy resources improves the bond, though Russia needs both China and Japan involved. “If it’s only Russia and China, then China owns Russia. But if it’s Russia and China and Japan, then Russia owns the relationship because it can play the balance off those two,” he said.

Baker downplayed the impact of Isis and al Qaeda on the world order due to their inability to hold sustained territory. They are located in critical areas, but he noted that their insurgencies are usually within areas where problems pre-existed.

He does warn that, as issues ease in Syria and Iraq, Libya will become a place to watch, particularly for southern Europeans.

“THERE WAS THE SENSE INTERNALLY IN EUROPE THAT NATIONS NEEDED TO START CONSOLIDATING AND THINKING ABOUT THEMSELVES...” – Rodger Baker, Stratfor ture investments into its interior also create transportation connections, forcing trade flows through the interior and outward to other markets, he said.

RUSSIAN PERSPECTIVE

Baker said Russia “is heading toward a major demographic crisis. Ethnic Russian populations are decreasing, as Islamic ethnicities are increasing, a trend similar to the U.S. in which minorities will make up most the country. Russians are also

More ominously, Baker said “there is no resolution to the North Korean crisis any longer.” The North Koreans won’t give up their program and the U.S. has declared they cannot accept the program. “The U.S. policy now is to convince the Chinese that the U.S. is serious about attacking North Korea and get the Chinese to decide it’s costlier to do nothing than it is to overthrow the Korean government,” he said.

In response to a later question on the threat of nuclear war, Baker saw the ISSUE 6 / 2017

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executive summary

highest risk as likely coming from an accident, during some provocative act.

“I would say it is very serious, but I have in-laws in Korea and I haven’t told them to leave,” he said.

DO WE NAFTA?

While much has been made of the U.S. nationalism trends and wall-building, it remains tightly entwined with Mexico and Canada, and economically, as well as geographically, placed smack dab between them.

The North American Free Participants of the Trade Agreement G20 summit and their – which Baker spouses pose for a notes preceded family photo around the World Trade German Chancellor Organization – has Angela Merkel. not kept up with how manufacturCredit: Ludovic MarinPool/SIPA/Newscom ing has changed.

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ISSUE 6 / 2017

And while he doesn’t see NAFTA being completely thrown away, he sees necessities to change and update the trade pact.

“Certainly, the U.S. demands for local content levels are going to be very hard for the Mexicans and Canadians to fully agree with,” he said. He also noted that automakers may simply ignore a revived NAFTA because of local content rules, as taking a tariff on the automobile “will be cheaper than redoing everything else.”

Any movement on NAFTA is likely to lag. “The last set of talks was putting everything on the table in such an extreme way that nobody wants to come back and talk today,” he said. While talks should restart next year, two speed bumps are Mexican and U.S. midterm elections.

“It will be something that’s going to come out much different than what we’re used to seeing, but I don’t think nearly at the extremes that we’ve been seeing from the Trump administration,” he said.

Baker added that the U.S. movement towards isolationism was a natural, cyclical trend, and was not caused by the president. “World War I, World War II, Vietnam … you saw these same cycles that came because of changes in the perception of military. Perceptions socially, economically, pull it back in,” he said.

PACKING UP TRADE PACTS

Beyond North America, China and the EU are exerting influence on Latin America and the Caribbean, China through being a leading trade partner, and Europe as the biggest provider of foreign direct investment.

In the middle is Mercosur and full members Argentina, Brazil, Paraguay and Uruguay. On one hand, the trade bloc offers an alternative for Mexico – which can do bilateral deals within Mercosur countries without Mercosur’s permission as a whole. But Mercosur is

also looking outward at South Korea and China, and the EU as its main driver, along with other European groups.

NAFTA, the EU and WTO ushered in a burgeoning volume of trade agreements starting in the early 1990s. Baker says that trend is now reversing.

“It may be we still have a lot of trade agreements, but they’re going to go back to a lot of the bilateral and mini-lateral agreements,” he said.

The nationalist movements of nations mean removal of a lot of global elements that became enmeshed in those agreements, focused on changing political concerns. Instead he sees more interregional agreements replacing the extreme supply chains. BB This story is part of our news coverage of Breakbulk Americas 2017. See the full event recap on page 58.

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rules and regulations

BY PAUL SCOTT ABBOTT

TRADE TERMS EVOLUTION Incoterms 2020 Come Into Focus

A

s Incoterms rules used in global trade go into their latest iteration, leaders of engineering, procurement and construction and freight forwarding firms are hoping their input will be incorporated.

The Incoterms 2020 revision process has been going on for two years already, with plans for a finalized version of the powerful three-letter acronyms to be available in 2019 in anticipation of worldwide implementation as of Jan. 1, 2020.

EPCs and forwarders would like to see a number of issues addressed – from technological advances and insurance requirements to safety and security concerns – while hopes are that additional easy-to-understand guidance will be provided on implementation of the rules, which are largely the work of attorneys.

In conversations with Breakbulk, Samuel Holmes, logistics coordinator for the Wood Group, noted the significance of avoiding costly misuse of Incoterms rules; Stefanie Roberts, manager of quality and training for project forwarder Fracht USA, emphasized the importance of more comprehensive insurance obligations; while Frank Schroder, global logistics manager for CB&I Fabrication Services, homed in on a need for non-legalese clarity.

CLARITY SOUGHT

The call for clearness apparently has been heard by the Paris-based International Chamber of Commerce, which has led the process in publication of the 34 BREAKBULK MAGAZINE www.breakbulk.com

Samuel Holmes

Stefanie Roberts

Wood Group

Fracht USA

International Commercial Terms since the first of eight editions to date came out in 1936, following eight years of study. While voluntary, the rules, commonly referred to as Incoterms, have become widely accepted in furnishing a legal framework for global, as well as domestic, transactions.

Like most of those closely involved in the Incoterms 2020 process, Emily O’Connor, senior policy manager for the Commission on Commercial Law and Practice for the ICC, was largely silent on revision discussions, citing confidentiality – but she did offer a hint as to what may be expected in conversation with Breakbulk.

“I’m afraid we’re not in a position to provide information about the new revision, which is confidential in connection with the ongoing consultations with members,” O’Connor said. “I can say that a general focus will be on making the rules easier to understand and use, to try

to reduce misuse of the Incoterms rules, which can lead to costly consequences.”

Wood Group’s Holmes said he believes appropriate training of those – like himself – who apply the rules on a daily basis is essential.

“Improper use of Incoterms can cost your company a whole lot of money,” Holmes said, “so education in how to use those terms is a very key issue. Logistics leaders need to make it a priority to educate and prepare the next generation on how to properly use these terms.”

LEGALESE SPURNED

CB&I’s Schroder underscored the imperative of clarity: “Everybody hopes for a little less legal talk and a little more explanation and definitive results.”

Schroder said he thinks it would be “a great idea” to combine descriptive guidance with the rulebook itself, calling such a combination “No. 1 on the wish list.”

Fracht’s Roberts, noting that the Incoterms 2010 revision reduced the number of terms from 13 to 11, said, “The fewer terms there are, but the more guidance the ICC can give, is best for everyone, including forwarders and the buyers and sellers.”

One term Roberts would like to see eliminated is EXW, short for Ex Works, through which the seller makes goods available at its premises or other specified place, leaving the buyer on the hook for risks in bringing goods to final destination.

“I think that would be great, because, in my opinion, Ex Works ISSUE 6 / 2017

Over the course of nearly a century, Incoterms rules have evolved to stay current with international trade practices.

1990

1923

ICC unveils Incoterms 1990, a complete revision of the 1953 version reflecting contemporary practices in international trade and use of intermodal transport.

FRC becomes FCA. Changes also contain provisions for the use of electronic messages.

1980

ICC conducts first study of most commonly used trade terms, highlighting disparities of their interpretation.

FRC (Free Carrier) term and new documentation processes introduced to address rise of containerization.

1928

Second Incoterms rules study expands scope to improve clarity of trade terms in more than 30 countries.

2000

Publication of Incoterms 2000 sees major changes to the “Delivery” section, which made the term FCA (Free Carrier) far clearer and easier to use.

1976

Fourth edition of the Incoterms rules announces new terms to end confusion related to the interpretation of FOB (Free on Board) for air transport.

2010

1936

ICC publishes first edition of the Incoterms rules featuring six trade terms relating to carriage by sea.

1953

Three new nonmaritime terms address the rise of transport of goods by rail in the wake of World War II. FOR (Free on Rail), FOT (Free on Truck) and DCP (Delivered Costs Paid).

1967

ICC launches third edition of the Incoterms rules including two new terms: DAF (Delivery at Frontier) and DDP (Delivery in Country of Destination).

ICC releases Incoterms 2010, reducing the number of terms from 13 to 11 by inclusion of two new rules for use irrespective of the agreed mode of transport.

Other modifications to reflect contemporary trade landscape comprises measures to enhance cooperation among parties and adaptations regarding commodities sales and domestic transactions.

Source: International Chamber of Commerce

www.breakbulk.com BREAKBULK MAGAZINE 35

rules and regulations

doesn’t really benefit either party – the buyer or seller,” she said. “Ex Works is commonly misunderstood and is our worst nightmare of a term.”

Rather than EXW, Roberts would prefer to see greater use of FCA, short for Free Carrier, through which the seller delivers cleared-for-export goods at a named place. Under FCA, she said, the seller has greater responsibility while the buyer is more protected in transfer of risk.

tion,” Schroder said. “It’s hard to make those a whole lot better.”

That said, modern technology does need to be addressed, he said. One example he cited is pinning down the point of transfer for cargo being floated onto a semisubmersible vessel.

LOADING UNDEFINED

In fact, according to Schroder, the entire issue of loading remains fuzzy, even for container ships, which, unlike semisubmersibles, have been a common means of carriage for more than a half-century.

“Incoterms have trouble defining a clear path when it comes to container vessels, and container vessels have been around since the 1950s,” Schroder said.

“Loading is not defined in the Incoterms, which is odd and is something I’d like to see.”

Others close to the Incoterms revision process have cited the need to address technological advances such as deliveries via drones, as well as the increasingly commonplace practice, even in the EPC business, of online catalog buying.

Indeed, technology is seen by Wood Group’s Holmes as a favorable influencer.

“Technology will continue to have a positive impact on how transactions that are governed under Incoterms are executed, especially those terms that involve international trade,” Holmes said. “Technology has made it easy for parties to collaborate and meet their export and import clearance obligations electronically.”

This, according to Holmes, has improved the import and export

RISK SEEN AS ISSUE

Indeed, risk is a broader significant issue for Roberts, who said current Incoterms rules call for only minimum insurance coverage. “We would like to see a push for all-risk insurance to be standard,” she said.

Roberts also called for better industry use of sales contracts to shore up details that are not covered by Incoterms rules.

Above all, she simply wants to be heard.

“A lot of organizations reach out to forwarders for their input,” Roberts said.

“To be honest, I’m not sure how much of that filters down to the actual meetings.

I would hope they take into consideration the feedback from us, because we’re the ones at the front line, working on real shipments.”

CB&I’s Schroder said he is satisfied with the process for gleaning suggestions from forwarders and EPCs and that – other than replacing or at least augmenting legalese with simple explanations – few changes may be necessary as Incoterms 2020 evolves.

“I think the 2010 version is already a good set of instructions and informa-

SECURITY AND SAFETY OF CONCERN From a project cargo perspective, Wood Group’s Samuel Holmes is hoping for additional guidance in the next iteration of Incoterms on dealing with cargo security as a result of increased terrorism activities around the globe, including guidance on the Safety of Life at Sea, or SOLAS, new verified gross mass requirements for container shipments, port unloading costs, and container drayage and loading costs.

On the safety front, Holmes would like more specificity on which party

pays the down time costs related to stopping work due to unsafe practices by stevedores, riggers, drivers and others.

He said he believes a comprehensive risk management plan is needed for each job to assess factors that could impact delivery schedule, community relations and the environment.

Such a plan, he added, should encompass the ability to quickly change course and execute work with minimum disruption to operations.

36 BREAKBULK MAGAZINE www.breakbulk.com

clearance process by significantly reducing the turnaround time in receiving documentation to file with Customs. It has also greatly lessened the need for using courier services to pick up and deliver physical hard copies of export/import documents in a trade environment in which fewer countries are requiring physical copies of such documents.

“One thing I am most excited and optimistic about is how artificial intelligence and virtual reality are going to positively shape how Incoterms are used in the very near future,” Holmes said.

“For instance, AI could influence domestic delivery terms on how shipments will be delivered using autonomous vehicles such as self-driving trucks.”

He added that EPCs and forwarders could positively influence the next iteration of trading terms by collectively proposing candid recommendations that improve the effective use of the terms to reflect current and future market conditions.

“Much has happened since 2010, and events influencing how these terms are used effectively to improve global trade transactions will continue to occur,” Holmes said. “EPCs’ inputs are especially important since they are one of the frequent users of these terms.

They understand which Incoterms have worked well for all parties and those that could be improved upon to balance sellers’ and buyers’ obligations.”

EPCs and forwarders alike have been among parties furnishing their thoughts to national committees in 130 countries. Those committees have already reviewed an initial highly confidential Incoterms 2020 draft and are slated to receive a second draft version for further comment by the end of 2017.

The ICC drafting group itself includes representatives from seven nations – France, the UK, Germany, Australia, Turkey, China and the U.S. Once consensus is reached, the final version of Incoterms 2020 is to be translated into three-dozen languages, with its vision appropriately fully focused for 2020 implementation. BB A professional journalist for nearly 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late 1980s.

ISSUE 6 / 2017

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logistics perspective

ISLAND IN DESPAIR Puerto Rico Faces Protracted, Multibillion-dollar Rebuilding

BY PAUL SCOTT ABBOTT

R

elief and rebuilding efforts can’t come fast enough for the more than 3.4 million people of Puerto Rico, who on Sept. 20 suffered devastation wrought

by Hurricane Maria, exacerbating an economic crisis that has impaired the island commonwealth for more than a decade.

All three U.S.-flag carriers engaged in Puerto Rico commerce have significantly stepped up their services, but challenges are expected to linger for years as endeavors shift from basic relief to reconstruction of annihilated infrastructure.

Whereas the U.S. federal government has come under staunch criticism for lack of swift, efficient efforts, including for power restoration, executives of carriers serving Puerto Rico are quick to note that, as an island, the commonwealth is not nearly as easy to reach 38 BREAKBULK MAGAZINE www.breakbulk.com

with relief and recovery cargoes as a mainland U.S. state, to which trucks can rapidly drive.

In the case of Puerto Rico, which is located in the Caribbean about 1,000 miles southeast of Miami, all goods – from drinking water bottles and ready-to-eat meals to utility trucks and telephone poles – must arrive via water or, in fewer instances, air.

RECOVERY ‘LONG WAY OFF’

“Return to normal is a long way off,” said Cole Cosgrove, vice president of marine operations at Crowley Maritime, which has served the Puerto Rico market for 65 years and has more than 300 employees on the island.

As of Nov. 1, Crowley had delivered 11,000 loads of commercial and government relief supplies to its Isla Grande Terminal in San Juan. That included more than 4,000 loads for the Federal Emergency Management Agency.

In the first six weeks following Maria’s Puerto Rico landfall, Crowley increased to 16 from nine the number of vessels in its fleet serving the island, including deploying two flat-deck barges, each measuring 400 feet by 105 feet, specially retrofitted to carry stacked shipping containers to San Juan from the company’s mainland hub at the Port of Cole Cosgrove Jacksonville, in Northeast Florida.

Crowley Maritime Crowley also has brought in more than 5,000 additional containers and chassis.

While Crowley and other U.S.-flag carriers have been transporting unprecedented levels of cargo to the Port of San ISSUE 6 / 2017

Juan, pickup of goods-filled containers, as well as return of empties, has continued to lag.

Communications remained a substantial challenge several weeks after landfall, as did impacted internal road infrastructure beyond city thoroughfares, while a clear majority of the 100-mile-long, 35-mile-wide island remained without electric power.

Engineering, procurement and construction firms are playing an increasing role in the early efforts. For example, the U.S. Army Corps of Engineers in early November boosted to US$840 million from US$240 million a contract with Fluor Corp. as part of strategies to speed power grid restoration.

MORE FEDERAL AID NEEDED

In late October, Puerto Rican officials said that – in part because collections of taxes and fees are likely to be cut in half due to storm impacts – they will

be seeking billions of additional federal dollars to help recovery. Estimates of costs to rebuild Puerto Rican infrastructure have ranged from US$40 billion to US$100 billion, but, as of the first week of November, only about US$5 billion in additional aid to the island had been approved by U.S. Congress.

From a human standpoint, Maria resulted in deaths of more than 50 Puerto Ricans and has caused tens of thousands of residents to flee the island.

Quickly getting relief cargo to the people of Puerto Rico became an instant priority following Maria’s landfall, and Crowley had its first tug-and-barge combination discharging cargo in the Port of San Juan within two hours of the port’s reopening the morning of Sept. 23.

Cosgrove pointed to the dedication and resilience of Puerto Ricans whose personal lives were drastically impacted by the storm yet toiled on an around-theclock basis to get cargo moving. Also, in

OPPOSITE PAGE: Residents walk down a

street in the Condado neighborhood in San Juan after Hurricane Maria.

Credit: Jose Ahiram Diaz-Ramos/ZUMA Press/Newscom THIS PAGE, CLOCKWISE FROM LEFT:

Aerial view of a flooded and damaged road in the mountains near San Juan.

Credit: Lauren Harrah/ZUMA Press/Newscom

Citizens of Jayuga unload food and water from a HH-60 Black Hawk assigned to the 101st Combat Aviation Brigade (CAB), 101st Airborne Division (Air Assault) on Oct. 4. The 101st CAB is conducting medical evacuation and relief efforts to support FEMA during Puerto Rico’s recovery process.

Credit: Staff Sgt. Pablo Piedra/UPI/Newscom

Some of more than 40 trucks shipped to Puerto Rico by Northeast Florida’s JEA utility company are loaded on a Crowley Maritime barge at the Port of Jacksonville.

Credit: Jacksonville Port Authority

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logistics perspective

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ISSUE 6 / 2017

the first days following landfall, Crowley employees in Jacksonville filled containers with 50 tons of donated bottled water, canned foods and other relief goods that were promptly shipped to the island.

Cosgrove said he sees abundant opportunities for bringing project cargoes to Puerto Rico, adding, “Crowley and the rest of the transportation industry as a whole are positioned to support that.”

VESSEL CAPACITY ADDED

JACKSONVILLE SERVES AS PRIME HUB Whereas some goods to ravaged Puerto Rico are moving by air, a clear majority of activity continues to be waterborne, with the Port of Jacksonville maintaining its longtime role as the maritime link between the U.S. mainland and island commonwealth.

Roy Schleicher, Jacksonville Port Authority’s executive vice president and chief commercial officer, said: “JAXPORT’s Puerto Rican carriers have been adding services and expediting the shipment of thousands of containers of relief items to the island’s residents daily since Maria’s devastation.

“All of us have been working around the clock to support the timely delivery of not just food, water and other essentials, but also equipment to restore power and some semblance of normality for our neighbors,” Schleicher said.

“Jacksonville will continue to serve as a lifeline between the U.S. mainland and Puerto Rico – just as we always are – long after the hurricane headlines fade.”

Other ports, those of Florida in particular, have been engaged as well.

In late October and early November, Port Canaveral, on Central Florida’s Atlantic Coast, saw Beyel Brothers Crane and Rigging partnering with port marine terminal operator Ambassador Services Inc. to transport vital communications equipment, infrastructure, emergency supplies and equipment, including pallets of bottled water, bundles of fiberoptic cables, vehicles and some 2,500 light poles, as part of what Port Canaveral CEO John Murray, described as a “Herculean effort.”

On Central Florida’s Gulf Coast, Port Manatee saw deployment the first week of October of a newly built Seacor Marine U.S.flag aluminum fast support vessel carrying equipment including 10 work trucks, two generators and two containers of relief goods, as well as a dozen construction, maintenance and security workers, for Sarasota, Florida-based cellular communications contractor USA Groups.

ABOVE: At the Port of Jacksonville, Florida Gov. Rick Scott visits a warehouse filled

with Federal Emergency Management Agency water pallets to be loaded for transit to Puerto Rico. / Credit: Jacksonville Port Authority OPPOSITE PAGE: A work truck to be used to help restore communications in

hurricane-devastated Puerto Rico is loaded on a vessel at Port Manatee, on Central Florida’s Gulf Coast. / Credit: Manatee Port Authority

Another U.S.-flag carrier typically serving Puerto Rico via barges, Trailer Bridge, put a fifth barge into its liner service within 48 hours of the storm hitting while adding 300 more containers and chassis, according to the company President and CEO Mitch Luciano, who said an additional 400-by-100-foot barge was being deployed to bring in telephone poles Mitch Luciano and other oversized cargo units.

Trailer Bridge Luciano said he sees “huge opportunity” for bringing Puerto Rico utility poles, power cables and other big cargoes for rebuilding what he described as “already a lackluster infrastructure to begin with.”

“They literally need for the infrastructure to be rebuilt from the ground up,” said Luciano, who spent two weeks on the island in the month following Maria’s landfall.

Luciano said fresh approaches may be taken in some cases. For example, rather than extending power lines back into a remote mountainous area that is home to fewer than 100 people, electricity might be restored to those residents via development of a solar power installation.

As of early November, Luciano said, efforts were beginning to shift from the relief mode to the repair phase, with a third phase, that of replenishment, anticipated to get into gear by yearend.

The third carrier plying the waters from Jacksonville to San Juan, TOTE Maritime, has augmented its fleet of LNG-driven containerships with two www.breakbulk.com BREAKBULK MAGAZINE 41

logistics perspective

barges, and secured more than 2,000 pieces of additional equipment, including refrigerated and dry containers plus flat-racks for moving utility trucks, while extending gate hours in San Juan and Jacksonville.

CHALLENGES COMPOUNDED

At Central Florida’s Port Canaveral, telephone poles and other supplies to be used in rebuilding Puerto Rican infrastructure are loaded Oct. 23 on a barge.

Credit: Canaveral Port Authority

QUESTIONING U.S. POLICY ISSUES As U.S.-flag vessels plus foreignflag ships originating from non-U.S. ports have continued to meet Puerto Rico’s demands, Maria’s destruction of Puerto Rico has revived controversy in the form of efforts to repeal the 97-year-old Jones Act, which requires all goods shipped between U.S. points, such as Jacksonville and San Juan, to be carried on U.S.-owned, built and crewed ships.

The Trump administration ordered a 10-day waiver of the Jones Act for Puerto Rico on Sept.

28, but did not extend the waiver, with David Lapan, director of the U.S. Department of Defense press office, commenting: “We believe that extending the waiver is unnecessary to support the humanitarian relief efforts on the island. There is an

ample supply of Jones Act-qualified vessels to ensure that cargo is able to reach Puerto Rico.”

More valid long-term solutions for spurring Puerto Rico’s rebound may better come from revival of U.S. incentives for business on the island, such as the federal Section 936 tax program, which from 1976 to 1996 allowed U.S.-based pharmaceutical manufacturers to send all income from Puerto Rican plants to mainland parent plants without having to pay federal taxes.

However, some observers contend that the incentives themselves were responsible for artificially boosting the island’s economy, as their full repeal in 2006 timed directly with a departure of foreign investment and the start of Puerto Rico’s fiscal collapse.

Tyler Edgar, TOTE Maritime’s senior manager of marketing and communications, said the already behind-the-times infrastructure of the island has compounded challenges and will continue to make recovery difficult.

“The hurricane has highlighted the lack of investment in infrastructure over the last decade or so as a result of the island’s financial problems,” Edgar said.

“This is making it harder to get power and reliable communication, which are critical to daily life, back in place.”

Third-party logistics providers have been heavily engaged as well.

Eric Shover, C.H. Robinson’s vice president of the Americas, said his company has focused on sending cargo planes from Miami International Airport to San Juan Luis Muñoz Marin International Airport with critical supplies such as generators, hygienic kits, food, water, ice, cots and materials for building bathroom and shower facilities.

C.H. Robinson’s first such charter plane landed in San Juan nine days after the hurricane hit.

“Many of the day-to-day products desperately needed are considered hazardous for air travel,” Shover said.

“For example, items like lithium batteries, generators and hand sanitizer are considered hazardous and had to be properly labeled and packaged to be safe for air travel.”

Another of the challenges faced while trying to move cargo within the island, according to Shover, is that, because traffic lights don’t function without electricity, it can take three hours to complete a truck move that otherwise would have required just a half-hour. On a positive note, he added that the fuel shortage that plagued the island in Maria’s wake had eased by late October. BB A professional journalist for nearly 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late 1980s.

ISSUE 6 / 2017

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logistics perspective

WIND ENERGY LOGISTICS FOLLOWS THE CONSTRUCTION CURVE, TWIDDLING ITS THUMBS UNTIL THE GROUND THAWS AND CONSTRUCTION STARTS, THEN GOING GANGBUSTERS.” – Clay Gambill BNSF Logistics

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ISSUE 6 / 2017

BY LORI MUSSER

WIND DRIVEN Upsizing Begs Supply Chain Change

R

enewable energy sectors are growing.

In September, WindEurope reported that by 2030, 323 gigawatts of wind energy capacity would likely be installed in the European Union, more than doubling capacity in 2016, and providing 30 percent of EU power demand. Targets of 20 percent by 2020, and 27 percent by 2030, are kindling renewables.

In its mid-year 2017 report, the American Wind Energy Association, or AWEA, said there were 84 gigawatts of installed wind capacity in the U.S., and another 26 GW on its way. Because 2020 is the last year to get wind projects fully commissioned to qualify for full federal Production Tax Credit, developers are racing to completion.

With wind sector growth comes greater demand for transportation and logistics. Wind projects have disproportionately higher transport costs, which favors near-sourcing. AWEA reported U.S. domestic content has grown to 67 percent.

Compressed windows for wind project delivery are an issue. Minnesota-based wind transportation expert Anderson Trucking Service, or ATS, said that while roughly 7.1 GW will be installed in the U.S. in 2017, volumes are expected to rise to 12.4 GW or more to meet the peak tax credit in 2020. Gene Lemke, vice president of ATS Project Services, said: “Transportation will be concentrated to the latter portion of that window, creating an intense demand for available capacity.”

Fortunately, U.S. demand will evolve and persist after 2020. As onshore tur-

bine platforms get larger, their efficiency should ensure competitiveness without tax credits.

Clay Gambill, director of wind energy sales with BNSF Logistics, said that seasonality is another factor. “We need to smooth out the peaks and valleys. Wind energy logistics follows the construction curve, twiddling its thumbs until the ground thaws and construction starts, Clay Gambill then going gangbusters.” Moving BNSF Logistics components within a compressed time period each year hinders supply chains.

With demand for wind power growing and price falling, the supply chain is tasked with keeping costs low, despite cycles, seasons or upsizing.

OVER-THE-ROAD INNOVATION

In 2017, ATS hauled 62 meter blades for the first time – more than 80 loads.

Visualize roughly 14 mid-size sedans parked end-to-end, 80 times over.

“The 62-meter blade is currently the largest wind component in motion, and today’s designs already push the limits of existing transportation equipment,” Lemke said. “The industry will eventually get to 70-meter-plus blades, and that will create continuing challenges.”

In some ways transportation providers are a victim of their own success. / Credit: BNSF

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logistics perspective

REINFORCEMENTS WORTH EXPENSE In August, Glogos Project LLC delivered 40,000 freight tons of wind turbine blades for Russia’s first wind farm, near Ulyanovsk.

Windmill components for the Fortum power initiative were moved from Shanghai via ocean freight with delivery to Constanța, Romania, and then transshipped to the river port of Ulyanovsk.

Konstantin Grinevich, head of Glogos Project, said the project presented numerous challenges.

Transshipment was necessary due to river draft, but overcapacity and weather concerns at the Russian port of Novorossiyk led the company to settle on transshipment at Constanța, Grinevich said.

Glogos ruled out the use of flat-top barges due to cost and potential air draft issues, but had to upgrade existing sea-river vessels to accommodate weight distribution and optimal (cradled, three-tier) stowage of components that were too long for the holds and too heavy to sit on hatches.

Although Grinevich deemed the reinforced deck “quite an expense,” Glogos’ bespoke solution allowed the entire project to move in only two shipments – the towers were delivered in autumn 2016 and the propellers in August 2017.

46 BREAKBULK MAGAZINE

The size of components requires STARTING A DIALOGUE thorough vetting of every route option Sander Splinter, president of ESTA’s for safety, height, width, weight restric- Section Cranes and managing director tions and other factors. “Every mile, of Mammoet Europe, said an important every intersection, every turn. Once fix may be found in early dialogue about a viable route is determined, it oftenelements such as site design. He said the times must be altered – sometimes quality of preplanning and communicamidstream – due to construction or tion between stakeholders is the key other unforeseen circumstances; then issue. the process must start all over again,” “At Mammoet we are involved in Lemke said. transporting wind turbine components So, while big turbines are mainly in Denmark,” he said. “The undoubtedly better for efficient knowledge we have from the local marpower generation, they are not for ket enables us to make the impossible transport. Gambill said in some ways possible for our customers … By early transportation providers are a victim involvement, we are able to advise the of their own success. turbine manufactur“We keep telling the ers, and come up with industry they can’t transport solutions make the components fitting their needs.” any bigger, then An optimized they do, and we find project supply chain WE KEEP solutions,” he said. works hand in hand That said, wind with original equipTELLING THE industry transporment manufacturers to INDUSTRY THEY tation mishaps are develop creative soluspotlighting the need CAN’T MAKE THE tions that drive costs for safe and costout of transportation.

COMPONENTS effective delivery, and OEMs that cleverly will likely expedite engineer transportANY BIGGER, some manufacturfriendly turbines THEN THEY DO, ing and supply chain – perhaps with splitsolutions. blade designs, nacelle AND WE FIND Here, progress is components that can SOLUTIONS.” afoot. The increased safely be moved on use of more advanced readily available trailer – Clay Gambill materials, including inventory (such as BNSF Logistics carbon fiber, S-Glass 13-axle or less in U.S. and advanced bondmarkets), and tower ing and core materials, as well as blade dimensions that can be safely accommodularization, flip-twist-coupled modated within the capacity of existing blade designs, and other developments, equipment – can optimize logistics are in the works, according to the costs.

Massachusetts-based Wind Technology To create greater efficiency in Testing Center. Designers are increaswind projects in general, setting comingly modularizing components and mon minimum standards is an option. cranes. Boston-based Vortex Bladeless National standards organizations and has even developed a bladeless option the International Organization for Stanthat captures energy through vorticity, dardization have recognized that, across eliminating blades. sectors, technological changes affect Potential for standards is also every aspect of logistics and create presemerging. FEM, the European Materisure to deliver faster, cheaper and more als Handling Federation, and ESTA, the safely. In the September-October 2017 European Association for Abnormal ISOfocus report on transport trends, Road Transport and Mobile Cranes, are Christoph Winterhalter, executive board jointly advocating for new industrychairman of DIN, Germany’s standards wide best practice guidelines for lifting organization, wrote: “New business and transporting wind turbines. models, new business participants and ISSUE 6 / 2017

new technologies all conspire to make innovation cycles shorter, forcing the logistics sector to constantly reinvent itself in order to keep up.”

In the U.S., AWEA’s Transportation and Logistics Working Group, which aims to eliminate transportation-related barriers, is drafting an OEM guide that will highlight existing transportation constraints for turbine manufacturers.

PERMITTING, ESCORTS, TRAINING

While component size, route and site challenges bedevil almost all wind turbine movements, each market faces regional challenges too. In the U.S., for example, there are challenges related to permitting and escort requirements.

“Hauling components this large requires a heightened focus on safety and special permitting,” complicated by escort and other requirements that vary by state, Lemke explained. “The process to coordinate it all can be complex and time consuming. A high degree of expertise, market relationships and technical knowledge are required to do it efficiently and do it right.”

Driver training is a top issue.

Schnable trailers and wind blade trailer drivers are among the most highly skilled heavy-haul drivers in the world, according to Lemke. Matching equipment, drivers, escorts and other personnel with loads can be a daunting task – one exacerbated by compressed transport windows and ever-larger components. Fortunately, there is no shortage of innovative solutions.

When a service with the right clearances is available, rail can offer substantial savings and environmental/ safety advantages over trucking. That is particularly important in the state of Texas, home to triple the wind capacity of any other U.S. state. Texas-based BNSF Logistics is production-ready on a patent-pending technology it calls a single universal fixture for all modes, which improves clearance, load factors and efficiency.

With logistics costs for wind projects running at perhaps twice that of other industries, and truck capacity projected to be a real challenge, moving increasingly longer blades inside the required clearance by rail is an important develop-

ment. “When the 70-meter blades come, we are standing ready,” Gambill said.

BNSF said its Blade Runner eliminates the need for attached fixtures, saving money and other resources, “unshackling” logistics constraints and moving the wind industry a little closer to self-sustaining cost levels. Tests of the new system (blades pointing tip to tip in a reverse pivot-point configuration that helps manage curves) reportedly showed a 35 percent improvement on clearance and a 25 percent improvement on ocean blade stowage, as well as additional efficiencies.

Transportation Technology Services, or TTS, also based in Texas, has developed its High Density Universal Blade Train fixture and configuration to allow customers to ship 48 blades of 50 meters length on a single 72-car unit train. The “stacking tip stand” reportedly resulted in a 33 percent load increase, reducing shipping costs. The TTS blade trains were launched in 2014.

In September, Martin Bencher USA announced a patent for its North American market blade fixture. According to the company, only minor adjustments are needed to support different OEMs. Martin Bencher’s fixture connects to the end of the wind blade, includes a midframe saddle on the second railcar, and an additional fixture to restrain the tip against lateral movement. The company reported successful testing on 56-meter blades on 11-degree curves.

CRANE INNOVATION

Every aspect of wind turbine logistics is dictated by component size and site accessibility. Accidents on difficult sites have occurred, but innovations to mitigate are in the works. Mammoet, for example, recently announced development of two cranes designed to conduct wind turbine construction and maintenance using the turbine’s tower as a point of support. Mammoet described the cranes’ ability to lift components to greater heights enabling turbine manufacturers to further increase scale and capacity, and eliminating the need to transport traditional cranes to difficult sites – the new cranes ship in containers.

And Dutch energy company Lagerwey is field testing its climbing crane, touted as the world’s first. The crane is designed

KEY WIND STATS 27% = Proportion of EU power demand supplied by wind by 2030*

20% = Proportion of EU power demand supplied by wind by 2020*

Wind energy capacity installed in the EU by 2030* 323 GW 84 GW

Installed wind capacity in the U.S.**

26 GW

Planned additions to wind capacity in the U.S.**

*Source: WindEurope / **Source: AWEA

to climb the turbine tower as it assembles it. “There are no issues associated with the transport to site of difficult-to-move large tower components and it means that large cranes are no longer needed for the assembly work,” the company said. The crane can be transported to site on three regular trailers.

Evolving government incentives and targets, technological advances, and new cost efficiencies are driving wind industry growth. Rather than simply reacting to the dynamics, many logistics and transportation providers are carving out leadership roles, working to drive industry development in directions that allow optimal transportation solutions going forward. BB Based in the U.S., Lori Musser is a veteran shipping industry writer.

www.breakbulk.com BREAKBULK MAGAZINE 47

port focus

Antwerp has been the preferred breakbulk hub in recent years. / Credit: Port of Antwerp

MacIsaac, regional director – UK & Caspian at FH Bertling Logistics Aberdeen.

Traditionally, Rotterdam and Antwerp are used as consolidation points, although Antwerp has been preferred in recent years because many breakbulk operators, such as Rickmers-Line and Chipolbrok, have focused on the Belgian port, he said.

Both ports also offer a maturity of service providers that are used to handling breakbulk and have suitable facilities including large entrance gates and good laydown areas. “We have also seen a good capability for delivering cargo by sea – shortsea on coasters – into the berths where the large liner and semi-liner breakbulk services call already. So, this also lowers client calls by reducing inducement requirements and increases flexibility to work with the main carriers on the known trade routes.”

Bertling uses the North Sea Supply Base in Middlesbrough for its UK breakbulk cargo consolidation; it has its own office at the base and works closely with A.V. Dawson and Sarens.

Middlesbrough is the port of choice for Bertling’s cargo heading out to mainland Europe.

NIPPING AT THE HEELS Up-and-coming Ports Challenge European Stalwarts 48 BREAKBULK MAGAZINE www.breakbulk.com

PORTS EYE BREAKBULK VOLUMES

BY FELICITY LANDON

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acilities, equipment, experience, connections and critical mass; all of these ensure that a handful of ports remain established as Europe’s go-to hubs for breakbulk and project cargo.

Ask a project cargo forwarder to list the ports of choice and inevitably the list will be topped by the likes of Antwerp, Rotterdam, Hamburg and Duisburg. Is that likely to change? It seems not. However, project cargo consolidation requirements can drive breakbulk port selection, said Colin

But just as container operators have tried, especially since 2008, to chip into the breakbulk and project sector, ports themselves have sought to get more of a foothold.

Zeebrugge for one is looking for new opportunities now that the Yamal module transshipment activities there have finished, MacIsaac said. And at the Port of Vlissengen, the Bow Terminal and Verbrugge Zeeland Terminal are also looking for opportunities.

Beyond these, many ports are looking to get into breakbulk handling more as an additional revenue opportunity rather than a core competence.

However, this can introduce a perceived risk into the equation, MacIsaac ISSUE 6 / 2017

said, “as you know that your cargoes will never be priority for ports with other interests.”

Forwarders have many options in Europe but they tend to stay with their tried-and-tested and reliable partners. “The main driver, of course, is that if there are any issues or incidents that cause delays, they can get expensive very quickly,” MacIsaac said. “You also have to remember that ship waiting time is limited; you are on the clock and once you start paying detentions, the bill can grow quickly.”

Another issue is that over the years, many project forwarders have had to invest time and money to ensure that port partners meet increasingly high health and safety standards, a demand that cascades down from the energy industry clients in particular.

“We don’t really want to start all this work again,” MacIsaac said.

“There is always potential for serious accidents, and you need reliable and experienced partners to overcome these.”

CONNECTIONS TOP WISH LIST

At the top of MacIsaac’s wish list in terms of facilities or services at European ports is better connections.

The ports highlighted above are, of course, the main operations centers.

But they are also limited by the number of breakbulk operators calling there, he pointed out.

For Richard Platts, group head of marine at Kestrel Line Agencies in the UK, better and stronger handling facilities for heavy-lift cargo in UK ports is crucial. Most major ports in mainland Europe are fine, he said.

In Rotterdam, for example, floating cranes are easily available. “They are like a taxi, literally going from job to job. You book your slot, they turn up and lift, and they are on to the next job. There is a real dearth of floating cranes or of heavy-lifting capacity in the UK, and that makes it much more difficult and expensive to handle very heavy project cargo in the ports, unless you are using a heavy-lift ship.

Therefore, you often have the huge expense of bringing very large mobile cranes in to load the vessel for the crossing to Rotterdam or Antwerp.

I would like to see a suitable fleet of floating cranes in the UK that can address that problem,” Platts said.

Kestrel recently opened a marine and operations center in Hull, on the Humber River – the choice of location reflects the importance of the Humber ports in its breakbulk and project cargo movements, as well as being within a two-hour drive of UK hotspots such as Liverpool, Middlesbrough and Newcastle, and central for the whole of the country.

“With heavy pieces (exporting from the UK), we will end up going into Hamburg, Antwerp, Rotterdam – one of the major ports for lifting capacity onshore to handle the bigger pieces. From the UK point of view, clearly Rotterdam or Antwerp are closest to access the waterway system,” he said.

ROAD AND RAIL RESTRICTIONS

Another factor, which many people fail to consider when it comes to European breakbulk port selection, are road and height restrictions in Europe, Platts said.

“We can easily move something here in the UK up to 5 meters on British roads – but as soon as you are talking about Rotterdam, it’s 4.2 meters,” Platts said. “So, we have to consider more carefully where we take something, to be able to move it onwards. Waterways are the solution – take it to Antwerp or Rotterdam and load it to barge there.”

Further inland, Duisburg offers an interesting option too, particularly as RMS runs a weekly direct service from Humberside port of Goole.

The Humber is well located for shipping out foundry pieces from Sheffield, including industrial press components and tunnel-boring machine components of more than 300 tonnes apiece and 300-tonne reels of wire rope from Worksop and Doncaster, Platts said. But UK roads have their limits too, and that makes the

BREAKBULK COUNTS FOR LABOR Of the Port of Hamburg’s 9,000 ship calls last year, nearly 15 percent were general or heavy-lift cargo vessels or specialized units for rolling or refrigerated cargoes.

“This makes clear that conventional handling and transport of general cargoes is not just a niche market but a highly important segment, particularly for export-oriented trade and industry,” said Axel Mattern, CEO of Port of Hamburg Marketing.

More than 25 shipping lines are active in Hamburg in the conventional segment. But a more important measure for the port is the effect of this sector on employment.

“Statistically, not even one single worker is needed to handle 1,000 tonnes of containerized freight, while the same volume of conventional general cargo requires eight.

Remarkable figures!” Mattern said.

In 2016, more than 1.5 million tonnes of general cargo, two-thirds of this for export, was handled conventionally in the Port of Hamburg, with the main categories being vehicles, iron and steel, fruit and vegetables, paper, timber, and machinery and plant, or project cargo.

A project to infill part of the Steinwerder-Hafen basin is moving ahead that will create 40,000 square meters of new terminal space, and is due for completion in mid-2018. The new area will be incorporated into the multipurpose terminal operated by C. Steinweg, which has also invested heavily in superstructure for the development.

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port focus

inland port of Goole a particularly useful link via coastal vessel.

“There is still a strong element of very heavy industry in the region that needs the Humber ports to survive because with the weight or size or both, you can’t take it anywhere else,” Platts said.

Some UK ports are increasing investment in heavier cranes to facilitate more cargo – including the Port of Tyne and its near neighbor Blyth – which has seen a massive increase in offshore industry fabrication and energy-linked projects in recent years.

Port of Blyth CEO Martin Lawlor said the strategy is to have at least 100

CHAMPIONING STEEL, FORESTRY VOLUMES As Europe’s leading steel and non-ferrous port, Antwerp has seen a distinct upward trend in steel volumes.

The Belgium port has handled about 6 million tonnes of conventional steel and 3 million tonnes of containerized steel in recent years. This year, it is predicting 8.6 million tonnes of conventional steel volumes.

While China’s flood of steel exports has been slowed by anti-dumping measures in many countries, this only impacted country of origin, not volumes of steel. Antwerp’s Wim Dillen said the gap left by a decrease in steel shipments from China has been more than filled by other countries, notably South Korea, India, Turkey and Brazil.

At the same time, the port has seen higher steel exports – most going to North America. This is despite President Trump’s threat to use antidumping measures against European steel producers. “America still needs steel, and the growth there is such that they simply can’t provide enough steel to meet their needs,” Dillen said.

Antwerp’s unique selling position remains its proximity to the key areas of consumption and production based on the Ruhr and in northern France, Belgium, Luxemburg and the Netherlands.

“With our inland location and being able to receive the biggest vessels, we are very interesting because we

generate a lot of export cargo,” Dillen said. “A ship can come to the port to import steel and take cargo back; it avoids running empty and that is very attractive. Also, there is no denying that a lot of cargo changes from breakbulk into containers in our port, and vice versa. Being able to offer both solutions is enormously helpful.”

As well as steel increases, Antwerp is also seeing higher volumes of forest products after many downward years.

As a result, the port expects to see 11 million tonnes of breakbulk cargo this year.

Antwerp has 15 terminals specialized in breakbulk cargo, and over the past three years there has been substantial investment by terminal operators in new heavy-lift cranes and equipment, and in adapting and strengthening warehousing.

A successful investment provided a climate chamber with a range of 60 to -60 degrees Celsius for testing wind turbines and other components before they are installed in harsh conditions offshore.

This has attracted shippers because generators and other pieces can be tested before going offshore, Dillen said, and the climate chamber has been expanding its role, being used to test mining equipment going to the Arctic area.

50 BREAKBULK MAGAZINE www.breakbulk.com

WE WILL NOT GO BACK TO THE GLORY DAYS OF 1980S, BUT WE HAVE MODEST IMPROVEMENTS AND HOPEFULLY THIS WILL PERSIST” – Wim Dillen Port of Antwerp

tonnes of lift capacity on every quay.

This is being achieved partly through purchasing heavy-lift craneage, but also through working with industry partners to keep their cranes at the port. Blyth also has a self-propelled modular trailer permanently onsite.

Work is ongoing to merge the Wimborne Quay and Bates Terminal to create one large deepwater, heavy-duty facility with a new crane, due for completion in the first quarter of 2018.

IHC Engineering Business has a large base at the port and is expanding. Blyth has been the location for IHC to build one of the world’s largest pipe-laying systems; the J-Lay project concluded with the largest item ever moved over the port’s quays, weighing in at more than 2,000 tonnes.

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This was the first major project the company carried out at the port; IHC EB Managing Director Paul Hardisty said it would pave the way for other major works there.

DECLINING VOLUMES

On the breakbulk handling side, Antwerp continues to dominate the European port market, still accounting for a decent share of breakbulk volumes that have halved across the Le HavreHamburg range since a peak of 80 million tonnes in 1980. That slide was an inevitable result of containerization, said Wim Dillen, head of business development at the Port of Antwerp.

Given that Antwerp is Europe’s secondlargest container port, the news wasn’t all bad, of course.

“The Port of Antwerp is the largest breakbulk port in northwest Europe and we handle about a quarter of the total of the Le Havre-Hamburg range – so 10 million, with another 5 million tonnes of ro-ro including rolling stock, car exports, bulldozers and other rolling cargo,” he said. “We have always had that dominant position, but we must admit that over the years, due to containerization, we saw volumes of breakbulk and conventional cargo drop sharply. It isn’t that it isn’t there – it is in containers.”

To put the statistics in perspective, Antwerp handled less than 100 million tonnes of total cargo in 1980; last year it was 250 million tonnes, with containers making up half of volumes.

As freight rates took a nosedive post-2008, container carriers were keener than ever to attract new business from other sectors. But interestingly, Dillen is reporting a swing back the other way.

“We see a few signs of a modest recovery in breakbulk in the sense that the market has started to realize that container transport has its disadvantages too,” he said. “Most container lines have been losing money for the past few years, and now they try to have mergers, acquisitions, consolidation and alliances.

They want the market to be less fragmented in order to push rates up, and to some extent that is already realized.

As a result, we are seeing some cargo starting to return from container to

Antwerp is seeing a “few signs of positive recovery” in breakbulk.

Credit: Port of Antwerp

conventional. We will not go back to the glory days of 1980s, but we have modest improvements and hopefully this will persist.”

Antwerp has also seen the knockon effect of projects being put on hold due to the 2008 crisis. But now, according to Dillen, there are signs of a slight improvement here too.

“It is not a case of suddenly everything is rosy again. Even if there is a return today to oil and gas (projects), and

we see the economy recuperating and one starts to believe in industrial mining projects again, it takes one or two years before that materializes into cargo to be shipped. Having said that, project cargo is starting to materialize in higher volumes,” he said. BB Felicity Landon is an award-winning freelance journalist specializing in the ports, shipping, transport and logistics sectors.

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profile

SYMPHONY IN STEEL

BY ALAN M. FIELD

Metalwork Expertise Energizes Thai Exports

P

roject cargo services provider FLS has ridden Thailand’s burgeoning steel industry, aligning its expertise with the country’s challenges.

Francesco Jose Rivi, FLS’s Italian-born director of business development, described Thailand as a “great country” despite its ups and downs. After bouncing back from the Asian crisis of the late 1990s, Thailand’s project cargo sector – mainly targeting imported shipments – has grown apace with the spectacular expansion of Thailand’s industrial and power infrastructure. Between 1980 and 2016, Thailand’s per capita income grew from just US$682 to US$5,900.

Ambitious and costly – US$2.5 billion – expansion plans for the nearby port of Laem Chabang will spur further activity in project cargo, as well as in the container traffic sector, Rivi said. Laem Chabang Port, or 52 BREAKBULK MAGAZINE www.breakbulk.com

LCP, already handles more total cargo than any U.S. port except the Los Angeles-Long Beach complex. LCP, which occupies 2,572 acres (1,041 hectares), is already capable of handling the largest post-panamax vessels.

Roll-on, roll-off volumes at LCP have increased steadily from 897,000 vehicles in 2011 to about 1.3 million in 2016. Last year, 98 percent of all Thai-assembled vehicles were exported from LCP, which is within 150 miles of the major exporters of Ford, GM, Honda, Isuzu, Mazda, Mitsubishi, Nissan and Toyota.

FLS was founded in 1993 by Swiss-born Martin Haeberli, the company’s chairman, who came to Thailand in the late 1980s. Its headquarters in Laem Chabang was the company’s first office, and still its largest.

When Rivi joined in 2010, there were 20 people in the company, and it was the company’s only office “even though FLS was established already as one of ISSUE 6 / 2017

Credit: FLS

FLS TACKLES BAYTOWN PROJECT

Credit: FLS

the most reliable [project cargo] companies in the region,” he said. The weak Thai bhat at that time made Thailand attractive for engineering companies from the U.S. and Europe. Now, FLS has more than 90 employees, including 45 people in Thailand alone.

The key to the company’s continued success, he explained, is its team’s knowledge, flexibility and high commitment to the company. Another key of FLS’s success is its insistence on getting everyone in the firm – not just its sales staff – involved in selling FLS’s services to potential customers. “In our business, we say that everyone can sell, and that’s the truth of our business.” »

One major project in 2015-2016 presented challenges in scale and complexity, when FLS exported 151 steel modules to be assembled into a petrochemical plant near Houston, Texas.

The project involved exporting more than 200,000 revenue tons out of the Thai port of Sattahip to the U.S. FLS chartered 13 BBC Chartering vessels to carry the modules, which were shipped across the Pacific, and through the Panama Canal to the Port of Houston, and then delivered by trucks and barges to the nearby job site.

The project involved a series of tricky challenges over 15 months, including extensive initial preparations. FLS was required to send modules at a rate of one shipment every two weeks during nine of those 15 months. If any shipment had run behind schedule, the entire project would have gone awry, said Sarawut Suwattanakorn, project manager for FLS. “If you delay one ship, you then delay another one, so if something goes wrong it has a domino effect.” That didn’t happen.

Choosing how to protect these modules against the potential ravages of long ocean voyages was another major challenge. Would the cargo be protected better if it was placed under the deck where it would be less exposed to weather?

Because of the delicacy of the cargo

the decision was made to shrink wrap all on-deck modules in plastic and then place them into protective netting. Suwattanakorn explained: “We picked the thickest possible material we could find and then placed the cargo stowed on deck.”

Francesco Jose Rivi, director of business development at FLS, added that there would have been space constraints if the cargo had been placed under deck, meaning that a rotation of 15 to 17 vessels would have been needed to ship all the modules, rather than the 13 vessels that were ultimately used. Ultimately, all the cargo, including the modules stored on deck arrived in perfect condition after the 40- to 45-day journey.

FLS opted for the Thai port of Sattahip, 68 kilometers south of Laem Chabang Port, as its point of departure for each shipment to accommodate the 10-meter maximum height of the cargo modules, which were too high to pass under every pedestrian bridge on the way to the port of Laem Chabang.

It is the challenge of dealing with such complexities that makes the project cargo business consistently more compelling than the cookiecutter containerized sector, Rivi said.

“This business is so challenging, you need to feel the passion. Our size is an advantage, because we are more flexible, and our decision-making process is faster.”

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profile

I BELIEVE IN THE POTENTIAL OF THIS COUNTRY, AND I’M STILL LOOKING FORWARD TO SEEING THE BENEFITS OF THE ASEAN TRADE BLOC COMMUNITY FOR THAILAND.” –F rancesco Jose Rivi Director of Business Development, FLS

Credit: FLS

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Loading in Sattahip, Thailand.

Credit: FLS

SUCCESS IN STEEL

Rivi said Thailand’s reputation for high-quality workmanship of locally made steel structures is a key reason why Thailand, long known as a sleepy, sundrenched vacation spot, began to take off in the project cargo sector in 2000, and has remained strong, despite some glitches along the way. Another strong point is the country’s skilled labor force in the industrial sector.

“There are a lot of steel fabricators around here that are producing quite a lot of modules – steel structures, pressure vessels, modules,” fabricated from steel, mainly imported from other countries, Rivi said. FLS’s exports are mainly those steel structures and pressure vessels.

“In terms of project cargo, I believe in the potential of this country, and I’m still looking forward to seeing the benefits of the ASEAN trade bloc community for Thailand,” Rivi said.

That said, FLS is not active only in Thailand. While maintaining its headquarters at Laem Chabang, FLS opened its first foreign office in Vietnam in 2011, recognizing the “great potential” of that

neighboring nation, Rivi said. That office has since expanded to five employees and is said to be “well established in the very tough Vietnamese market.”

Following the success of its Vietnam office, FLS has opened one new office almost every year: 2012 in Australia, 2014 in Singapore, 2015 in Indonesia, 2016 in the U.S., and 2017 in Taiwan.

One point of concern for FLS in Thailand is limited infrastructure for delivering oversized cargo from project fabricators to the ports.

“You see a lot of flyovers of 5.5 meters – where breakbulk cargo sometimes means pieces that are 6 meters high, or 7 meters or more. That creates a barrier,” Rivi said. Further, over the last few months, there have been indications that Thailand’s Department of Highways, which distributes permits, is fully enforcing a road transportation law that dates back to the late 1970s which has presented problems. “The law does not take into account transportation by hydraulic trailers,” Rivi said. “And when you want to transport heavy, bulky items, you need hydraulic trailers.”

In order to obtain a road permit from the Department of Highways in Bangkok, each transportation project must have a feasibility study, which is costly to produce.

“We have to subcontract an engineer to do a bridge study to assess the capability of the bridges along the route to bear the cargo weight, plus the trailer, and the whole process (feasibility study and road permit) can take us up to three months.”

Thereafter, the project cargo mover must use the specific number of axle lines advised and required by the Department of Highways to perform the move.

Rivi said he fears that Thailand-based projects could lose their competitiveness as a result of the long lag times required for getting such permits as the market shifts towards moving larger and heavier cargoes. BB Alan M. Field has reported on trade, logistics and related technologies from numerous countries in North America, Latin America and East Asia (Japan, Taiwan and Korea) over two decades.

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thought leaders

REDEFINING STRATEGIES Logistics in The Low-price Energy Era

A

fter nearly four years of low oil and gas prices, energy producers have emerged battered but with stronger balance sheets, a better grasp of technology, and a new outlook on how to manage their portfolios.

Their outlook on logistics is changing, too.

The industry’s initial response to slumping prices was to revert to old habits: slashing

BY GRANT WATTMAN headcount, mothballing new projects and squeezing suppliers. The hope was to ride out the storm until prices climbed back to comfortable levels. But with the renewed surge in U.S. shale production came the realization that the era of oversupply and low prices could persist.

Most in the industry couldn’t survive without painful change.

Shell CFO Jessica Uhl spoke for many last spring when she said changes at Shell were “about transforming the company for the future. We’re not waiting for prices to increase.”

Like Shell, nearly every player in the industry began to focus on trying to create a leaner, stronger, built-to-last company to weather price cycles without boom/bust volatility. The resulting transformation has been dramatic, as evidenced by the industry’s encouraging first-half 2017 financial performance.

Shifts in strategy, combined with digital technology and lower raw materials costs, have driven down the cost of production in the last few years. Other factors have played a role too: streamlined project design, 56 BREAKBULK MAGAZINE www.breakbulk.com

standardization of equipment and operations, and more overall focus on efficiency. But IHS Markit says that at least some of the reduction has come from “counter-cyclical cost declines” rather than lasting structural change.

Can cost reductions be sustained?

For companies taking an integrated approach to their supply chains, the answer is yes.

CUTS ACROSS THE BOARD

The industry entered the current down cycle demanding sizeable acrossthe-board cuts and easier payment terms from logistics providers. As the slump wore on, more companies decided to engage in deeper discussions with providers, giving joint scrutiny to the supply chain. Today, we see a welcome new emphasis on pre-project planning. We’re seeing more interest in figuring out integrated delivery across the whole supply chain, and on lean project management and designs that use modular approaches. It would be a mistake to slip back into old habits.

During development, logistics typically accounts for 3 percent to 10 percent of capital expenditure before shrinking as a percentage of operating expenses and downstream costs. But the complexity of the work means there are variables with cost, risk and opportunity at every stage: purchase-order management, pricing, packing, risk assessment, hub setup, rig transport, chartering, health and safety, and compliance.

The industry’s shift to short-cycle project development is an example. The focus on quick-turn projects did little to address endemic weaknesses in planning and coordination that have huge costs attached. In recent years, twothirds of the industry’s capital projects went 25 percent over budget and/or ran past their deadlines by 50 percent. When you consider that logistics cost is buried

in every cost category of project scope, you realize the potential of any delay to cause significant overruns.

In general, the energy industry has been a slow technology adopter, capturing huge amounts of data but making use of very little. Now companies are plowing resources into data analytics that help them make sense of the enormous quantities of data they use to find oil and gas, and manage production. Algorithms are employed for predictive maintenance that reduces costly, unplanned downtime. And cloud processing can generate millions of production scenarios, giving producers ability to realize double gains by raising production at the same time they are cutting costs.

In the race to create the digital oil field and gas field, one risk is that companies forget to plug in the logistics piece: there is risk in leaving your supply chain to a provider that can’t keep pace with your technology and offer you tailored IT answers that give you an edge.

What good is your predictivemaintenance algorithm if it’s not connected to full-visibility supply chain technology? Will it tell you that the supplier of a critical part is late on more than half of deliveries? Will it let you know whether you can ship that part with regularly scheduled freight or need a separate shipment?

Keeping up on the logistics side requires a global footprint, technical expertise, and standards and processes that have been repeatedly stress tested, refined and improved. In addition to best practices, you need to identify a provider developing “next practices” so you can stay ahead of the competition. BB Grant Wattman is CEO of Agility Project Logistics. This article was adapted from Tradelanes, the magazine of Agility (www. agility.com).

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CALCULATING CSR SUPPORT Linking Sustainability to Improved Project Outcomes

T

he capital project industry and its supply chain – owners, contractors, and transportation, shipping, and logistics firms – are increasingly expected to be sensitive to the needs of the communities in which they operate.

As such, many companies include sustainability as a core element of their capital project management system.

A focus on sustainability

BY PHYLLIS KULKARNI can go a long way toward demonstrating support for communities near industrial sites. However, corporations have historically had a difficult time measuring and understanding the effects of sustainability practices on capital project outcomes.

For several years, Independent Project Analysis Inc., or IPA, has been studying sustainability practices and their associated benefits. This work has led to identifying best practices that correlate with better project cost and schedule outcomes. This represents a significant step forward, as other industry attempts have failed at quantifying sustainability approaches in relation to project results.

The practices measured by IPA encompass environmental preservation, economic advancement, heritage conservation activities, and various stakeholder identification and community outreach initiatives.

Business leaders can now quantify the use of particular practices and express their value to the capital project system. They can also better predict project risks if certain

COSTS OF CSR FAILURE

Problem projects are more likely to have stakeholder ID gaps.

95%

PRACTICES USED STAKEHOLDER ID GAPS

5% 63%

PRACTICES USED STAKEHOLDER ID GAPS

37%

Percentage of Projects Projects with No Problems Problem Projects

Source: IPA Global

sustainability practices are executed poorly or not at all.

The links between sustainability practices and capital project outcomes were identified using IPA’s proprietary database of more than 18,000 projects.

A subset of projects involving significant sustainability efforts was identified, comprising hundreds of projects with an average total cost of US$500 million.

The database represents nearly 50 companies in the oil and gas exploration and production, refining, mining, and chemicals sectors. More than a quarter of the projects entail resettlement activities of significance to projects executed in developing regions.

KEY PRACTICE AREAS

Stakeholder identification, baseline studies, and community engagement are among the key sustainability practice areas that companies must not ignore.

In most cases, implementation of these practices must begin early in project definition, or Front-End Loading, or FEL, ordinarily during the business planning phase, FEL 1, or at the start of the project scoping phase, FEL 2. When these areas are neglected, significant problems can result. One-third of projects experienced serious project value erosion—cost growth or schedule slip—due to the improper implementation

of sustainability best practices.

For example, in the case of a large greenfield mine, facilities and infrastructure project in Africa, the owner failed to establish effective communication mechanisms to record community grievances. A site-wide labor strike delayed construction for weeks, leading to significant project cost growth. Similarly, an owner’s failure to identify external stakeholders near an oil refinery in the U.S. Midwest led to an environmental permit being overturned.

This project also experienced large cost growth.

In contrast, a large greenfield mine project in Canada avoided significant cost growth and schedule slip, plus delivered broad economic and social benefits to the community, when the owner implemented several key sustainability practices early in the project development process.

As maintaining the “social license to operate” becomes an increasingly important component of business and project success, these sustainability best practices offer a quantitative, proven way for companies to measure and substantiate their performance for communities and shareholders alike. BB Phyllis Kulkarni is director of North America at Independent Project Analysis Inc.

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conference recap

asked. Lusty added that he expected that there would eventually be large disparities between those that are technologically able and those that are not.

The potential of drones was also discussed by the panel, and while Ynosencio noted it would take time for drone technology to be widely applied, Siemens’ and Bechtel’s representatives confirmed their companies were already using drone technology.

Siemens is using drones to find out if there is an asset heading towards failure without putting people at risk, while Bechtel uses them to make inspections at heights. “There’s real clickability to applying this to our industry,” Spoljaric said.

STAFFING FIT FOR PURPOSE

CARGO THROUGH A DIFFERENT LENS Panel Urges Forwarders, EPCs to ‘Step up’ to Innovation

BY CARLY FIELDS

True to its moniker, the innovation panel at Breakbulk Americas took a novel approach to get its message across.

Led by Bechtel’s Steven “Spo” Spoljaric, the panel took attendees on an interactive journey using a HoloLens to allow the audience to view a large component in a mixed reality. The display demonstrated how stakeholders in different parts of the world could view and interact over

realistic models of project cargoes.

Panelist John Lusty, director, energy and utilities, industry solutions at Siemens, explained that the shipper was already using HoloLenses in two ways, firstly in its own manufacturing internally and secondly, for customers.

“The HoloLens offers a great way to interact with data,” Lusty said.

Joining him on the panel, Michael Ynosencio, director, business development – Americas at DHL Global Forwarding, described the technology as “really interesting,” adding that it “definitely has potential.” However, he questioned how it could be placed on a large scale across the industry.

“How long will it take for mixed reality to become mainstream in how we plan and execute shipments?” he

However, technological leaps such as the HoloLens, mixed reality and drones bring challenges, specifically with staffing skills.

Andrew Kinsey, senior marine risk consultant at Allianz Global corporate and specialty, also on the panel, said that the insurer was examining the concept of youth and at what young people are exposed to today. “This technology does not blow them away.

They expect it, it is their baseline, their normal.”

Lusty added that project cargo companies need to be comfortable with technology to attract the right people.

Spoljaric went one stage further and urged EPCs and forwarders to “step up with the engineers and speak the same language.”

Looking ahead, the audience heard how the project cargo industry could avoid making the same mistakes as other industries further ahead on the technological curve.

“In the energy industry, we have the advantage as we can look at other industries to see how they have solved challenges that we haven’t solved yet,” Ynosencio said. “We can take lessons learned that have already been derisked in other industries and use them in this sector.” BB

From Conference Session “Technology Innovation in the Project Cargo Industry” www.breakbulk.com BREAKBULK MAGAZINE 59

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conference recap

LEAN ON PROJECT FORWARDERS FOR MODERNIZATION

BY CARLY FIELDS

Engineering, procurement and construction companies need to make better use of the data and know-how available from project cargo forwarders to help modernize the sector, an audience at Breakbulk Americas heard.

Forwarders are in a “unique position” to be disruptors, John Hark, regional managing director at Bertling Logistics, told the room. “We’ve got the data, the know-how and we invest – use that.”

He said that to meaningfully modernize, the project cargo sector needs money, people and time. “We have time now, so we should use that wisely and not kick the can down the road.”

Creative partnerships with EPCs would go some way towards pushing the long-overdue modernization of the sector, he continued. “The opportunity is there. We are all capable of modernization, we just need to push it.”

Making better use of the data available on projects would be another step in the right direction. “The data is there and we can proactively use this for the

next project,” Hark said. “It really comes down to the forwarder being proactive about what data they have and the EPCs being proactive about using that data.” The ideal would be clients that use milestones to look for trends in data regularly, not every six months.

PREDICTIVE VS REACTIVE

Joining Hark on the panel, Todd Arnold, global category manager, international, inbound and project logistics at Shell, said the challenge was to use data to become more predictive in nature.

“Why can’t we as a supply chain be more predictive and know two months in advance that we won’t make a deadline, instead of a week?” he asked the audience. “Being more predictive will give project managers on site more comfort in delivering projects.”

The panel also discussed the loss of knowledge from a project when those involved moved on, urging that more use is made of the lessons learned from previous projects.

“It seems every time a project begins you start from scratch – you shouldn’t have to,” said Gary Sostack, adminis-

A panel at Breakbulk Americas discussed modernization of the project cargo sector.

trator, logistics and services division, Aramco Services Co. “We may think that as an industry we are ready for innovation, but the guy at the job site is still pulling out a spreadsheet – that’s one step away from a clipboard.” BB

From Conference Session “Shippers Panel: The Modern Project Logistics Supply Chain – Or Is It?”

ATTRACTING THE MILLENNIAL WORKER

BY CARLY FIELDS

Specialist recruiters are facing up to the challenge of attracting and retaining millennials in the breakbulk and heavylift industries.

Zandol Whited, director ports and terminals at PeopleReady, said the recruiter was having to get “really creative” to find people and attract talent.

“We’re having to appeal to the millennial mindset,” she said.

In response to that, PeopleReady has created a bespoke online cloud-based

app, Jobstack and is going into high schools to promote careers in the breakbulk ports and terminals industry.

“Gone are the days of technology and trade schools,” Whited said. “Workforce from those outlets has aged. We have to figure out how to appeal to the younger audience.” Familiarity with technology has a part to play in attracting talent from that demographic, she said.

Whited said that one of the biggest gaps between the aging and incoming workforce was career aspirations. “I assumed that everyone would want a

full-time career with benefits, but that’s not the case today.”

PeopleReady has faced particular challenges finding plug-and-play candidates in the last two years, which has prompted it to create full scale training programs.

In terms of employment trends, one of the biggest challenges is meeting ondemand requirements to deal with the changing size of ships. Also, over the past year, Whited said that clients have started switching from temporary to permanent for skilled jobs, but sticking with temps for less skilled positions in the industry. BB www.breakbulk.com BREAKBULK MAGAZINE 61

breakbulk americas 2017

Delegates at Breakbulk Americas heard about compliance challenges.

POSITIVITY FOR MPV OUTLOOK China’s plan to curb steel production might be a longer-term threat to global breakbulk exports, but that alone will not be enough to dent rising positivity for the multipurpose and heavy-lift sector, according to Drewry’s expert for the sector.

Susan Oatway, lead analyst for multipurpose shipping at the consultant, said that China’s attempt to clean up the air pollution blighting its cities will cut some 50 million tons of steel production from the fourth quarter of 2017, making Chinese exports less competitive for their Southeast Asian customers.

But there are signs that the longer-term health of competing sectors is improving, with one container line having already announced that it is less interested in project cargo, Oatway said.

In its latest Multipurpose Shipping Market Review and Forecast report, Drewry noted the still significant level of overtonnage in the MPV fleet, but with a rising number of the fleet now heavy-lift capable, there is hope for a turnaround.

“The improvements in many other key drivers for this market mean we remain optimistic about its future. The expectations for global GDP, coupled with those for global PMI and the rising oil price, are likely to lead to improved investment and therefore increased demand for breakbulk and project cargo,” Oatway said. BB

From Conference Session “Deep Waters: Whither the Fleet? ” 62 BREAKBULK MAGAZINE www.breakbulk.com

DELEGATE COMPLIANCE TO FORWARDERS AT YOUR PERIL

BY CARLY FIELDS

Project cargo compliance cannot and should not be delegated to a third-party agent or freight forwarder, delegates at Breakbulk Americas in Houston were told.

It is a misconception that either will take care of compliance, said Kathy Canaan, global director trade compliance at Fluor. “You can flow down the key strokes, but that’s about it.”

It was sentiment mirrored by Jeremy O’Guin, regional trade compliance lead – west, QHSSE manager for Bertling Logistics, who added that shippers and engineering, procurement and construction companies have a legal obligation to manage compliance. “It’s your responsibility to do your due diligence,” he said.

“You’re the experts in your commodity.

Don’t rely on some agent or freight forwarder to keep you safe – if you do that and they do it wrong, it’s still your fault.”

Ignorance is not a defense when it

comes to compliance, Canaan added.

Further, an increasingly complex sanctions environment was adding to compliance challenges with list-based sanctions on the rise and more complicated than before.

Today, Canaan said, it’s not just know your customers, it’s knowing everyone you’re doing business with and who owns them.

Meeting shifting North Koreanrelated trading restrictions was also an area to watch. “I think that the impact to the supply chain related to North Korea is going to come out of China and Russia,” Canaan said. “It’s going to come in the companies that supplied goods to North Korea and the banks that are involved.

There could be supply chain disruption.”

She explained that there is a halt on the export of labor, and the next step would likely be a prohibition of goods that were supplied by North Korean labor.

“That’s another piece of diligence that we will need to start doing on our supply chain,” Canaan said. BB

From Micro-seminar “Trade Compliance” ISSUE 6 / 2017

breakbulk europe 2017 ocean services

Rickmers-Line ‘Bullish’ on Long-term Prospects

A ROLLER COASTER RIDE

BY CARLY FIELDS

B

y 2022, multipurpose ship operators can expect their fortunes to reverse dramatically as a predicted shortage of geared 12,000- to 17,000-deadweighttons tramping ships take hold.

That was the outlook from Ulrich Ulrichs, CEO of Rickmers-Line, who anticipated that the market will “will take off like a rocket” in five years’ time. RickmersLine will face its own challenges then with a fleet that turns 20 years old in 2022.

“Medium to long term, I’m quite bullish,” Ulrichs said to Breakbulk. “In five years’ time we will be in a better place.”

However, he conceded that the sector will still need to “hunker down and survive” in 2018. “How much more crisis endurance can you have? So far, there’s not been real consolidation,” he said.

“Companies may get new shareholders, but they haven’t got any smaller.”

Ulrichs added that he was not overly concerned about the current orderbook for multipurpose vessels, as those on order were likely to be cancelled or delayed. Scrapping was also expected to increase because of the age of MPVs and because of reduced maintenance on ships as a result of cost cutting.

SECOND-HAND PURCHASES

Now part of the Zeaborn group, Rickmers-Line recently bought five ships from its previous owner Rickmers Holding, which filed for insolvency in June.

Zeaborn is targeting further acquisitions.

“Zeaborn has the ability and the means to buy and invest, and wants to have 100 ships by next year,” Ulrichs said. The current group-wide fleet stands at 50 ships. “With the base organization we have worldwide today we could handle much more.” The target would be to spread the risk over the enlarged fleet: one-third owned, one-third long term time-chartered and one-third short term time-chartered.

Further, Rickmers-Line would consider buying the three non-owned ships in its nine-strong fleet if the opportunity became available. Currently, those ships are KG-owned and time-chartered to Rickmers-Line.

In an exclusive interview with Breakbulk, Ulrichs reflected on the “roller coaster ride” of the past year, when Rickmers-Linie – as it was previously known – ended 2016 facing an uncertain future under Rickmers Group.

“It was a roller coaster getting out of the group,” he said. “It was difficult to benchmark us as Rickmers-Linie in the holding group, and therefore very dif-

ficult to give firm borders for the future.

The holding [company] wanted us to find a new home, if possible, so that they could focus on their biggest exposures, not us.

“We knew we could sit there and die within two years or we could do something about it. I personally did not expect Rickmers Group to go insolvent.”

Ulrichs said that under Rickmers Group, Rickmers-Linie lacked a willingness, means and vision to invest in the future. “Zeaborn gave us a chance to live another day.”

CATALYST FOR INNOVATION

On an operational front, Ulrichs said he would like to see greater innovation in the sector to improve on the incremental changes being made to the technological side of the ships. This, he said, is a sector lacking in innovation and “the people who come up with the crazy ideas.” Specifically, the industry lacks the necessary helicopter approach, something which could mean we end up “shooting ourselves in the foot,” he said.

Rickmers-Line would be interested in playing a greater role in driving innovation if the right idea comes along at the right price tag. “We have the ability and we’d like to be in the lead. We’d like to be a catalyst for innovation and consolidation,” Ulrichs said. BB www.breakbulk.com BREAKBULK MAGAZINE 63

FIRST PLACE KAHL Schwerlast Conneforde, Germany German heavy haulage specialist KAHL Group transported a 300MVA transformer 350 kilometers within Germany using four different kinds of transport vehicles in one of the most spectacular transports in Germany in 2017. The transformer weighed 592 tons and measured 81.5 meters long.

4.7 meters wide and nearly 6 meters high. KAHL Schwerlast employed a 22-axle trailer, a 12-axle self-propelled trailer and a 600-ton high girder bridge (G²IK600) in two different versions.

BEST OF 2017

THE BIGGEST CARGO. THE MOST COMPLEX MOVES. OUR READERS SUBMITTED THEIR OUTSTANDING TRANSPORTS OF 2017 AND VOTED FOR THEIR FAVORITES.

64 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2017

SECOND PLACE Rickmers-Line / Lavrion, Greece A view from a drone above a mega yacht aboard the Rickmers Jakarta. Loading was a challenging operation due to the tight space on the vessel’s weather deck.

THIRD PLACE

FOURTH PLACE

BOTTOM LEFT Tera Projects & Shipping / Kemaman, Terengganu, Malaysia: Tera Projects & Shipping has successfully completed Petronas’ vinyl

chloride monomer plant decommissioning project at Kerteh. Tera Projects & Shipping transferred nearly 16,000 freight tons of cargo from the project site to Kemaman Port for loading, and the photo shows some of the dismantled, oversized and heavy units transferred to the Kemaman site, which included reactors, vessels, tanks and silos. After conducting detailed route survey, Tera Projects & Shipping identified the best route to transport oversize items up to 8 meters in diameter. The journey beings about 11 p.m., with a police escort along the 45-kilometer route, arriving at the storage yard about 9 a.m. Removal of traffic lights and electricity and telecommunications cables, tree trimming, road-leveling and high-tension cable shutdown were executed during the convoy.

BOTTOM RIGHT deugro / New York, New York, USA: The Kuenz rail-mounted gantry crane project was a transportation highlight for the deugro

organization in 2017, and the photo depicts the cargo passing the New York City skyline on its way to the Brooklyn destination. deugro conducted several site surveys and meetings at the Gdynia, Poland, origin and its New York City destination, in order to find the best engineering solution for transporting four rail-mounted gantry cranes. Creative engineering enabled deugro to assist Kuenz in reducing the weight of the cranes, which resulted in significant cost savings through more options on the receiving end. Each of the RMG cranes weighed 301 tonnes and measured 45.63 meters by 14.17 meters by 25.60 meters.

www.breakbulk.com BREAKBULK MAGAZINE 65

J. Supor & Son Trucking & Rigging Co. Inc. Towantic Energy Center – Oxford, Connecticut, USA J. Supor & Son Trucking & Rigging offloaded a unit from a high bridge girder trailer on site at a new power plant under construction in Connecticut.

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TOP RIGHT

Schenker Deutschland AG Burrullus, Egypt: Burullus Fishing Port, in the middle of the Nile Delta at the Egyptian Mediterranean Coast in March. The port is being converted into a heavy-lift terminal to serve construction of a power plant.

MIDDLE RIGHT

dship Carriers / Singapore: This picture displays a shipment of oversized petrochemical equipment passing the Singapore straits aboard dship Carriers’ Helvetia. One of several petrochemical projects the organization handled in 2017, it is a highlight due to sheer size and complexity. Still ongoing, the project comprises about 250,000 tonnes of heavy and oversized cargo, planned and managed within 12 to 16 months.

The operational phase of the project is expected to be finished within seven months – faster than originally planned. To date, cargo weighing up to 1,230 tonnes per unit, has been shipped successfully to Sohar, Oman, with the port captain supplied at each port organized by dship Carriers.

BOTTOM ROW, FROM LEFT

Fast Line Belgium Albert Canal in Tessenderlo: Servicing the wind power industry, Fast Line Belgium loaded project cargo, bound for the UK, onboard the Fast Julia along the Albert Canal. Located in northeastern Belgium, the canal connects Antwerp with Liége.

EMS LLC Seattle, Washington, USA: An image of the port taken July 2017 from the top of Seattle’s Space Needle.

Transport Bellemare International Montreal, Quebec, Canada: On June 27, the heavy-haul team moved its biggest load ever for the construction of a bridge in Montreal. The transport required the positioning of girders on the jetties of the bridge separated from each other by water.

www.breakbulk.com BREAKBULK MAGAZINE 67

TOP ROW, FROM LEFT

Edwards Moving & Rigging / Nicholson, Pennsylvania, USA: This historic viaduct dwarfs the load handled by Edwards Moving & Rigging.

Three turbines were transported from the manufacturer to a new combined-cycle power plant located in the U.S. Northeast. Each 375,000-pound turbine transport took about seven days to complete along the 230-mile, multi-state route utilizing Edwards’ A500 Dual Lane Expandable transporter.

Dockwise / Batam, Indonesia: Loading operations of Dockwise’s Treasure, providing piggyback transport of two barges loaded with jacket and components.

Broekman Logistics / Port of Rotterdam, Netherlands: Loading of bundled aluminum into a barge opposite the Broekman Distriport’s all-weather terminal at Rotterdam-Botlek.

Broekman Project Logistics / Port of Rotterdam, Netherlands: Broekman Project Logistics recently executed a project from St. Nazaire to Rotterdam to ship eight engines of 325 ton. The customer, which requested shipment to a orthern European port, with the critical condition of inside storage, chose Broekman due to its unique facilities in the Port of Rotterdam and its experience in chartering heavy-lift vessels. Broekman’s Control Tower successfully coordinated the project and communicated with all the internal departments involved: Broekman Chartering, Broekman Breakbulk Terminals and Broekman Shipping.

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ISSUE 6 / 2017

BOTTOM ROW, FROM LEFT

Perkins STC / Between Kansas and Minnesota, USA: Crews make quick work of a mill dryer drum from Kansas to Minnesota on a 90-tonne perimeter frame dual lane loading 8-line trailer with a gross vehicle weight of 347,000 pounds.

Port Houston – CK Production / Port Houston, Houston, Texas, USA: Wind turbine blades being offloaded at Port Houston.

Collett & Sons / Blyth, Nottinghamshire, UK: With a 140-tonne deaerator vessel destined for Immingham Dock, South Yorkshire’s Charles Thompson Ltd. appointed Collett & Sons to facilitate the route planning, transport and port agency services for the cumbersome 28-meter-long cargo.

ALE / South Korea: ALE performed the weighing, back skidding and load-out of the 40,440-ton Appomattox hull, the heaviest module ALE has ever loaded out by hydraulic skidding. Ninty-six skid shoes were installed under the hull, divided over eight tracks and moved forward using 32 push-pull units, while controlled using ALE’s new computerized skidding system. The maximum deflections of the barge were set within a very tight window, so the maximum skidding speed was set at 8 meters per hour.

www.breakbulk.com BREAKBULK MAGAZINE 69

THIS PAGE, FROM TOP LEFT

Conceptum Logistics (two photos) / Kamsar, Guinea: One of the major highlights 2017 of Conceptum Logistics was the replacement of a ship loader in Guinea. Despite the challenges of extraordinary cargo specifications, technical requirements and local restrictions and limitations, Conceptum Logistics properly executed the transport of the new and existing ship loader from Nantong, China, to Kamsar; and Kamsar to Ghent, Belgium.

Conceptum Logistics / China: Another 2017 highlight for Conceptum Logistics was shipping two stacker/reclaimers totaling more than 70,000 tonnes from China to Hay Point, Australia, using two multipurpose charters. Due to the modules’ extraordinary dimensions, road transport to the site was impossible. Instead Conceptum Logistics arranged direct discharge to barges alongside and a beach landing in Hay Point for the final transport to the remote location.

BigLift Shipping / Weipa, Queensland, Australia: BigLift Shipping’s Happy Star loaded to the brim with three large jackets, with smaller items in her hold – totaling some 140,000 freight tonnes in all – for Rio Tinto’s Amrun project. When the Happy Star first arrived at Weipa, it encountered a row of guiding piles in the seabed. When leaving after unloading the third load, some three months later, a completely new quay will have arisen.

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THIS PAGE, FROM TOP

Goldhofer Aktiengesellschaft / Colombia: Transport of an 800-tonne Komatsu PC 8000 for Transportes Montejo on two Goldhofer PST/SL 16 selfpropelled modular transporters.

Port Tampa Bay (three photos) / Tampa, Florida, USA: People movers/airport trams were built in Japan by Mitsubishi Heavy Industries specifically for the Tampa International Airport expansion project. They came off the vessel on 40-foot Mafi roll trailers. There were 12 mafis with the railcars, one with the repair locomotive unit, and two with crates of batteries and other parts needed to complete the railcar project. The port sourced a specialized spreader bar from another Ports America facility, and used with top picks to lift off the mafis and land on flatbeds for over-the-road. As for equipment challenges, care was taken to find the right landing spot on the flatbeds so that the units would travel over the road safely and without damages.

Logistics required pulling together engineers from Mitsubishi, freight forwarder Vantec Hitachi, and McTyre Trucking for the trucks to deliver.

www.breakbulk.com  BREAKBULK MAGAZINE  71

TOP LEFT Höegh Autoliners / Brisbane, Australia: An extended roll trailer concept was used to transport two 43.5-meter trams from Bremerhaven

to Brisbane. The trams were loaded on a special railed truck at the factory in Austria and driven directly onboard the vessel in Bremerhaven. While onboard, the trams were pulled from the 50-meter trailer to the extended roll trailer concept; comprised of two railed roll trailers placed in front of each other and connected with the Höegh bridge. Following their six-week, 1,400-nautical-mile sea journey, the trams were discharged from the vessel in Brisbane. The trams were pulled from the extended rolltrailer concept to a railed truck trailer, ready for road transport.

TOP RIGHT Worldlink Shipping Colombo (Pvt) Ltd. (two photos) / Colombo, Sri Lanka: Worldlink Shipping Colombo, a member of WCA

Projects Network, handled successful re-export of a shipment from Colombo, Sri Lanka, to Port Santo, Vanuatu for a large airport project. The company received the client’s confirmation for re-export in early June and fixed a deadline to deliver the cargo within 60 to 70 days. Given strict deadlines to an odd destination – Vanuatu is a small island situated between Australia and New Zealand – it was difficult to find a suitable vessel.

However, a vessel was chartered and the cargo was loaded smoothly and securely within deadlines.

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ISSUE 6 / 2017

BOTTOM ROW, FROM LEFT

Port of Zeebrugge / Pierre Vandamme Lock, Port of Zeebrugge, Belgium: Project modules arrive from Asia for transshipment on ice-class vessels bound for Russia.

Express Global Logistics Pvt Ltd. (two photos) / Mundra Port, Gujarat, India: Four rubber-tired gantry cranes successfully rolled onto a barge on a single tide at India’s Nhava Sheva Port. Express Global Logistics experienced a high tide of up to 6.2 meters on the day for roll-off on a full moon night. The RTGs, whose dimensions totaled 26 meters by 12 meters by 26 meters, were rolled off in two tides at Mundra Port.

Express Global Logistics said its customer appreciated that the operation was completed safely and on time despite various challenges.

Fortune International Transport SRL / Malpensa Airport, Italy: Special cargo, including many 10-tonne cases, were loaded onto an Ilyushin aircraft for shipment at Malpensa Airport in Italy.

Instar Project Logistics Middle East DMCC / Abu Dhabi, UAE: A 115-tonne Rotor GT received directly from the mother vessel at Mina Zayed to landing craft basis double banking operations and moved to Mugharaq Port near Ruwais. We performed roll-off operations and delivered to Shuweihat S1 project site.

www.breakbulk.com BREAKBULK MAGAZINE 73

INDEX Breakbulk cargo is an eclectic mix, encompassing forest products, steel, pressure vessels, windmill blades, rolling stock and out-of-gauge items.

With this in mind, BREAKBULK INDEX data ranges from steel production to details of planned capital projects.

The global nature of today’s breakbulk and heavylift sectors requires transportation professionals to be on top of economic trends worldwide, which calls for inclusion of focused macro-economic data on prices and events that affect EPCs, the breakbulk community and the multipurpose fleet.

EUROPEAN FREIGHT FORWARDING INDEX The index, based on European forwarders’ actual and expected freight volumes, is anticipating a significant increase in volumes in the coming two months. Values above 50 on the zero-to-100 scale indicate an increase.

100 90 Actual

80

Forecast

70 60 50 40 30 20 10 0

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N 2012

2013

2014

2015

2016

2017

Source: Danske Market Equities, www.danskebank.dk

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ISSUE 6 / 2017

TIME CHARTER RATES TOEPFER TRANSPORT MULTIPURPOSE SHIPPING TIME CHARTER INDEX

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

TIME CHARTER RATE PER DAY

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

Oct

Nov

Dec

2016

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

2017

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

ALWAYSRELIABLE DEPARTSWEEKLY SMOOTHSERVICE EXPRESS SERVICE FOR OVERSIZE CARGO American Independent Line offers the most professional and comprehensive service available for the ocean and inland transportation of oversize and project cargo.

Our service: predictable, expedient and competitive.

Our people: knowledgeable, attentive and responsive.

Shippers and forwarders entrust American Independent Line to move the capital goods that move the world.

New York | east@aishipping.com Chicago | midwest@aishipping.com San Francisco | west@aishipping.com

Asia

|

Australia

|

Europe

|

Mediterranean

|

Middle East

|

South America

www.aishipping.com

www.breakbulk.com BREAKBULK MAGAZINE 75

bb index

PROJECTS SUPPLY CHAIN LEADING NORTH AMERICA INFRASTRUCTURE PROJECTS 2018

For its annual ranking of infrastructure projects for North America, CG-LA Infrastructure selects from hundreds of projects 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. The projects are listed by sector.

PROJECT

SPONSOR

LOCATION

STATUS

VALUE *

AIRPORTS 1

JFK Airport Redevelopment Plan

Port Authority of New York and New Jersey

New York

Planning

10,000

2

Kansas City Airport Single Terminal Project

Kansas City Aviation Department

Missouri

Procurement

1,000

3

LAX Terminal 2 and 3 Modernization Project

Los Angeles World Airports

California

Planning

2,000

4

Mexico City New International Airport

Grupo Aeroportuario Ciudad de Mexico

Mexico

Tendering

1,960

5

Pittsburgh International Airport Redevelopment

Allegheny County, PA

Pennsylvania

Planning

1,100

6

San Diego International Airport ADP (Terminal 1 Replacement)

San Diego County Regional Airport Authority California

Planning

2,200

7

Seattle-Tacoma Int’l. Airport North Satellite Modernization

Port of Seattle

Washington

Planning

550

8

St. Louis-Lambert Int’l. Airport Privatization Study

City of St. Louis

Missouri

Planning

1,000

ENERGY 9

Champlain-Hudson Power Express

Transmission Developers, Inc.

New York

Planning

2,500

10

DTE St. Clair Natural Gas Generating Station

DTE Energy

Michigan

Planning

1,000

11

FPL Dania Beach Clean Energy Center

Florida Power & Light (FPL)

Florida

Planning

900

12

Gateway West Transmission Line

Rocky Mountain Power & Idaho Power

Wyoming, Idaho

Planning

2,000

13 ITC Lake Erie Connector Transmission Project ITC Holdings Corp.

Pennsylvania, Ontario (CA)

Planning

1,000

14

Mactaquac Generating Station Refurbishment

NB Power

New Brunswick

Planning

2,500

15

More Creek Hydroelectric Project (BC)

Alaska Hydro

British Columbia

Planning

225

16

New England Clean Power Link

TDI New England

Vermont

Planning

1,200

17

Northern Pass Transmission Line

Eversource Energy

New Hampshire

Planning

1,600

18 Plains & Eastern Clean Line Clean Line Energy Partners

Oklahoma, Planning Arkansas, Tennessee

2,500

19

Salton Sea Hell’s Kitchen Geothermal Plant (280MW) Controlled Thermal Resources

California

Planning

20

Site C Clean Energy Project

BC Hydro

British Columbia

Phased construction

7,000

21

SolarReserve Sandstone Energy (Solar Thermal)

Solar Reserve

Nevada

Planning

5,000

22

Terror Lake Hydroelectric Improvements

Kodiak Electric Association

Alaska

Planning

850

100

23 TransWest Express Transmission Line TransWest Express LLC

Wyoming, Colorado, Planning Utah, Nevada

3,000

24

Invenergy

Oklahoma

Phased construction

4,500

Virginia DOT

Virginia

Planning

1,400

National Park Service (U.S. Department of the Maryland Interior) & Maryland Transportation Authority

Planning

1,400

Wind Catcher Energy Connection

HIGHWAYS & BRIDGES 25

Atlantic Gateway Freight Improvements

26 Baltimore-Washington Parkway Express Lanes

27

Brent Spence Bridge Replacement

Kentucky Transportation Cabinet & Ohio DOT Kentucky

Planning

2,600

28

Central 70

Colorado DOT

Colorado

Preconstruction

1,200

29

Gordie Howe Bridge

Windsor-Detroit Bridge Authority

Michigan

Procurement

2,100

30

I-10 Mobile River Bridge

Alabama DOT

Alabama

Procurement

850

*In US$ millions

Source: 2018 Strategic 100 North American Infrastructure Report, Ninth Edition, CG/LA Infrastructure

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ISSUE 6 / 2017

PROJECTS SUPPLY CHAIN LEADING NORTH AMERICA INFRASTRUCTURE PROJECTS 2018 (continued) HIGHWAYS & BRIDGES (continued) 31 I-4 Beyond the Ultimate

Florida DOT

Florida

32

I-5 Bridge (New Columbia River Crossing)

Washington DOT, Oregon DOT

Washington, Oregon Conceptual

33

I-55 Managed Lane Project, Illinois

Illinois DOT

Illinois

34

I-69 BridgeLink (Ohio River Crossing)

Indiana DOT & Kentucky Transportation Cabinet Kentucky, Indiana

Planning

1,000

35

I-84 Viaduct Redesign

Connecticut DOT

Planning

4,300

36

Maryland I-495 Capital Beltway & I-270 Express Lanes Maryland Department of Transportation

Maryland

Planning

7,600

37

Merchant’s Rail Bridge

Terminal Railroad Association

Missouri

Planning

200

38

Pattullo Bridge Replacement

Connecticut

Planning Planning

1,300 3,000 425

Translink

British Columbia

Planning

800

39 Route MEX-080 Campeche to Merida (330 km) Maintenance

Secretaria de Comunicaciones y Transporte

Mexico

Planning

133

40

Arizona DOT

Arizona

Planning

600

Sonoran Corridor

OIL & GAS 41

Alaska LNG

Alaska Gasline Development Corp.

Alaska

Planning

40,000

42

Atlantic Coast Pipeline

Dominion Resources

Virginia

Planning

4,500

43

Delfin LNG Terminal (Floating)

Delfin LNG, LLC

Louisiana

Planning

2,100

44

Jaltipan - Salina Cruz Pipeline Gasoducto Jaltipan - Salina Cruz

CENAGAS

Mexico

Planning

643

45

Jordan Cove LNG

Veresen, Inc.

Oregon

Permitting

46

NEXUS Gas Transmission Pipeline

Enbridge & DTE Energy

Ohio, Michigan

Pre-construction

47 Round 2.4 Gulf of Mexico 30 Deepwater Blocks Auction PEMEX, Comision Nacional de Hidrocarburos Mexico

Procurement

10,000 2,000 –

PORTS 48

Corpus Christi Ship Channel Improvements

Port of Corpus Christi & USACE

Texas

Planning

325

49

Inner Harbor Navigation Canal (Industrial Canal) Lock Replacement

U.S. Army Corps of Engineers

Louisiana

Planning

950

50

Jacksonville Harbor Deepening Project

Jacksonville Port Authority

Florida

Preconstruction

705

51 Jasper Ocean Terminal

Georgia Ports Auth., South Carolina Ports Authority

Georgia, South Carolina

Planning

52

Port of Charleston Leatherman Terminal

South Carolina Ports Authority

South Carolina

Preconstruction

762

53

Port of Los Angeles - Harbor Performance Enhancement Center

Port of Los Angeles

California

Planning

100

54

Port of Oakland Expansion

Port of Oakland

California

Phased construction

600

55

Roberts Bank Terminal 2 Expansion

Port of Vancouver

British Columbia

Planning

1,600

56

Tradepoint Atlantic

Tradepoint Atlantic

Maryland

Phased

2,000

4,500

RAIL 57

75th Street Corridor Improvement Project (Belt Junction)

Illinois DOT

Illinois

Planning

58

B&P Tunnel Project

Amtrak

Maryland

Planning

4,500

59

Gateway Program (Hudson River Tunnels)

Amtrak

New York

Planning

12,900

60

Gateway Program (Portal North Bridge)

Amtrak

New Jersey

Planning

1,500

61

Great Lakes Basin Transportation Build

Great Lakes Basin Transportation, Inc.

Illinois

Conceptual

2,800

62

Howard Street Tunnel Modernization

Maryland Department of Transportation, CSX Maryland

63 Modernization of Chiapas-Mayab Rail Line

Secretaria de Comunicaciones y Transporte / Mexico Design Zonas Economicas Especiales

64 Pacific Northwest Corridor HSR Washington State DOT

*In US$ millions

Planning

Washington, Oregon, Conceptual British Columbia

475

425 – 24,000

Source: 2018 Strategic 100 North American Infrastructure Report, Ninth Edition, CG/LA Infrastructure

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bb index

PROJECTS SUPPLY CHAIN LEADING NORTH AMERICA INFRASTRUCTURE PROJECTS 2018 (continued) RAIL (continued) 65 Regional Express Rail, GO Transit

Metrolinx

Ontario

Planning

10,800

66

Texas Central High-Speed Railway

Texas Central Partners

Texas

Planning

12,000

67

Toluca - Valle de Mexico Passenger Rail Concession Secretaria de Comunicaciones y Transporte Mexico

Phased construction

68

Toronto-Windsor High-Speed Rail

Government of Ontario

Ontario

Planning

17,000

69

VIA Rail High-Frequency Plan

VIA Rail

Ontario, Quebec

Planning

4,800

–

RESILIENCY 70

San Francisco Seawall Resiliency Project

Port of San Francisco

California

Planning

500

TRANSIT 71

Brooklyn-Queens Connector (BQX) Streetcar

NYC DOT & NYC Economic Development Corp. New York

Planning

2,500

72

Calgary Green Line LRT

City of Calgary

Alberta

Preconstruction

3,750

73

Cotton Belt Regional Rail

Dallas Area Rapid Transit (DART)

Texas

Planning

1,100

74

CTA RPM (Red & Purple Line Modernization) Program Chicago Transit Authority

Illinois

Phased

1,900

75

D2 Subway

Dallas Area Rapid Transit (DART)

Texas

Planning

1,300

76

Durham-Orange LRT

GO Transit (NC)

North Carolina

Planning

2,500

77

Express Rail - Mexico City to new International Airport Sistema de Transporte Colectivo

Mexico

Design

78

Finch West LRT

Metrolinx

Ontario

Procurement

1,000

79

Foothill Gold Line Extension

LA Metro

California

Planning

1,480

80

Hurontario LRT

Metrolinx

Ontario

Procurement

1,120

81

LaGuardia Airtrain Project

Metropolitan Transportation Auth. (MTA)

New York

Planning

1,500

82

Los Angeles Streetcar

Los Angeles Streetcar, Inc.

California

Planning

290

83

MBTA Green Line Expansion

Massachusetts Bay Transportation Authority Massachusetts

Procurement

2,300

84

Nashville nMotion Long-Range Transit Plan

Nashville MTA

Tennessee

Planning

6,000

85

Orange County Streetcar

Orange County Transportation Auth.

California

Preconstruction

86

Ottawa LRT Phase II

City of Ottawa

Ontario

Planning

2,900

87

Réseau électrique métropolitain (REM Montreal)

CDPQ Infra

Quebec

Planning

4,800

88

Route MEX-07 Tulum-Cancun (178 km.) Maintenance Secretaría de Comunicaciones y Transporte Mexico

Planning

700

89

Sound Transit Federal Way Link Extension

SoundTransit

Washington

Planning

1,400

90

Southwest Light Rail

Metropolitan Council (Twin Cities)

Minnesota

Preconstruction

1,900

91

Toronto Pearson Airport Regional Transit Hub

Greater Toronto Airports Authority (GTTA) Ontario

Planning

8,800

92

VTA BART Silicon Valley Extension Phase II

Santa Clara Valley Transportation Authority California

Planning

4,700

–

300

WATER 93

Augustin Plains Ranch Water Pipeline

Augustin Plains Ranch, LLC

New Mexico

Planning

94

Cadiz Water Conveyance Project

Cadiz, Inc.

California

Planning

250

95

California WaterFix

California Natural Resources Agency

California

Planning

16,000

96

Expansion of Los Berros Water Plant

Comisión Nacional del Agua

Mexico

Planning

140

97

Huntington Beach Desalination Plant

Poseidon Water

California

Planning

1,000

98

Pure Water San Diego

City of San Diego

California

Planning

1,200

99

Santa Clara Valley Water District Expedited Purified Water Program (EPWP)

Santa Clara Valley Water District

California

Procurement

Comisión Nacional del Agua

Mexico

Planning

100 Water Treatment Plants in State of Mexico

*In US$ millions

600

800 50

Source: 2018 Strategic 100 North American Infrastructure Report, Ninth Edition, CG/LA Infrastructure

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