Breakbulk Magazine Issue 6/2016

WHISPERS OF RECOVERY n MODERN MODULARIZATION CHALLENGES n INDIA BUILDS UP STEAM

ISSUE 6 / 2016

NEW DIMENSIONS IN PROJECT CARGO

Unique Demands Fuel Equipment Innovation

contents

Cover Story

08

16 EXECUTIVE SUMMARY WHISPERS OF RECOVERY

Trade Turnaround Bodes Well for MPVs

20 INLAND TRANSPORTATION

BUILDING UP STEAM India’s Waterways Promise Better Connectivity

26 REGIONAL REVIEW

BUILDING OPTIMISM China’s Transport Boost for Over-dimensional Industry

8 NEW DIMENSIONS IN PROJECT CARGO Unique Demands Fuel Equipment Innovation

32

32 TRADE NOTES

UNBRIDLED AMBITION

But Has Indonesia Bitten Off Too Much?

36 LOGISTICS PERSPECTIVE

SQUARE PEG, ROUND HOLE

Logistical Challenges of Industrial Modularization

39 CARGO LENS

ALTERNATIVE ENERGY

44

Grinding Out New Cargo Opportunities

44 PORT FOCUS

STEADY AS SHE GOES Improved Economics Boost St. Petersburg’s Prospects

SPECIAL SECTION

BREAKBULK CHINA PREVIEW

6 Editor’s Note n 48 Reversing Bolivia’s E&P Decline n 52 New Finance Source for Developing Countries n 58 Thought Leaders 60 Breakbulk Middle East Event Recap n 68 Breakbulk Index n 73 Crazy Cargoes Photo Contest Winner n 74 The Last Word On the Cover: Image courtesy of LM Wind Power 4 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2016

editorial

EXIT, STAGE RIGHT

T

he United Kingdom’s June 2016 vote to withdraw from the European Union appeared to turn the world upside down. The narrow 52-percent majority in favor of so-called Brexit set the UK on a march towards exiting the EU by March 2019.

If the UK’s Brexit vote gave the world mixer a turn, Donald Trump’s presidential victory set it to puree.

Six months later, the UK is still picking its way gingerly towards kick-starting the formal procedure to begin withdrawal from the EU within two years.

Stateside, a little more than 10 weeks after the Nov. 8 vote, Trump will be sworn. There, the roller coaster is ratcheting quickly upwards towards the Jan. 20 summit Gary Burrows from which the Trump administration will plunge ahead.

From those precipices, there are brief, but vivid glimpses of vast potential. But both events have approached so rapidly, with immediate impacts, that any judgments about what’s ahead carry the same validity of the forecasts that promised that neither event would come to pass.

Looking back upon more than a year of unprecedented venom and vitriol, of populists versus progressives, two deeply divided nations hold their collective breath.

As the U.S. faced in 2000 – the previous time a candidate won the popular vote but lost the election – the losing side must mask its bitterness and acquiesce to the winning candidate.

CORRECTION: On page 56 of Issue 5/2016,

the person in the second image from the top should have been identified as Diego Maldonado, regional project cargo manager with Expeditors.

6 BREAKBULK MAGAZINE www.breakbulk.com

In such a deep and decisive battle, there is much to forgive and unlikely to be forgotten. But from here, and within these pages, analysis must limit itself to matters related to economics, trade and business potential for our industry. That is challenge enough.

As Trump works towards selecting his cabinet, there are many indications – to the relief of the Republican core – that the president-elect is hewing towards party convention and not edging too far out on the extremist limb he rode through rallies and Twitter tweets.

There’s nothing to say, however, that when the clock starts, he won’t return to his protectionist positions, including those on tariffs, trade wars and barriers.

On one hand, as Mark Willis points out in this issue (“Steady as She Goes,” page 44), Trump’s presidency could spark a thaw between the West and Russia. On the other hand, the president-elect could spark the ire of the largest U.S. trade partner China, by making a phone call to Taiwan President Tsai Ing-wen.

Trump’s tenure will likely be a benefit to the hydrocarbon industry, along with a push towards reducing or eliminating environmental barriers. The advancement of the renewables industry, due in nearly equal measures from lower fuel prices and continued incentives, has that vertical standing on its own regardless of Trump’s potential deregulations.

Certainly, his promises of driving investment in infrastructure would be huge news to the project cargo industry – though how it would be paid for is painfully vague.

Less certain is how Trump will aid U.S. businesses with trade, including the future of the U.S. Export-Import Bank, which has deeply served the project cargo industry.

Come Jan. 20, the ride commences. For the good of business and industry – as for any previous president – Trump must be held accountable for how successfully he guides the world’s largest economic engine through the curves, loops and corkscrews.

Consistent, pragmatic engagement will defend and promote business interests under the new administration. And keep the cars on the tracks.

EDITORIAL DIRECTOR Gary G. Burrows / +1 904 535 5460 gburrows@breakbulk.com NEWS EDITOR Carly Fields carly@breakbulk.com HEAD DESIGNER Catherine Dorrough DESIGNER Mark Clubb REPORTERS Alan M. Field V L Srinivasan Lori Musser Thomas Timlen Jaya Prakash Mark Willis

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 / +353 021 477 3808 rjanusauskas@breakbulk.com SUBSCRIPTIONS To subscribe, email bb.breakbulk@adsg.info, or call from inside the US +1 855 613 8186 between 8:00 am and 5:00 pm CST. A publication of ITE Group plc Transport & Logistics business 105 Salisbury Road London NW6 6RG, UK.

ISSUE 6 / 2016

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cover story

NEW DIMENSIONS IN PROJECT CARGO UNIQUE DEMANDS FUEL EQUIPMENT INNOVATION

Credit: LM Wind Power

8 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2016

BY CARLY FIELDS

hen you’re in the business of moving large and often unwieldly cargoes, crossing your fingers and hoping it all works out is a surefire way to guarantee failure on a spectacular scale.

You need people, and welltrained, innovative people at that.

But you also need a plethora of specialist equipment to stand a chance of moving that 40-ton industrial generator or that 80-meter turbine blade to a job site on the other side of the world.

With loads getting ever heavier, longer, deeper or a combination of all three, equipment manufacturers are having to push technological boundaries to meet the demands of shippers.

Wind turbines stand apart as a project cargo that simply refuses to be restricted by traditional carriage constraints, and movers are being continually challenged to find ways to shift these renewable beasts.

With the world’s largest wind turbine blade a whopping 88.4 meters in length, traditional methods of packing them into frames for transport no longer sits well with the supporting trailers. Specially designed equipment is necessary to bypass the need for an extremely long chassis.

At the other end of the spectrum, heavier loads make different demands of transportation, with crane weights steadily rising to keep pace with increases in the weight of cargoes. www.breakbulk.com BREAKBULK MAGAZINE 9

cover story

SOLVING CRANE CAPACITY MYSTERIES Crane owners and rental companies have expressed disappointment at the lukewarm response to date from manufacturers to their plans to create a new Crane Capacity Index, or CCI. ESTA – the European Association for Abnormal Road Transport and Mobile Cranes – is attempting to create the index to aid transparency in the industry.

Sander Splinter, ESTA’s section crane president, said: “We are striving for transparency in the industry, and especially transparency for the enduser. What kind of crane am I buying?

What kind of crane am I renting?”

However, he added: “I have to say that we have been disappointed with the response from manufacturers so far, and we will be calling on them to give us more support in this project.”

Explaining why he felt a CCI was needed, he said: “In the old days the crane capacity was simply expressed as follows: The maximum lifting capacity a crane could lift at 3 meters of radius, 360 degrees.

“Today, crane capacity is determined in many different ways – for example, by expressing the maximum lifting capacity at 2.7- or 2.5- and even 2.3-meter radius; or only over the rear (back-end) of the crane.”

“Manufacturers choose many different categories in between the well-known classes, such as 55-ton, or come with name conventions from which it is impossible to derive the crane capacity – something we believe our CCI will resolve.”

Splinter, who is also managing director of Mammoet Europe, concluded: “We will keep working on this, but obviously it will be a lot easier to complete with the cooperation of all of the major manufacturers – and we hope that they will eventually see that it will benefit the whole industry.”

10 BREAKBULK MAGAZINE

And transportation is not the only challenge.

Lifting everheavier units into Credit: Mammoet place, either for transportation or on delivery, stress tests cranes and jack-up systems.

Mammoet has developed a new concept crane that can lift loads of up to a record-breaking 24,000 tons. Jointly developed with Stoof E&I, its Focus heavy-lift crane is designed for ultraheavy-lifting use in confined areas, and as a containerized crane it’s relatively fast and easy to transport to site.

Patrick Dick, managing director of Myanmar-based The Freight Co. and founder of Global Project Logistics Network, or GPLN, points to a number of must-have pieces of kit that The Freight Co uses on a regular basis: • Rigid inflatable boats, or RIBs, to undertake survey on Myanmar’s waterways.

• A sonar depth sounder to sound the depth of a river.

• A laser distance measuring device to measure height or width clearances.

• A clinometer to measure the angle Mammoet’s Focus crane is designed for ultra-heavy-lifting use in confined areas.

of elevation/incline when going uphill with heavy loads on the road.

And if the right piece of kit isn’t in the toolbox, this is an industry that prides itself on coming up with unique solutions. As David Collett, president of the European Association of Abnormal Road Transport and Mobile Cranes, or ESTA, and managing director of Collett & Sons Ltd. in the UK, puts it: “You have to continually innovate and create different solutions, and look to the trailer manufacturers and our own engineering department to provide the answers.”

Louis Perrin, project manager at Hemisphere Freight Services, adds that bespoke Louis Perrin

options can make Hemisphere Freight Services a project. In a recent project, handling the transportation of an 180,000-kilogram transformer from Rotterdam to the UK, the transformer was lifted via a mobile crane onto stools ISSUE 6 / 2016

BOOTH

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cover story

and beams that had been welded into its specialist roll-on, roll-off Credit: Hemisphere seagoing barge.

Freight Services “When the transformer arrived into the UK port we were able to discharge the barge within 30 minutes through rolling an SPMT [self-propelled modular transporter] underneath the transformer, jacking up to the required height to fully support the product,” Perrin said. “After securing the transformer to the SPMT we could then drive it from the barge using the ramps. This made the operation safer and far more efficient.”

Changing cargo dimensions are challenging forwarders.

12 BREAKBULK MAGAZINE www.breakbulk.com

SAFETY ISSUES PARAMOUNT

But it’s not only the size of machinery that’s evolving; with bigger units come greater safety issues that pose challenges to quality operations. Protranser International Logistics Co. Ltd., a local company in China and GPLN member, sees value in better regulation of the sector to address these issues. Leo Liu, marketing manager, believes that it should be mandatory to have specific licenses for operating equipment designed to handle abnormal and project cargo loads. This would ensure, he said, control of handling and safety risks, protecting the interest of the cargo owner as well as the equipment owner.

Hemisphere’s Perrin agrees that mandatory licenses for operating equip-

ment handling abnormal and project cargo loads is essential. “It is key that operators have the proper training and/ or licenses for operating any equipment which are used to handle abnormal and project cargo loads. Safety is the No. 1 consideration when handling any project cargo, therefore it is of the utmost importance for operatives to have the correct training and licenses.”

These licenses should go hand in hand with common standards for operation of project cargo equipment, he said.

While reputable companies may already have common or regulated standards in place, there is always room for improvement.

Highland Project Logistics’ Radek Maly would like to see mandatory certification of forwarders as well to increase the overall knowledge base in the industry. However, he questions Radek Maly the feasibility of common standards Highland Project Logistics for operations of equipment when dealing with project cargoes. “Each country is vastly different, so a global standard will not work,” he said. And while the project cargo industry consistently flies under the radar of regional bodies, he calls for ongoing self-regulation and certification as “better than anything coming from the top as directives.”

Perrin pointed out that requirements for risk assessments and toolbox talks prior to an operation varies between developed and developing regions and nations.

“In these instances, it is vital to take extra care that the operatives and equipment are suitable.” Better education, qualifications and training within the industry from a young age would ensure more qualified talent within the profession, he added.

Maly notes that the most useful piece of equipment is “our minds,” but he also sees value in a website that could do various calculations, such as loadability, combined with information for various markets, equipment specifications and the like – a one-stop shop for forwarders to hone their project cargo loading skills.

ISSUE 6 / 2016

cover story

LICENSED TO THRILL

In terms of licensing, ESTA is creating a European Crane Operator License, or ECOL, with financial support from the European Erasmus+ program that backs education, training and lifelong learning to boost economic competitiveness.

Work on the ECOL certification program is expected to be largely complete by the end of the year, setting standards that testing companies will have to abide by and ensuring a level playing field. A next step involves setting up of the ECOL Foundation to oversee the future running of the whole project, which should be in place by 2017.

“I believe ECOL will have a hugely positive impact on this industry’s safety performance, its recruitment success and our efficiency,” ESTA’s Collett said. “There is a long way to go, but the signs are good, and we are making excellent progress.

“This is the biggest project ever

undertaken by ESTA, and we strongly believe that using ECOL as a way of training everyone to the same benchmark will raise standards, improve site safety and boost employment opportunities for qualified operators. The simple truth is that the industry is changing, the equipment is becoming more sophisticated and training schemes across Europe need to reflect those changes. In addition, the workforce is getting older, which means skills shortages are going to get worse.”

BEST PRACTICE GUIDE FOR

SELF-PROPELLED MODULAR TRANSPORTERS

SAFETY PRIORITY NO. 1

Safety has to be priority No. 1 in any project. ESTA’s publication of its SPMT Best Practice Guide in 2016 helps to address the problem of trailers tipping over, which has happened on some occasions even though the existing operating rules and stability calculations were precisely followed. The association set up a special working group following concerns first expressed by the

ESTA’s SPMT Best Practice Guide is available for download at

estaeurope.eu.

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ISSUE 6 / 2016

heavy transport industry and clients at a conference back in 2012.

Collett said: “Safety is at the heart of ESTA’s work, and when an accident happens the fallout can be monstrous.

Of course, and most importantly, there is the issue of personal safety, and that is terrible. But on top of that, a whole project can be threatened and the consequential losses can be huge.”

The working group included representatives from several leading ESTA members, plus manufacturers and clients. The resultant best practice guide covers a wide range of topics including: • Lines of communication.

• Equipment capacity, maintenance and design.

• Design of the load.

• Load documentation and information.

• Operator and engineer training.

• Engineering transport.

• Work environment.

“It has been a very challenging undertaking,” Collett said. “The intention of this document is to correlate the chain of responsibility for all stakeholders involved with SPMT operations, recommend best practice and serve as a ‘baseline starting point’ for the use of SPMTs from which more complex transport engineering jobs can be developed.

“However, it should be noted that the document has been produced and should be read, with the view that such a complex subject as the ‘use of SPMTs’ means it cannot be prescriptive, or offer engineering calculations, due to the many complex possibilities for this unique transport method.”

ESTA will be working towards getting the guide read as widely as possible and in as many markets as possible.

Collett acknowledges that SPMTs are not the answer to every situation, but he says they do have a lot of flexibility compared to hydraulic modular trailers and remain an important tool in the toolbox. But innovation, even for these trusty project cargo workhorses, could disrupt their widespread use in the future. Mammoet’s Trailer Power Assist, or TPA, is in the field testing stage and promises an assisted road speed five times higher than SPMTs at only one-third of the fuel consumption.

With a drawbar pull equivalent to two fully loaded prime movers, one TPA can replace at least two trucks, reducing the

length and enhancing maneuverability.

If larger and heavier cargoes threaten to render the almighty SPMTs obsolete, no existing project cargo equipment can be deemed “safe” from overhaul to meet the new normal of project cargo handling. BB

Carly Fields has reported on the shipping industry for the past 16 years, covering bunkers and broking and much in between.

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www.breakbulk.com BREAKBULK MAGAZINE 15

executive summary

WHISPERS OF RECOVERY Trade Turnaround Bodes Well for MPVs

D

BY SUSAN OATWAY

rewry is quietly confident that the dry bulk market has bottomed out and that recovery, albeit slow and soft, is underway.

The Baltic Dry Index crossed 1,000 points on Nov. 11 for the first time since August and Drewry expects dry bulk freight rates to follow.

YOUTH ON ITS SIDE

We expect dry bulk trade to grow at about 1.4 percent per year to 2018, compared with growth of 4.6 percent seen over the last five years. However, we do expect to see the usual first-quarter slowdown in dry bulk trade due to a combination of the Chinese New Year holidays and more newbuilding deliveries over this period because of some push-back of the orderbook.

For the dry bulk market, the impending additional cost of implementing ballast water management systems is expected to keep demolition

Age profile of the MPV and heavy-lift fleet

2500

2000 heavy-lift

premium project carrier

MPV

project carrier

1500

1000

500

0

‘69 ‘71 ‘73 ‘75 ‘77 ‘79 ‘81 ‘83 ‘85 ‘87 ‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 ‘13 ‘15 Source: Drewry 16 BREAKBULK MAGAZINE www.breakbulk.com

numbers high after September 2017. We have also seen increased demand for coal and iron ore from Asia, in particular China and India. When we look at the supply-demand balance, we therefore see a dry bulk fleet with a growth of just 1.4 percent per year to 2018, again much lower than the 5.2 percent growth seen over the previous five years. It is this slowing in fleet growth that will balance this sector.

Meanwhile in the container market, we believe that Hanjin’s bankruptcy is just a temporary glitch, despite the short-term turmoil it has caused. Rather than being a harbinger of worse to come, we believe it signals the bottom of this market. The conditions for recovery in the medium term are improving, so long as carriers cultivate them wisely.

That said, the excess of ships in the system and the poor prospects for demand in this sector remain at the root of its problems. Consolidation of companies and restructuring alliances may all help to some degree, but none will solve the fundamental problem. For this sector, some of the positive developments include higher scrapping again improving the supplydemand balance; the Panama Canal widening offering a relief valve for the deployment of ships of 8,000 TEUs and above; and higher fuel prices lifting some weaker economies and therefore encouraging more buying.

ISSUE 6 / 2016

executive summary

So if the outlook is looking cautiously better for the two main sectors that compete for the breakbulk market against multipurpose vessels and project carriers, what does that mean for them?

Firstly, the directive from the International Maritime Organization that has made the installation of a ballast water treatment system (BWTS) compulsory for all deep-sea vessels after September 2017 is expected to affect fleet supply here too. Drewry has yet to finalize the numbers (they will be ready for the Multipurpose Forecaster due in mid-December) and accepts it is not quite as simple as for the bulk carrier fleet – in as much as not all vessels are in deep-sea trades – but we do expect to see more ships demolished after September 2017.

Vessels that are able to dry dock prior to September 2017 will not have to fit the BWTS until their next special survey, so the focus must be on vessels that are due to dry dock after that date, and will therefore be required to fit the system at their next visit. Various reports suggest that fitting a BWTS to a medium-sized multipurpose vessel will cost about US$250,000 to US$300,000. This is significantly less than the US$1 million expected to be paid by capesize bulk carrier owners. Indeed, the directive is expected to have the biggest impact on bulk carriers because of their current deballasting arrangements.

Although it might not be a significant amount of money when spread over, say, a further 20 years of trading, it is a significant amount of money when the MPV market has been at rock bottom for so long.

So, unlike with bulk carriers, we are not expecting to see the average age of scrapping drop significantly below 30 years. But we are suggesting that for the 10 percent of the fleet that is above that age, there will be some serious calculations to do as to whether the investment is worthwhile.

It is true that of the 338 vessels more than 30 years of age, nearly half are below 5,000 deadweight tons and therefore less likely to be trading deepsea. But the remaining vessels represent about 5 percent of the current operating fleet and could make a big difference to the demolition numbers.

For example, if we assume that all vessels more than 30 years old could scrap at a quicker rate than previously expected, we 18 BREAKBULK MAGAZINE www.breakbulk.com

Credit: BBC Chartering

CAUTIOUS OPTIMISM

could be looking at demolition rates rising back to 1 million deadweight tons by 2019 and fleet growth stagnating at about 30 million deadweight tons for the next few years at least.

More significantly, we would expect to see the so-called simple multipurpose fleet (vessels with lift capacity of less than 100 tons) shrink at a sharper rate than previously expected. Add to this the contraction in the handysize bulk carrier fleet and we have the potential for the market to lift significantly over 2018 and 2019.

The BBC Pearl in Shanghai. MPVs could face a threemonth lag before realizing the recovery in other trades.

LARGE SCALE LAYUP

In the short term, it is clear that shipowners are hurting. There is now talk by some – Briese Schiffahrt for example – that laying up a significant proportion of their fleets is the only way to ride out the market. Although a single owner laying up its vessels will make little difference to supply in the short term – even an owner as big as Briese Schiffahrt – it would only take a few in the project carrier sector to join forces for there to be a big change to supply.

On the demand side of the equation, again the short-term outlook is weak.

The end of the year is expected to suffer from a weakening steel trade, largely due to anti-dumping duties. All steel importers are struggling with a surfeit

of steel at the moment and are looking to governments to protect their domestic industry. The U.S. imposed a huge duty of more than 200 percent on Chinese steel imports earlier this year, and now the EU has also imposed an import duty on hot-rolled steel from that region of between 13 percent and 73 percent.

On the plus side, global dry cargo demand is expected to start to recover from 2017 onwards, with Asian countries some of the main supporters of trade.

As economic development in this region advances, more power and foodstuffs are required to support urbanization and industrialization.

The market outlook is therefore soft for the short term, but improving from end 2017. As ever, it is always led by the competing sectors, and while the bulk carriers and container vessels continue to drive freight rates down, this sector is still some way off improvement. Drewry believes that it is likely to lag the other sectors by at least three months in the longer-haul routes, but expects rates to have moved firmly off the bottom of the trough by the start of 2018. BB Susan Oatway FICS is an associate with global shipping consultancy Drewry, specializing in the multipurpose and reefer trades. Drewry’s latest Multipurpose Shipping market review and forecaster for the fourth quarter 2016 will be published mid-December.

ISSUE 6 / 2016

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inland transportation

NW-2

Brahmaputra Dhubri to Sadiya

NW-1

INDIA’S NATIONAL WATERWAYS

891 km

Ganga

STATES SERVED: Assam, West Bengal,

Arunachal Pradesh, Meghalaya

Haldia to Allahabad

1,620 km

total length: 4,503 km

STATES SERVED: UP, Bihar,

Sa diya

Jharkhand and West Bengal

states served: 15

Bra hma putra River Dhubr i Ga nga River Allaha ba d

NW-6 Ha ldia Geonk ha li

N a r m ad a Riv e r

L a k hipur

Bha nga

M aha na di River

Barak

Lakhipur to Bhanga (in process)

121 km

Ta lcher

STATES SERVED:

Assam, Mizoram, Manipur, Tripura

Ta p i R i v e r God av ari Riv e r

NW-5

Brahmani, Delta Canals, ECC K rish n a Riv e r

Ka k ina da

Geonkhali to Talcher

588 km

STATES SERVED: Odisha, West Bengal

BY V L SRINIVASAN

NW-3

Pu d u c h e rry

West Coast Canal

Kollam to Kottapuram

205 km

Ko ttap u ram

STATE SERVED: Kerala

BUILDING UP STEAM India’s Waterways Promise Better Connectivity

Ko llam

NW-4

E

Map source: Archana Venur; images via Shutterstock; illustration by Catherine Dorrough

xisting infrastructure for transportation of over-dimensional and out-of-gauge cargo in India is inadequate, so the country’s government has embarked on an ambitious plan to boost the use of waterways for project cargo movement. »

20 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2016

Godavari, Krishna and Canals Kakinada to Puduchery

1,078 km

STATES SERVED: AP, Tamil Nadu, UT of Puducherry

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inland transportation

The Indian government’s plans to set up three multimodal transport ports at Varanasi, Sahibganj and Haldia on the River Ganges has gained momentum with works on two of these projects expected to start soon. These hubs – part of the National Waterway-1, or NW-1, plan – will reduce pressure on the rail and road network within the country, and promise to expedite project cargo moves through waterways in the future.

This plan addresses the fundamental need to increase the number of inland waterways in India to counter poor road connectivity into the hinterland, given the topographical and geographical challenges in India.

The inland ports are being developed under the Rs5400 crore (US$800 million) Jal Marg Vikas Project, which is being implemented with technical and investment support from the World Bank. The World Bank will provide half of the total cost of the project and the government is hoping the private sector will make up the difference.

While works on Varanasi port have already started and will be completed by 2019, works at Sahibganj and Haldia are expected to be completed in the next 26-30 months.

NW-1 was first mooted in 1986, but it took nearly three decades to overcome all the hurdles, including several court

cases. Indian Minister for Shipping Nitin Gadkari was finally able to launch the project in August 2016.

The government awarded construction of the Varanasi project to AFCONS Infrastructure Ltd. in May and construction of Sahibganj to Larsen and Toubro, or L&T, in October. Hopes are that Sahibganj port will accelerate movement of goods between India and Bangladesh.

Six firms submitted technical and financial proposals for Haldia.

The cost of Varanasi is said to be about US$28 million (Rs184 crore) and works for Haldia and Sahibganj are put at US$70 million (Rs465 crore) and US$44 million (Rs292 crore), respectively. All three ports access the River Ganges, touching major industrial hubs in India as well as Bangladesh.

The government is also planning to increase the tonnage of barges for these waterways through a special design to handle larger volumes of passenger traffic and oversized cargo.

OOG TIME SAVING

ROAD RULES LACK CLARITY Regulations for the transport of ultra-heavy project cargoes on India’s roads lag international standards, much to the chagrin of over-dimensional cargoes movers in the country.

Indian Ministry of Road Transport and Highways, or MORTH, regulations prohibit the movement of cargo more than 32 tons on mechanical suspension trailers, stipulating that only hydraulic suspension trailers can be used.

While multiple-axle mechanical suspension trailers have been developed worldwide, these have not been approved in India. However, hydraulic suspension trailers are more expensive and moves take longer.

With ever-larger and heavier equipment required for global projects, Indian forwarder NTC Logistics is calling for urgent changes to the regulations.

NTC Logistics’ K Chandramohan said that revision of existing laws to permit multiple-axle mechanical suspension trailers would go a long way towards easing the transportation of overweight consignments on Indian roads.

“Movement of such equipment from a manufacturing facility to a site or port will continue to remain a concern until an amendment is made to the rules to facilitate long haul of such large and heavy equipment,” he said.

Road transportation can be challenging in India. / Credit: NTC Logistics 22 BREAKBULK MAGAZINE www.breakbulk.com

One of the major benefits of these logistics hubs is that it will take less time to move all kinds of cargo including overdimensional and super-over-dimensional.

Presently, oversize cargo movers face myriad problems moving equipment by road or even by dedicated freight corridors in India.

The port also offers a reduction in pollution, quick transshipment, better handling, reduced transportation losses and faster movement of cargo.

Pon Radhakrishnan, Indian Minister of State for Shipping, said this will ultimately lead to reduction in end-to-end logistics cost, shorter turnaround time and efficient utilization of resources.

Nilesh Sinha Procam Logistics group Procam Logistics director Nilesh Sinha said these hubs will give a big push to waterways development in the country, following on from the Indian government’s adoption of the National Waterway Act in April 2016.

ISSUE 6 / 2016

inland transportation

At present, only 3.5 percent of freight movement is undertaken through waterways in India, compared with 47 percent in China, 44 percent in Japan and the European Union, and 35 percent in neighboring Bangladesh, he said.

“Of the 14,500 kilometers of waterways in the country, organized transportation of cargo is done on a small scale only in the states such as Goa, West Bengal, Assam and Kerala. The government is planning to set up some 2,000 water ports and roll-on, roll-off services at five different parts in the country to transport goods. Establishing the three multimodal transport ports is part of this big plan,” Sinha said.

The NW-1 connects the industrial hinterlands of Haldia, Howrah, Kolkata, Bhagalpur, Patna, Gazipur, Varanasi and Allahabad and other industrial hubs located along the Ganges basin. These logistics hubs are expected to aid the smooth transition and movement of bulk goods, over-dimensional goods and create economic development in the region, Sinha added.

There is strong demand for NW-1 as far up as Varanasi, as potential shippers, thermal power plants, cement manufacturing industries, fertilizer and edible oil companies have expressed intent to use the waterway, but with the proviso that adequate infrastructure is developed to facilitate navigation by vessels of up to 2,000 deadweight tons.

ECO-FRIENDLY TRANSPORTATION

K Chandramohan, chairman and managing director of Chennai-based NTC Logistics, said the locations of these hubs were chosen by the Inland Waterways Authority of India to facilitate barge movements of cargo, providing an eco-friendly mode of transportation. Heavy-lift barges also provide a more economic, safer and time effective option for inland transportation of cargo weighing more than 350 tons.

“These new hubs will facilitate crosscountry, west-to-east logistics and coastal 24 BREAKBULK MAGAZINE www.breakbulk.com

movements. Uttar Pradesh, Jharkhand, Bihar and West Bengal will benefit greatly, since most of the Indian heavy equipment manufacturing facilities are in states on the West Coast such as Maharashtra and Gujarat,” Chandramohan said.

Coastal logistics combined with improved inland waterways open the possibility of utilizing more ships and barges to reduce the distance travelled by road, minimizing potential damages to bridges and infrastructure, he added.

K Chandramohan Echoing similar feelings, Procam NTC Logistics Logistics’ Sinha said rail and road corridors in the adjoining states were already saturated, and that the development of NW-1 would offer a viable alternative thereby aiding economic development in region. “It will also result in an environment-friendly, fuel-efficient and cost efficient alternative mode of transportation especially for bulk, hazardous and oversize cargo,” he said.

Waterway use A 517-tonne DHDT will also counter reactor moves some of the reguby barge out of latory burdens in Kolkata on the IndoBangladesh Protocol India. The federal waterway. structure of the country is such Credit: ABC India that each state needs to approve transportation of over-dimensional cargo on state highways, and on national highways, permissions need to be sought from the Federal Ministry of Surface Transport.

However, challenges remain in establishing an improved waterway network.

Crucially, the system needs to be robust, taking account of seasonal river flow, dry summers, and low height bridges and other obstructions, all without hurting irrigation and drinking water needs.

Additionally, continued growth in waterway traffic could create more challenges in the future as vessels size grow and demand increases. BB V L Srinivasan is a senior journalist based in Hyderabad, India, covering finance, infrastructure, energy, shipping, transportation, IT, environment and political developments in India and the GCC region.

ISSUE 6 / 2016

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regional review

Sunward Logistics Co. Ltd. coordinates an offshore drilling platform project in Shandong Province, China.

Credit: Marshall Bian, Sunward

BUILDING OPTIMISM China’s Transport Boost for Over-dimensional Industry

BY THOMAS TIMLEN

C

hina’s Ministry of Transport issued guidelines in August to promote the “intensified, intelligent and standardized development of the logistics industry,” making efforts to reduce costs and to enhance the efficiency of the industry, “injecting new vitality to the Chinese economy.”

With its four-year timeline, the project aims to achieve its goals by 2020, and industry experts believe there are grounds for optimism that the plan will aid the movement of project cargo in China.

“Obviously, the Ministry of Transport has introduced the guidelines to promote the development of China’s transport industry,” said 26 BREAKBULK MAGAZINE www.breakbulk.com

Marshall Bian of Sunward Logistics Co. Ltd., based in Qingdao. “Whether ordinary goods or the out-of-gauge, oversized, project cargo, all are bound to benefit under this guidance.”

CHINA’S LOGISTICS: 2016 GAINS Value of goods carried by China’s logistics sector, in US$trillions.

13

12.25

WHY THIS, WHY NOW?

Although China’s overall economic growth has slowed to levels last seen in 2009 (yet still on an upward arc enviable in other parts of the world), indicators released for 2016 show the logistics sector improving against last year’s performance, having moved almost US$13 trillion worth of freight in the first half alone.

With growth comes higher volumes of freight across all transport modes, and inefficiencies experienced at bottlenecks create unwanted costs that nullify savings gained elsewhere.

Jan 2016

May 2016

Source: The State Council, People’s Republic of China

ISSUE 6 / 2016

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regional review

One multimodal transport expert, Teik Poh Goh, managing director at Global Maritime Talent Pte. Ltd., pointed out that it costs much less to move a 20-foot container from Shanghai to Los Angeles by ship than it does to move the same 20-foot box between an inland location in China to the port by road or rail.

“This needs to change,” says Goh, adding that if China achieves its goals by 2020, this will in turn enable reductions in overall transportation costs on an end-to-end basis, benefiting exporters, importers and the public.

Where Goh points to costs, Sunward’s Bian focuses on the benefits of standardization to contain and reduce them.

“The current logistics industry market in China is very broad, and nonstandard phenomenon still exists,” he said. The lack of national standardization means there is “low efficiency and high cost of transportation.” Bian feels that with the rapid development of the Chinese economy, the logistics industry should welcome the development of the network.

Sunward is a member of the Global Project Logistics Network, a nonexclusive professional projects logistics network of independent companies specializing in international project cargo movements.

When the Ministry of Transport says the guidelines are meant to inject “new vitality to the Chinese economy,” it means it is seeking to ensure transport cost savings and sustainable freight movement throughout the country.

In other words, these guidelines are akin to what the European Union would call a new Infrastructure Policy, a framework of initiatives, or a blueprint

Sunward Logistics Co. Ltd. moves a yacht from Shanghai to Miami.

Credit: Marshall Bian, Sunward

28 BREAKBULK MAGAZINE www.breakbulk.com

Marshall Bian

Teik Poh Goh

Sunward Logistics Co. Ltd.

Global Maritime Talent Pte.

with a focus on the logistics network, not a set of operational requirements for the machinery and goods moving within it.

PLAYING A SUPPORTING ROLE

The bulk of the plan involves construction of 150 new transportation hubs, and 3,000 kilometers of new railway and highway lines connecting with major air and seaports.

Not everything will be newly constructed, as the plan also involves the rational and expected improvement and modification of existing roads, rail lines and facilities as part of the package.

In practice, many of these activities would have been initiated anyway in response to road congestion hotspots and other inefficiencies caused by bottlenecks. However, as part of a national coordinated policy the prospects of meeting the 2020 completion date look good.

China is no stranger to ambitious plans, and its track record of achieving them is laudable. Only 10 years ago, faced with bottlenecks at its container ports and terminals as a result of bulging trade volumes, China pursued expansion of existing terminals and construction of new terminals, at a pace dwarfing the comparatively dismal efforts to tackle similar bottlenecks in Europe and North America.

As the world witnessed then, and more recently in the South China sea where

obscure rocks suddenly expand to become habitable islands, when China wants to get something done, it acts quickly.

How does China do it? Investment plays a big role. “China spends more on economic infrastructure annually than North America and Western Europe combined,” according to a study published in June by the McKinsey Global Institute.

Sufficient funding is an effective enabler. Recognizing this and past performance, Goh said he has no doubt that the 2020 deadline is doable, having watched how China developed Yangshan port in 2006. “At that time there were few terminal experts in the world who said that it could be done, [claiming] the engineering effort as well as the adverse weather conditions that would plague its operational status would make it somewhat untenable. Today, nobody gives it a second thought.” He adds that China has “the manpower and financial wherewithal to make it happen.”

Bian agrees, saying that “the construction of these facilities is no problem.”

LOOKING AHEAD

All stakeholders appear to have much to gain from this Chinese drive, and there is palpable industry confidence that the ambitious plan can be achieved within the four-year time frame.

Even though the government’s summary is silent in respect to customs formalities, industry experts feel that these too will be part of an overall review, resulting with improved efficiencies gained from harmonized or standardized customs procedures throughout China.

For companies moving out-of-gauge, oversized, project cargo, benefits should be expected in logistics planning, as this would be optimized if China applies a standardized scale to its hub facility and road and rail network expansion, making it easier for operators to quickly determine what equipment will be suitable across the entire network.

In any case, it should come as a relief to note that it is not the freight, nor the equipment moving it, that would have to conform to a new ISO standard or similar requirements.

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regional review

became apparent, steps would have been taken to correct them with or without the introduction of the guidelines. However, in their absence, this would have been done on an ad-hoc, regional level at best.

“Yes, this would have happened, eventually,” says Goh, “However, with the government firmly behind it there would be greater impetus to making things happen.”

According to Goh, with the guidelines in place, the entire government machinery will be brought to bear to tackle this issue where, in the absence of such a government-endorsed plan, entrepreneurs and others would likely have baulked at initiating a national effort due to finite financial resources and perhaps organizational bureaucracy.

Jasmine Siu Lee Lam, associate professor for the Maritime Studies Program at Singapore’s Nanyang Technological University School of Civil and Environmental Engineering, agrees. “A lot of logistics developments are actually ongoing. The guidelines provide a clearer direction and would speed up the progression in the development of Jasmine Siu the logistics indusLee Lam try. The guidelines Nanyang Technological are also in line with University the One Belt One Road initiative.

China has good capability; however, it is still challenging to complete such a system by 2020.”

In line with Goh and Lam’s views, Sunward’s Bian has no doubt that the guidelines will prioritize efforts to address known bottlenecks in a coordinated manner. Whether China achieves all the desired goals of this logistics initiative will be clear for all to see in 2020. If the goals are met on schedule, a wide range of stakeholders stand to reap the benefits.

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.

30 BREAKBULK MAGAZINE www.breakbulk.com

WHAT MAKES CHINA DIFFERENT? China has time and again demonstrated its ability to quickly initiate national projects at speeds leaving other countries shocked.

Teik Poh Goh, managing director at Global Maritime Talent Pte., describes the latest example – China’s four-year transport industry project – as an initiative that many countries and governments have tended to pay lip service to over the years, without achieving much in practice.

“In my view,” Goh said, “this is something that more governments should be focused on to improve landside infrastructure to facilitate transportation and delivery of goods, both domestic and international. Logistics cost can easily account for 10 percent or more of a delivered product, and if that can be reduced, it will lead to lower delivered costs, not to mention reduced inventory and holding costs.”

The problems are well known.

Landside and intermodal costs tend to eat into, and in some cases significantly mitigate, cost savings on the ocean side. This is blamed on inefficient hubs, multiple handling of containers or cargoes, or just pure process inefficiency due to a lack of infrastructure.

Everyone familiar with China’s past achievements and the more recent initiatives, such as the Silk Road Economic Belt, or SREB, and Maritime Silk Road, or MSR, knows that the nation can achieve ambitious goals with a proven track record.

Yet, for the guidelines to succeed, efforts to improve and standardize the logistics network must involve procedural clarity and qualified people managing the process.

One industry source in China explains that unclear regulations and poorly trained officers can stymie otherwise noble efforts, citing an earlier initiative to improve road connectivity for freight transport at Shanghai. A resulting shortage of road hauliers led to some out-of-gauge cargoes being stranded at the terminal. After two weeks, it became necessary to find ways around the regulations to get cargoes moving again.

This may be an advantage with the new guidelines to improve Chinese logistics, as they have not appeared as a standalone instrument, but instead take a holistic approach, intended to assure the future success of the SREB and the MSR, while fostering continued efficiency gains throughout China’s transport sector. BB

ABOVE: Sunward Logistics Co. Ltd. manages an offshore wind energy project in Jiangsu Province, China. / Credit: Marshall Bian, Sunward ISSUE 6 / 2016

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trade notes

UNBRIDLED AMBITION But Has Indonesia Bitten Off Too Much?

BY JAYA PRAKASH

I

ndonesia is pushing full steam ahead with the infrastructure development projects that President Joko Widodo – more usually referred to as Jokowi – had promised when he took office two years ago.

That drive is despite

32 BREAKBULK MAGAZINE www.breakbulk.com

innumerable odds that could either threaten, curtail or even hurt his infrastructure building drive.

“We aren’t just serious about building infrastructure, we’re very, very serious,” Jokowi said earlier this year, despite a state budget trimmed at its margins and which on its face could not allocate funds to all the projects. “This is something we absolutely must do to build the founda-

tion of our economy, even if the work is bitter at the beginning.”

Jokowi’s projects are ambitious and historic. His projects do not just include thousands of miles of new roads and railway lines, they also consist of new seaports, airports, power and smelter plants and dams. The projects are more than about jump-starting the economy; they are also about improving connectivity, ISSUE 6 / 2016

A boy plays on concrete blocks for a road construction project in Bima, West Nusa Tenggara, Indonesia.

Indonesian president Jokowi has laid out ambitious infrastructure plans for the country.

Credit: MAST IRHAM/EPA/ Newscom

something not addressed since the depar11 million lack access to sanitation and 9 million lack access to safe water. Indoneture of the nation’s Dutch colonists some 70 years ago. sia’s urban poor pay 10 to 30 times more The high cost of not having proper to buy clean water from private providers compared to better-off families with roads and highways is causing its logistics costs to rise, too. The Indonesian Chamaccess to water utilities. ber of Commerce and Industry, known Rodrigo Chaves, World Bank as Kadin Indonesia, said that about 17 country director for Indonesia, said: “Addressing infrastructure and basic percent of a company’s total expenditure services gaps in urban slums is critical in Indonesia is absorbed by logistics costs. to ending extreme poverty, reducing And nowhere is that better illustrated than in Indonesia’s sea transportation sys- inequality and boosting shared prosperity in Indonesia. The Slum Upgrading tem, where under the cabotage banner it project will improve the lives of milis cheaper to import a product or produce lions of Indonesia’s urban poor and from a foreign nation than to have that support the country in realizing its same commodity ferried across the counpotential for higher growth. We comtry. That has caused Indonesian exporters mend the government of Indonesia for and entrepreneurs to lose out on lucrative establishing this national platform, opportunities, as its logistics challenges which will pave the way for all stakehave made the cost of its products and holders to collaborate effectively.” services unacceptably prohibitive.

With development comes connecAs vast tracts of the country – especially in the far-flung regions of Papua or the east- tivity, and with connectivity comes the accessibility to confront and rein ern provinces of Celebes – have remained in poverty through unhindered access undeveloped, they have also remained that only roads, highways and rail lines inaccessible. Jokowi’s drive to raise concould provide. nectivity on the back of infrastructure investment will give greater social mobility, This is something we absolutely giving Indonesians a share in the fruits of the must do ... even if the work is nation’s economic prosperity and importantly, bitter at the beginning. – Joko Widodo reintegrating them back into the economic, Indeed, roads and highways have political and social life of the country. become Indonesia’s overriding priority While there is no guarantee that items. Negara highlights the planned Jokowi’s projects will ever come to pass, Trans-Sumatra toll road; Trans-Java if they do, they will rival similar undertoll road; railways in Java, Sumatra and takings by China over the last 30 years.

Kalimantan; seaports; and airports as Like China, Indonesia is also eager to key projects. The Trans-Java toll netreduce the poverty that affects millions work, for instance, provides unbroken of its population. toll roads in the country’s main island.

Siwage Dharma Negara, a fellow and Meanwhile, a high-speed railway netassistant coordinator, Indonesia Studies work from Jakarta to Bandung, given to Program at Singapore’s Institute of Southa Chinese consortium, will potentially East Asia Studies (ISEAS), told Breakbulk change the face of rail travel in the that tackling poverty is actually the priority of the country’s infrastructure projects. country, along with the construction of a 720-kilometer railway from Jakarta to POVERTY AND CONNECTIVITY Surabaya that was awarded to Japanese investors.

Indonesia’s gross domestic product The toll roads are part of Jokowi’s stands at US$870 billion, according to plan to add at least 1,100 kilometers of the World Bank. Yet the bank stated functionally operable roads by the end that some 29 million Indonesians live in of his term in 2019. And that is only the slums with poor basic services. Another www.breakbulk.com BREAKBULK MAGAZINE 33

trade notes

icing on the cake. Also in the pipeline is the Balikpapan-Samarinda Toll Road, Manado-Bitung Toll Road, SerangPanimban Toll Road, Soekarno-Hatta Railway, North-South Line Jakarta MRT, Makassar-Parepare Railway, Light Rail Train (LRT) South Sumatra, and the East Kalimantan Railway, among others.

With 17,400 islands, close to 2 million square miles of land, three time zones and a land mass straddling the continents of Asia and Oceania, the nation is almost half the size of continental Europe. Its huge land mass and a population of 257 million makes Indonesia a colossus in its own right, explaining its huge appetite for water processing systems, power plants, and electrical transmission grids. These include a power plant for Batang, an electric steam power plant for South Sumatra, oil refineries and a port each for Bitung and Kuala Tanjung, and hydroelectric power plants.

However, the grand plans only scratch the surface of what is needed to tackle poverty and develop nationwide connectivity. Papua, a province in the far-flung eastern reaches of the country that is rich in mineral and natural resources, has remained untapped for decades. Lifting mobility there will almost certainly help in reducing poverty across the expanse of the country.

A slum area in Jakarta. An estimated 29 million Indonesians live in slums. Infrastructure improvements aim to bring basic services to Indonesia’s poor population.

Credit: Yuan Adriles/Polaris/Newscom

34 BREAKBULK MAGAZINE www.breakbulk.com

MIND THE FUNDING GAP

But where will funds come from for these grand plans? “Finance is the main issue, not the technical expertise,” said Elly R. Sudibjo, an environmental expert at the Indonesian Ocean Council.

Just how dire the financial situation in the country is and has been can be seen in the failure of a project to provide some 35 gigawatts of electricity by 2019, which fell through because of financial considerations. This grandiose project was slated to provide some 97 percent of the nation’s electrical needs.

There are no accurate estimates on just how much investment Indonesia needs to overhaul its country. Various news reports have placed the figure at between US$400 billion and US$450 billion. These funds could have been requested from the International Monetary Fund, but Indonesia is reluctant to ask the lender, deterred by issues it has faced in the past with the World Bank.

Instead, the country is banking heavily on the amount of tax revenue it could recoup from the tax exiles living overseas, and who it is prepared to pardon.

Finance Minister Sri Mulyani said that in addition to generating tax revenue, the tax amnesty would provide the government with better data about the nation’s economic potential, which will lead to better policies. In fact, the tax amnesty program has netted close to US$79 billion which, considering the scale of funds needed for the planned infrastructure projects, is still too small to get them all off the ground.

Another fund-raising initiative was to secure and consolidate fishing rights in its territorial waters. Fishing is an industry that has the potential to rake in billions of dollars if Jakarta can keep illegal Chinese trawlers out of its waters.

However, while Indonesia has come a long way in improving its tax system both in terms of revenues raised and administrative efficiency, the tax take-up rate is still painfully low. Negara said that could hurt the infrastructure drive and force the country to scale

back on some of the key plans aimed at connectivity.

Measures to broaden the nation’s tax base aimed at bringing more selfemployed into the tax system are noticeably absent, as are plans aimed at enhancing investment incentives. However, a streamlined and comprehensive tax regime is just what Jakarta needs, says the Organisation for Economic Corporation and Development.

It is not just the funding of projects that smarts; foreign and private sector interest in projects has been lukewarm on the back of a complex administrative system that has left many investors either cautious or plainly unenthusiastic about wanting to participate in the nation’s development. The country’s geographical location brings further challenges, lying atop the Pacific Ring of Fire, where natural calamities such as earthquakes and landslides add a layer of uncertainty to the global investing community.

Edi Saputra, an analyst with Wood Mackenzie, said: “It’s not only about the funds per se, but also about participation from the private sectors to assist with the development of the power plant projects. Foreign direct investment is needed as it provides financing as well as access to skills and technology.”

Another problem is Indonesia’s licensing regime, which Saputra described as “a real hindrance.” Despite these issues, some investors are participating in the nation’s development. If the administrative process is improved, take-up rates will likely be considerably higher.

In response, Indonesia has inaugurated the BKPM, or Indonesian Investment Coordinating Agency, designed to provide a one-stop permitting solution. But what it urgently needs to do is to bring the global community on board.

What Jokowi is promising goes far beyond anything his predecessors have done and there is the possibility that his ambitions will outlive his term in office or be scaled back. But if he manages to pull off a fraction of that which is planned, project cargo specialists will be kept busy in Indonesia. BB Jaya Prakash is a Singapore-based maritime analyst with wide-ranging knowledge on Asia.

ISSUE 6 / 2016

logistics perspective

SQUARE PEG, ROUND HOLE Logistical Challenges of Industrial Modularization

BY ALAN M. FIELD

S

ometime in November, the first lot of 40-foot by 40-foot containers and flat racks arrived in Raleigh, North Carolina, packed with modules for a high-tech machinery known as Reicofil Spunbond, which produces Spunbond fabrics of high quality even with “low basis” weights and at high production speeds.

In the advanced Reicofil non-woven process, polymers are transformed into endless filaments by melting and stretching them, and are then deposited on a wire mesh belt. Although the conversion of granulate into non-woven takes place in a single production step, in a process designed by German-based Reifenhauser Reicofil GMBH, the separate modules in the Reicofil plant come from as far away as France, Belgium and Germany and are later assembled in North Carolina.

Long before any of the various production modules leave for North Carolina, the engineers who designed the Reicofil plant collaborated with logistics specialists to make sure that the various modules “could be loaded as easily and as cost-efficiently as possible,” said Stefan Waschrath, managing director of MBS Logistics GmbH, which oversaw those processes.

Their specialized efforts helped to “avoid most of the problems and unforeseen extra charges” that often take place along the logistics chain. For example, MBS Logistics checked the maximum weight and dimensional weight, or DIM, restrictions in the European countries involved in the project, as well as in the 36 BREAKBULK MAGAZINE www.breakbulk.com

U.S., so that it would not face any problems in its delivery to port or to the destination.

Planning the transportation details began weeks in advance, so that there would be no delays in acquiring licenses or other permits from various authorities.

Modularization of components can present special challenges and opportunities for logistics firms, explained Kenneth Blaine, assistant manager of operations at Midrex Global Logistics, the exclusive global logistics provider for Midrex Technologies. “When a project is bid and won, engineering gets involved with actually designing all the specific components in a specific plant.

And during that engineering phase, they consult with us [logistics firms] in terms of the sizes and weights, and what can be moved – and things of that nature – into the area where we are going [to move the industrial modules].

A lot of times, they will have to do route surveys to make sure that a piece of whatever size and weight that they are planning on designing actually can be transported to the job site,” Blaine said.

Added Rusty Ray, sales and marketing manager at Midrex Global Logistics: “Modularization means early consulting of the logistics providers before the design phase ends.”

The AAL Dampier transfers an electrostatic precipitator from Nantong, China to Port Pirie in southern Australia, as part of a wider end-toend logistics operation managed by Geodis.

Modularization can present unique challenges and opportunities for logistics firms. / Credit: AAL ISSUE 6 / 2016

www.breakbulk.com BREAKBULK MAGAZINE 37

logistics perspective

CHAIN COMPLEXITIES

The complexities of global industrial modularization projects require the creation of intricate supply chains that span continents and involve the cooperation of numerous service providers. At MBS, Waschrath explained: “For windmills used in one manufacturing plant, we were involved in the dismantling process and modularization quite early in order to plan the transportation.”

But despite such advance planning, the project still faced several logistical problems, sometimes as a result of unforeseen changes in the weather, and at other times because of unforeseen changes after the dismantling of the machinery was completed.

Waschrath said one modularization project that Stefan Waschrath his firm undertook on behalf of an MBS Logistics GmbH industrial company needed to schedule a charter flight to transport its modules to a plant assembly site in Japan. It turned out to be “a perfect example of the old adage that ‘too many cooks spoil the broth,’ ” he explained. Although MBS was initially asked to only tender a price quote on the transportation portion of the project, things turned out to be a lot more complicated and difficult to manage.

Waschrath said: “We had to work with the shipper of the industrial modules in China, with a customer in Germany, with our Japanese consignee, with an FOB shipping agent in China, with our customs broker, and with the handling agent of the consignee in Japan.”

Nearly every day – and sometimes, as often as two or three times a day – MBS had to process new information about various packing lists; and about packing information about the goods; and about different weights, and so forth.” Ultimately, he said, “we had to wait until the vessel reached the port before analyzing how we could load the modules onto it, and how they would fit into the vessel.”

Despite his firm’s best efforts to plan in advance, Waschrath said, “If we 38 BREAKBULK MAGAZINE www.breakbulk.com

KEY QUESTIONS

that logistics companies need answers to early on in a modularization project include:

»

Where is the center of gravity of a piece of machinery?

»

How to bring it into a show or exhibition?

»

»

Where are the hooking points?

Which side is the front?

»

»

Where is the lashing for the forklift?

Which module goes first into the container?

»

Which goes last?

had been involved much earlier in the process, we would have had much less stress and miscommunication and the finger-pointing never would have started about who was failing and giving wrong information, and so forth.” Ultimately, he added, “everything worked out and we have been invited to quote for further projects.”

EARLY INVOLVEMENT A MUST Waschrath stressed that logisticians need to be involved in the entire process from the very beginning. “Too often, it isn’t until the machinery is getting ready to be transported that everyone says, ‘Now we have to think about the transportation.’ And then they send the cargo out to some logistics firm and they need quick delivery. At that point, it’s really difficult to get a good rate, and be competitive.”

Jason Mongelli, logistics coordinator at Midrex Global Logistics, recalled a case when some large fabrications – rather than modules that fit together to create them – were coming over the border from Mexico to a job site in Corpus Christi, Texas. “We had to take these large fabrications up to the border, across it, and to the Texas job site.

Some of the largest fabrications were an extreme challenge … If the engineering and design people who designed these big fabrications had talked to logistics a little bit sooner, we could have avoided a lot of issues that we had.”

When it comes to managing the logistics of modular shipments, logistics specialists don’t always intimately know the products they are shipping, so an open dialogue with the customers is a must. Logisticians need to learn what the product is, learn about the demands of the consignee, learn how to set up the cargo, and learn how many people will be working on it.

Waschrath added that logistics specialists can help manufacturers make decisions about the design of modules based on their knowledge of best logistics practices; “decisions not just about the [appropriate] size of the modules; we also know about what weights are easier to handle. The bigger the weight, the more likely there may be a crane involved in moving them; and if there is less tonnage, you may be able to work with a forklift instead of a crane, which is more expensive since you need additional tools. We can also answer questions about where the lifting point should be of each model of the machinery. When a piece of machinery is on the ground, it does not matter where its center of gravity is located; we in transport have to know that.

“At one show in Dusseldorf, Germany, a company delivered a machine that was six to eight tons in weight; with one machine, they delivered it with the lifting point in the middle of the machine, which was total nonsense.

When we lifted it up, it was dancing in the air. Wherever you moved, it was swinging like hell. It was difficult to bring it in because there were two less lifting points,” Waschrath said.

For all that, modularization does not necessarily make sense in every industrial sector. One of the Midrex logistics specialists explained that, after a careful consideration of its benefits and costs, his firm decided not to get involved in the modularization of ‘iron reduction’ plants around the world; a sector that has unique technical demands. BB International news correspondent 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 the past two decades.

ISSUE 6 / 2016

PREVIEW

BREAKBULK CHINA 2017: 13-16 MARCH, SHANGHAI WORLD EXPO EXHIBITION & CONVENTION CENTER

SHIPPERS PANEL PREVIEW RO-RO Q&A WITH WWL’S RIDER LIU EXCLUSIVE!

DECISION MAKER: CONTAINER SHIP VS. MPV with FLUOR’s Miroslav Jakab EVENT ESSENTIALS » E xhibitors » Agenda » F loor Plan

+

FREE 5 MARKETING TOOLS FOR EXHIBITORS

EVERYTHING YOU NEED TO KNOW ABOUT

ASIA’S LARGEST EVENT

FOR THE PROJECT CARGO AND BREAKBULK INDUSTRY

»

www.breakbulk.com/china BREAKBULK CHINA PREVIEW CH1

Sinomarine Ltd., the shipping management platform of Sinotrans & CSC Holding Co. Ltd., participated in Breakbulk China 2016 as an exhibitor for the first time. We benefited quite a lot from the exhibition. From the presentation “Working Together for China’s Belt & Road Initiative,” we learned about regional and global maritime outlooks from different carriers’ perspectives.

We also developed many new business relationships with companies from overseas. Furthermore, we believe we enhanced our brand image, and we felt honored to win the only golden prize awarded during Breakbulk China 2016.

We think that China’s “Belt and Road”-oriented strategic planning creates an improved ability for us to respond to personalized customer demands, in particular the ability to use new technology and equipment. It expands the market space for general cargo ship transport and enhances our potential service level and ability.

“To be superior and stronger” is the strategic philosophy of the Sinotrans & CSC Group, and Sinomarine has followed this precept in assessing business situations, researching and in particular in making decisions regarding general cargo ship construction. At present, we operate in Africa, the Middle East, Southeast Asia and other routes, and have achieved good results.

At the same time, we think that those in the general cargo ship market need to

rely on their own development and to strengthen their external cooperation and communication. The Breakbulk exhibition is a good platform for this.

Enterprises in the same industry can exchange opinions and also have opportunities to cooperate with owners.

We expect general cargo ship transportation to further develop, providing an more important role to worldwide and regional economies.

We believe that Breakbulk China 2017 will bring us more beneficial surprises.

ABOUT SINOMARINE Sinomarine’s business includes transportation of dry bulk, oil, ro-ro, container, breakbulk, and related matching businesses in the shipping industry. It is the only shipping company in China that can complete the whole course of service, integrated with ocean, coastal and Yangtze River transportation. To date, with more than 150 million tonnes annual transport capacity, owning and controlling more than 12 million DWT, the company ranks in the top two among all the shipping companies in China.

Sinomarine endeavors to develop into a “Professional Leading, Efficient Operation, Customer Trust” shipping enterprise. Taking the business philosophy of ‘Professional, Concentration, Cooperation and Win-win,’ Sinomarine is devoted to creating a bright future with all parts of the social public.

WHAT’S INSIDE

04

12

Dear industry colleagues, I hope your preparations for Breakbulk China 2017 are going well.

Breakbulk China has been steadily growing in the past five years along with the breakbulk industry. However, the market is experiencing a very tough time at present, so Breakbulk’s event mission to provide business promotion, industry networking and market intelligence is even more important. We look forward to seeing our returning exhibitors, sponsors and supporters and welcoming all new participants to the event.

Our team is working hard to ensure Breakbulk China is the largest and most important gathering in Asia where shippers have the opportunity to meet and develop relationships with the leading specialized carriers, forwarders, ports, terminals and packers who have the expertise and resources to handle oversized cargoes.

We will launch the Breakbulk Hosted Buyers Program, which will give you the direct connections with logistics procurement professionals onsite that often takes place behind the scenes. The program offers a strong return on investment compared to other events. The details are being work worked out and I look forward to sharing them with you.

We are so proud of our program team and their first-class agenda. This is the information that can inform and improve your decisions and planning throughout the year.

Our team works together to give you the most successful experience at Breakbulk China. We have launched the new online exhibitor manual through an interactive portal. This gives our exhibitors a new tool to prepare for our event, adding that additional level of customer service for your planning needs.

Breakbulk has launched a new registration channel and payment option at Breakbulk China 2017 via the popular smartphone app, WeChat. WeChat is one of the largest messaging apps in China with more than 700 million active users

12

04 E XPERIENCE BREAKBULK CHINA 2016 Photo & Video Gallery

12 D ECISION MAKER

CONTAINER SHIP VS. MPV with FLUOR’s Miroslav Jakab

17 E XHIBITOR ADVANTAGE:

NEW TOOLS FOR EXHIBITORS + FREE MARKETING

14 A SK AN EXPERT

CONFERENCE SESSION PREVIEWS 08 Shippers Panel 10 Ro-Ro Rises to the Challenge 11 Tackling Cross-border Issues

15 SKILL BUILDERS

EVENT ESSENTIALS 08 Workshops & Conference Agenda 16 Floor Plan 18 Exhibitor Checklist

TRUMP EFFECT ON TRADE LANES with TOLL GLOBAL FORWARDING’s Mac Sullivan for shippers & forwarders

monthly. WeChat registration is designed to make the registration process simple, quick and convenient. We hope this registration solution will help to enhance your registration experience!

As our event grows, so do our offerings, and we look forward to working with you over the next few months. We hope that this event will be a rewarding experience for all of our exhibitors and visitors.

I look forward to seeing you in Shanghai!

Sincerely,

CONTACTS CHINA EVENT DIRECTOR

Gary Tang

+852 2132-9698

gary.tang@ite-asia.com CHINA SALES

Wendy Tao

+86 21 61806789 ext. 861 wendy.tao@ite-asia.com

SOUTHEAST ASIA SALES

Colin Ho

+603 7842 9863 ext. 8186 colin.ho@ite-ap.com

EUROPE & MIDDLE EAST SALES

Mark Rimmer

+44 20 7596 5260

mrimmer@breakbulk.com

Gary Tang, Event Director Breakbulk China

RUSSIA & CIS SALES

Vladislav Pisklov

+7 (495) 935 73 50 ext. 4142 vladislav@breakbulk.com ADVERTISING

Robert Janusauskas +353 87 414 3737

robert@breakbulk.com MARKETING

Leslie Meredith +1 801 201 5971

lmeredith@breakbulk.com CONTENT

Janet Nodar

+1 251 473 2742

jnodar@breakbulk.com VIP SHIPPER CLUB

AMERICAS SALES

Mark Jakobsen

+1 281 416 4672

mark.jakobsen @ite-exhibitions.com

Christian Blair Thompson +44 207 596 5078 cthompson@breakbulk.com

www.breakbulk.com/china BREAKBULK CHINA PREVIEW CH3

EVENT GALLERY

MAKING

CARGO CONNECTIONS AT BREAKBULK CHINA

Moving project cargo and breakbulk goods involves complex logistics, months and even years of planning and multimillion-dollar contracts. It’s a complicated job and in this tight economy, finding new business is a top priority. We can help.

From 13-16 March 2017, Breakbulk China, Asia’s largest exhibition and conference for the project cargo and breakbulk industry, will bring together 6,000 industry professionals, 200 exhibitors and more than 300 shippers.

Now in its sixth year, Breakbulk China is the most efficient way to meet the business connections you need for a successful year.

CH4 BREAKBULK CHINA PREVIEW www.breakbulk.com/china

ISSUE 6 / 2016

www.breakbulk.com/china BREAKBULK CHINA PREVIEW CH5

WORKSHOPS & CONFERENCE AGENDA MONDAY, 13 MARCH 2017 08:30 – 17:00

WORKSHOP

10:15 – 12:00

MICRO-SEMINAR

INCOTERMS – BEST USAGE

[Presented in Chinese with simultaneous English translation]

PPG CERTIFICATE IN PROJECT FORWARDING DAY 1

While there are only nine terms, many derivations are used, resulting in disputes, lack of insurance coverage and increased risk to one or both parties.

ISO accredited, this two-day workshop is for project forwarders seeking to fast-track skills and knowledge.

10:30 – 11:20

[Presented in English]

» Rodger Hall, F​ ounder of SUN COMMUNICATIONS » Kevin Stephens, ​Founder of 3PL heavy-lift network PROJECT PROFESSIONALS GROUP

TUESDAY, 14 MARCH 2017 08:30 – 17:00

WORKSHOP

PPG CERTIFICATE IN PROJECT FORWARDING DAY 2

[Presented in English]

» Rodger Hall, F​ ounder of SUN COMMUNICATIONS » Kevin Stephens, ​Founder of 3PL heavy-lift network

KEYNOTE

CHINA SHIPPING OUTLOOK

[Presented in English with simultaneous Chinese translation]

A knowledgeable executive from an important Sinotrans subsidiary will discuss the regional and global maritime outlook from a Chinese carrier’s perspective.

» Zhou Bin, General Manager, SHANGHAI CHANGHANG SHIPPING CO., LTD.

11:30 – 12:30

CONFERENCE SESSION

SHIPPERS PANEL: CARGO OWNER PERSPECTIVES ON IMPROVING LOGISTICS EFFICIENCY

[Presented in Chinese with simultaneous English translation]

PROJECT FREIGHT MANAGEMENT: THE SHIPPERS’ PERSPECTIVE

Although cargo owners and freight forwarders are equally keen to maximize efficiencies, their views of the best strategies for efficient planning, communicating and cargo handling can clash. In this discussion, cargo owners offer their perspectives on efficient logistics operations, barriers to efficiency, and what they want forwarders to understand.

For EPCs, cargo owners and project forwarders, this one-day course will cover the keys to managing major projects.

» Shao Bin, Logistics Department Manager,

PROJECT PROFESSIONALS GROUP

08:30 – 17:00

WORKSHOP

[Presented in Chinese]

» Oscar Li, Project Manager, FLUOR CHINA LOGISTICS

09:00 – 16:00

WORKSHOP

ODERATOR: Stephen Liu, Sales Director, » M YOUNGER NICHE LOGISTICS

MORIMATSU (CHINA) GROUP

» James Jiang, Logistics Specialist, OUTOTEC OYJ » Morgan Meng, Deputy Project Manager, POWER CHINA HUBEI ELECTRIC ENGINEERING CORPORATION (HEEC)

BREAKBULK EDUCATION DAY

» Frank Zhang, Senior Shipping Coordinator, TECHNIP CHINA

For university students and those new to the industry, this workshop will feature instructors from FLUOR, BIMCO, TOLL

14:00 – 14:50

[Presented in English]

GLOBAL FORWARDING, AAL, PORT OF DUQM and CJ SMART CARGO.

CONFERENCE SESSION

CASE STUDY: GETTING AHEAD OF THE GRAIN LOADER GAME

» Elizabeth Wetzel, Education Manager,

[Presented in English with simultaneous Chinese translation]

WEDNESDAY, 15 MARCH 2017

Grain giant Viterra is ready to load post-Panamax vessels at the Port of Vancouver thanks to a 2016 project that included transporting a 250-tonne, 60 meters’ long shiploader from China to Canada. It took a year to plan the multi-voyage project, which also included a dock conveyor and a transfer tower. AAL and partners will detail the specifics of this complex cargo move.

BREAKBULK EVENTS & MEDIA

10:15 – 10:30

OPENING REMARKS

[Presented in English with simultaneous Chinese translation]

» Janet Nodar, Content Director, BREAKBULK EVENTS & MEDIA

CH6 BREAKBULK CHINA PREVIEW www.breakbulk.com/china

» Dona Asciak Fletcher, CEO, CONVOY LOGISTICS PROVIDERS LTD.

» Felix Schoeller, General Manager – Pacific Service, AAL » Jack Zhou, Planning Manager, AAL

ISSUE 6 / 2016

EVENT PREVIEW

15:00 – 15:50

CONFERENCE SESSION

WEIGHING THE OPTIONS: ALTERNATIVES FOR HEAVY CARGO OCEAN TRANSPORT

[Presented in English with simultaneous Chinese translation]

Alternatives to traditional project cargo and ro-ro carriers have emerged as manufacturers design heavy industrial products for container shipping and cargo owners attempt to cut costs in these lean times. What are the pros and cons of these alternatives, and how is the traditional project cargo sector responding?

» MODERATOR: Miroslav Jakab, China Logistics Manager/Global

Container Negotiation Manager, FLUOR » M ichael Juhler, Global Head of Special Cargo, MAERSK LINE » Jum Gyu Kim, Managing Director, SUPER RACK SHIPPING » O skar Orstadius, Global Segment Account Manager, Breakbulk and Project Cargo, HÖEGH AUTOLINERS » T homas Wang, Deputy General Manager, Project Logistics Shanghai Branch, COSCO LOGISTICS » D avid Lloreda Calero, Commercial Manager, Shanghai Office, BBC CHARTERING

15:50 – 16:00

10:30 – 11:20

KEYNOTE

SUPPLY CHAIN EXECUTIVE OVERVIEW

[Presented in Chinese with simultaneous English translation]

As China’s domestic economy matures, what challenges and opportunities will breakbulk supply chain executives face in 2017 and beyond? A seasoned executive from Chinese Supply Chain & Operations Managers Association will share his expertise with our audience.

11:30 – 12:30

CONFERENCE SESSION

CROSS-BORDER COMPLIANCE AND IMPORT-EXPORT CHALLENGES

[Presented in Chinese with simultaneous English translation]

Complex tax regimes, foreign trade zones, and import-export regulations for China and border countries are increasingly complex and time-consuming, but inter-Asia trade is growing, particularly through China’s Belt and Road initiative, and understanding is crucial. How can breakbulk professionals address and streamline these elements?

CLOSING REMARKS

» Henry Hu, NEW CHAIN LOGISTICS - SHANGHAI u Dedong, General Manager, CMEC COMTRANS » H

» Janet Nodar, Content Director, BREAKBULK EVENTS & MEDIA

eorge Qin, Sales Director, CCLG CHINA » G » David Xu, General Manager, SINO PROJECTS (SHANGHAI) CO.

16:00 – 18:00

14:00 – 14:50

[Presented in English with simultaneous Chinese translation]

NETWORKING

COCKTAIL RECEPTION

On the exhibition floor for shippers, exhibitors and delegates.

INTERNATIONAL CO., LTD.

CONFERENCE SESSION

RO-RO RISES TO THE CHALLENGE OF THE WORLD’S LARGEST MARKET

[Presented in English with simultaneous Chinese translation]

16:30 – 17:30

NETWORKING

MEETUP CHINA

Special gathering for shippers and first-time Breakbulk China exhibitors and delegates.

» Leslie Meredith, Marketing Director, BREAKBULK EVENTS & MEDIA

China’s vehicle import and export business is changing to meet government initiatives for inland vehicle manufacturing, increasing rolling stock and equipment exports, and ro-ro port modernization. How will the global ro-ro industry adapt to China’s growth patterns?

» MODERATOR: Christine Huang, Transportation Procurement

Supervisor, Global Supply Network Division, CATERPILLAR

lex Huang, General Manager, CHINA ELECTRIC POWER » A OVERSIZED EQUIPMENT TRANSPORTATION

THURSDAY, 16 MARCH 2017

» X i Jialin, SHANGHAI HAITONG RO-RO TERMINAL » R ider Liu, Commercial Director and Head of Beijing Office,

10:15 – 10:30

» B ob Tang, Country Sales Manager, HÖEGH AUTOLINERS

WELCOMING REMARKS

WALLENIUS WILHELMSEN LOGISTICS LTD. – CHINA

[Presented in English with simultaneous Chinese translation]

» Janet Nodar, Content Director, BREAKBULK EVENTS & MEDIA

14:50 – 15:00

10:15 – 12:00

[Presented in English with simultaneous Chinese translation]

MICRO-SEMINAR

PACKING AND LASHING: PROCESS TO COMPLETION

CLOSING REMARKS

» Janet Nodar, Content Director, BREAKBULK EVENTS & MEDIA

[Presented in Chinese with simultaneous English translation]

Packing and lashing involves pallets and strapping, but what else?

Experienced industry executives describe the process from start to finish, with particular attention to regulations unique to China. www.breakbulk.com/china BREAKBULK CHINA PREVIEW CH7

‘WE’RE ALL IN THIS

TOGETHER’

In the project and breakbulk transport logistics world, cargo owners call the shots and the transport supply chain responds. Participants along the supply chain want to know: 1. what they think and 2. what they want from vendors. For that reason, Shipper Panels have become a mainstay of Breakbulk’s global programming.

The common theme among shippers and a message to those they do business with – it’s that “we’re all in this together.”

At Breakbulk China last spring, executive panelists emphasized the value of logistics partnerships with

Chinese Shippers Value Logistics Provider Partnerships

freight forwarders and logistics service providers.

“We don’t communicate only when a problem happens,” said Liangli Ma, Asia Logistics Manager, Air Liquide Global E&C Solutions Hangzhou Co. Ltd. “Since we are a team, we know about each other’s procedures, products and processes. Exchange of information is very important from the early stages to execution so there are no problems.”

“We shouldn’t think of them as suppliers,” said Ronny Zhang, Logistics Head for Fluor China. “We are a team with a common goal: the execution of a project.

We mutually support each other.”

CH8 BREAKBULK CHINA PREVIEW www.breakbulk.com/china

As partners, it’s important for forwarders and logistics providers to be part of the process “as early as possible,” said Zhilv Zhang, Project Logistics Manager/Senior Logistician, Shanghai Electric Power Generation Group. “The partners’ expertise is key in transportation management, discussions of cargoes and sizes, vehicles and equipment involved, including heavy-lifts, route planning, safety and contingencies.”

The theme of partnership reverberated around the globe in 2016 from Shanghai to Abu Dhabi. We’ll take a closer look at the the shipper and logistic partnership at this year’s panel in Shanghai. BB ISSUE 6 / 2016

EVENT PREVIEW

CONFERENCE SESSION

» Wednesday, 15 March, 11:30 – 12:30

2017 SHIPPERS PANEL

The Cargo Owner’s Perspective: Improving Logistics Efficiency

Shippers Panel at Breakbulk China 2016: (from left)

The 2017 Breakbulk China Shippers Panel will tackle the enduring question of how to improve logistics efficiency, a pressing need in light of the economic slowdown and today’s tightening business environment. As China’s economy has matured and coastal manufacturing regions have become saturated and more expensive, many manufacturers have shifted inland. However, infrastructure and transportation networks there are far less efficient than along the coast.

China’s efficiency challenges are also exacerbated by outdated technology and the need to find, train and retain staff.

In Shanghai, VIP shippers Shou Bin, Logistics Department Manager with Morimatsu China Group; Morgan Meng, Deputy Director of Logistics, Sunshine Kaidi New Energy; James Jiang, Logistics Specialist, Outotec Oyj; and Frank Zhang, Senior Shipping Coordinator, Technip China (speakers

subject to change); represent a range of Chinese cargo owners, each with their own logistics concerns.

Morimatsu, a Japanese company, manufactures modules, pressure vessels, reactors, agitators and other types of large industrial equipment used widely in the oil and gas industry, petrochemicals, manufacturing and other industrial processes. Technip specializes in offshore and onshore oil and gas structures and subsea energy development. Outotec Oyj, a Finnish company, manufactures processing equipment, including all types of cooling towers, for the extraction industry. Sunshine Kaidi constructs power plants and is involved in refining, large-scale project engineering and various power generation projects. Company headquarters are in Wuhan, in central China, at the intersection of the middle reaches of the Han and Yangtze rivers. BB

Moderator: Tyler Johnson, Marketing General Manager, Shipparts.com Ronny Zhang, Logistics Lead, Fluor China Zhilv Zhang, Project Logistics Manager/Senior Logistician, Shanghai Electric Power Generation Group

»M ODERATOR:

Stephen Liu, Sales Director YOUNGER NICHE LOGISTICS

Liang Li Ma, Asia Logistics Manager, Air Liquide Global E&C Solutions Hangzhou Co., Ltd.

PANELISTS » Shao Bin, Logistics Department

Manager, MORIMATSU (CHINA) GROUP » J ames Jiang, Logistics Specialist, OUTOTEC OYJ

organ Meng, Deputy Project Manager, » M POWER CHINA HUBEI ELECTRIC ENGINEERING CORPORATION (HEEC)

» F rank Zhang, Senior Shipping CREDIT: MORIMATSU (CHINA) GROUP

Coordinator, TECHNIP CHINA CORPORATION (HEEC)

www.breakbulk.com/china BREAKBULK CHINA PREVIEW CH9

Q+ A EVENT PREVIEW

RELATED CONFERENCE SESSION Thursday, 16 March, 14:00 – 14:50

RO-RO RISES TO THE CHALLENGE OF THE WORLD’S LARGEST MARKET » MODERATOR: Christine Huang, Transportation Procurement Supervisor, Global Supply Network Division, CATERPILLAR

with Rider Liu, WWL

What does China’s ro-ro market look like at the moment?

We saw a big increase in both import and export volumes until around 2013 when import volumes stabilized.

However, for truck and car exports China is facing more competition from Japanese and Korean cars, and some countries have changed their duty and tax policies and have an increasing requirement for factory localization. Export volumes are going down.

Which areas are growth areas for the future?

Chinese-made buses are a growing opportunity. Overseas are accepting our brands more and more, so we see an increase. For the other machinery such as construction, we see the global market to be very challenging. The volume is still not good yet.

You mentioned that there are only a few Chinese ports that have permission from the government to import vehicles and handle ro-ro cargo.

Which ports are good for ro-ro?

In the last four years, the Chinese government has been issuing licenses for the import of cars to some of the new ports like Qingdao, Ningbo and Zhangjiagang. Some of the new ports are building new ro-ro terminals.

However, we see challenges for ro-ro carriers because as you know ro-ro

lex Huang, General Manager, QINGDAO CHINA ELECTRIC » A POWER INTERNATIONAL LOGISTICS

» Xi Jialin, SHANGHAI HAITONG RO-RO TERMINAL » R ider Liu, Commercial Director and Head of Beijing Office, WALLENIUS WILHELMSEN LOGISTICS

» B ob Tang, County Sales Manager, HÖEGH AUTOLINERS

shipping is not difficult. It’s roll-on, roll-off; we don’t need much more equipment. We need skillful drivers, which we have. We see these ports trying to engage the carriers to come into those ports, but this is challenging for the carriers because it means inducement calls, which involve a cost.

The new terminals like Qingdao, like Ningbo, I think these are quite good.

Even Tianjin and Dalian are continually improving.

But for the ro-ro carrier it’s not only shipping the cars: We also do some of the breakbulk cargoes. So some ports also invest for the tugmaster to have the experience to load what we call trailer cargo. So far, most of the breakbulk cargo is shipped from the Haitong terminal in Shanghai where the volume is quite good and the service is good.

How do you see the ro-ro market in China changing over the next five years, especially for WWL? For WWL, I think we have done a good job. We expanded not only our ocean deep sea service but also our

full service activity from factory to dealer. We’ve diversified our services to include technical services, warehousing, land transportation and terminal services. We can bundle more cars together and offer one-stop service. We see the demand increasing for this type of service.

We see local Chinese companies are growing very fast. In the last five years, they have learned how to do the vehicle logistics from import to the dealer.

They are growing very fast. For WWL, we see a very good future. For exports, we have our sister company named Eukor, along with an American roll-on roll-off carrier. We will work together to be the one of biggest ro-ro carriers in the world. We will operate more efficiently and cost-effectively and provide our customers more service globally for the total group tonnage.

So that merger is coming soon?

The company is still working on the solutions. As our CEO announced, it is scheduled to be completed in the first quarter of next year. BB

CREDIT: WALLENIUS WILHELMSEN LOGISTICS

CH10 BREAKBULK CHINA PREVIEW www.breakbulk.com/china

ISSUE 6 / 2016

TACKLING CROSS-BORDER ISSUES WHAT IS OBOR?

CREDIT: HONG CUI, CSL-VASTWIN

Complex tax regimes, foreign trade zones, and import-export regulations for China and border countries are increasingly complex and timeconsuming, but inter-Asia trade is growing, particularly through China’s One Belt One Road initiative, and understanding is crucial. How can breakbulk professionals address and streamline these elements? Expert help is crucial, whether in-house or from an outside professional.

China’s value-added-tax (VAT) regime was overhauled almost completely between 2012 and 2016, replacing a former business tax in most cases.

Not understanding the new VAT structure, according to a recent publication from Dezan Shira, a tax consultancy with Chinese expertise, can result in fines, blacklisting, or simply paying far more tax than necessary. The VAT system can benefit companies working in cross-border businesses, while those

RELATED CONFERENCE SESSION Thursday, 16 March, 11:30 – 12:30

CROSS-BORDER COMPLIANCE AND IMPORT-EXPORT CHALLENGES » Henry Hu, NEW CHAIN LOGISTICS – SHANGHAI

» Hu Dedong, General Manager,

CMEC COMTRANS INTERNATIONAL CO., LTD.

» George Qin, Sales Director, CCLG CHINA

» David Xu, General Manager,

SINO PROJECTS (SHANGHAI) CO.

unfamiliar with VAT regimes may be at a disadvantage.

The Chinese government has been encouraging investments in the Shanghai foreign trade zone using measures such as allowing private projects in the FTZ to raise yuandesignated capital, according to news reports. These moves are designed to stem outflows of Chinese currency.

The Silk Road Chamber of International Commerce, established in 2015, is a non-governmental organization intended to promote business participation in the Silk Road. The organization is building an e-commerce platform that should, when complete, enable cross-border e-commerce and RMB online payments and settlements to members, along with an ability to match projects and investors.

China, obviously not a liberal democracy, does not share in the populist, anti-globalization sentiment gaining strength in the west and made evident in the passage of Brexit in the U.K. and the election of Donald Trump in the U.S. China is working to strengthen its Asia-region economic partnerships, its internal consumer base, and broader, interlinked relationships via the OBOR strategy.

However, China’s near neighbors are manufacturing exporters themselves, and unlikely to replace China’s larger, more distant markets. Interestingly, after months of slumping, recent economic reports suggest an upturn in China’s manufacturing sector. Whether this points to greater internal demand within China or a pickup in export demand remains to be seen. BB

China has organized an Asian development initiative called One Belt One Road (OBOR) that targets what Beijing officials call the “belt” countries of central Asia and “road” countries of Southeast Asia. OBOR covers both land- and sea-based trade.

OBOR – a major shot in the arm for breakbulk companies serving dozens of countries in Asia and Africa – has reportedly powered a nearly 54 percent increase in Chinese outbound investment in recent months.

New deals signed by Chinese companies in 61 countries during January-September were worth a combined US$74.5 billion and accounted for more than half of all foreign engineering contracts, the ministry said.

OBOR is also credited with spearheading the building of economic trade zones in 36 countries. These zones have attracted a variety of Chinese company investments, including manufacturing plants. Through September, the ministry said, Chinese companies had poured nearly US$18 billion into businesses in 56 trade zones in OBOR countries, creating 163,000 local jobs.

Yet there’s still huge potential for future business through Belt and Road, according to Noel Quinn, CEO for the global commercial banking division at London-based HSBC. Referring to a recent poll of HSBC’s business customers, Quinn said, “As many as three in five are unaware of the potential opportunities.”

www.breakbulk.com/china BREAKBULK CHINA PREVIEW CH11

EVENT PREVIEW

CONTAINER SHIP VS MPV

CARRIERS IN THE BALANCE:

We asked Miroslav Jakab, Manager of Global Container Negotiations for FLUOR, five key questions about his criteria for selecting a carrier to ship project cargo in light of this very tough climate where decisions are critical – for everyone.

RELATED CONFERENCE SESSION Wednesday, 15 March 2017, 15:00 – 15:50

WEIGHING THE OPTIONS: ALTERNATIVES FOR HEAVY CARGO OCEAN TRANSPORT » MODERATOR: Miroslav Jakab,

China Logistics Manager/Global Container Negotiation Manager, FLUOR

» Michael Juhler, Global Head of

Special Cargo, MAERSK LINE » Jum Gyu Kim, Managing Director, SUPER RACK SHIPPING » Oskar Orstadius, Global Segment Account Manager, Breakbulk and Project Cargo, HÖEGH AUTOLINERS

1

Obviously in this market, every carrier is hungry for cargo. Why are container carriers able to edge into this market?

Fluor manages an annual spend of US$16 billion in equipment, materials or services, so it is critical for us to be able to ensure equipment and materials arrive to project sites in a timely and cost-effective manner. We consider all options when making transport decisions to find the solution that is best for the logistics and infrastructure of that project.

Over the last several years, we have seen the project transport market, which was traditionally dominated by multipurpose carriers, develop. One of the main factors is the entrance of container carriers into the project cargo segment. The market development over

CH12 BREAKBULK CHINA PREVIEW www.breakbulk.com/china

the past two years has emphasized this trend, with the demand for regular sailing with high frequency, economy of scales and global coverage.

As a result, the modern container vessels, usually able to carry up to 500 tons of cargo, have become serious competitors to multipurpose vessels because they can offer frequent sailings, fast transit times and reasonable transport costs.

However, multipurpose carriers still provide advantages, especially as good port infrastructure is needed for container vessels. In addition, you have to consider the lot size and with it connected the stowage plan and port time requirements.

However, options are not limited to multipurpose and container carriers, as roll-on/roll-off carriers are also entering the project cargo market. We continue to see developments in this segment as providers adjust their operation models.

Container carriers typically have fixed liner routes while MPVs and heavy-lift carriers are typically tramp carriers. Does a tramp carrier have an advantage in the project market?

2

Many consider HL carriers as carriers suitable of carrying cargo over 500 tons, so currently this is not in the container carrier’s scope. In addition, multipurpose carriers are not purely tramp carriers, as many have established regular liner or semi-liner service.

Multipurpose carriers have several advantages, including their flexibility to accommodate multiple types of ports, ability to accommodate substantial amounts of heavy cargo and flexibility during shipping.

For cargo owners, it is important to have a variety of carriers, such as multipurpose, roll-on/roll-off and container carriers that complement each other, so that we can make the best selection to support project needs.

ISSUE 6 / 2016

3

Do you see EPC engineers adapting project pieces so they can be transported in containers?

Our engineering and modularization teams work closely with logistics teams to optimize modular parameters for the maximum efficiency.

State-of-the-art engineering solutions cannot be delivered without collaboration from specialized logistics teams.

Transport is not only about the costs – our purpose is to have the right cargo, in the right place, at the right time. If we miss one of those elements, then we are being inefficient with our resources.

Each project is different and poses its own challenges regarding the proper logistics; there is no “one size fits all” approach. For example, if there are shallow draft limitations, container carriers might not be the solution in that instance, but it may still be part of the overall project logistics plans.

We also adapt cargo parameters to consider technical capabilities.

We’ve already seen consolidation and collapse in the carrier segment. Do you think this will continue?

4

We are in the midst of a wave of consolidation in the container, multipurpose and heavy-lift carrier segments.

The aim is to create a self-sustainable logistics model, where parties can be profitable, but deliver a level of capital efficiency that supports our project execution.

Automation and electronic data exchange are bringing new aspects into the business model and hopefully can assist in creation of well balanced system in between two undesirable extremes – over-fragmented on one side and super monopolized on the other one.

In general, how would you characterize the project cargo market in China?

5

As one of the world’s fastest-growing economies, Chinese projects and customers have been significant for our company’s growth. China is a very important market for Fluor; we have had the opportunity to complete more than 350 projects across 20 provinces and municipalities.

In recent years, the Chinese project market has not only concentrated on China but, in line with “One Belt, One Road” policy, rapidly expanded worldwide.

Our belief in the long-term growth and the importance of China and the Asia-Pacific region is underscored by our joint venture with COOEC, COOEC-Fluor Heavy Industries Co., Ltd., that was announced in 2015.

Through this joint venture, we own, operate and manage the Zhuhai Fabrication Yard, which is one of the world’s largest fabrication yards. The yard’s central, ocean-front location shortens shipping times to global markets. It is easily accessible to the region’s major cost-competitive suppliers and vendors, creating additional cost savings for our clients.

Through this yard, we cannot only serve clients in Asia-Pacific, but around the world, creating numerous project cargo opportunities. BB

Zhuhai Fabrication Yard Fast Facts » Located on the South China Sea » Over 2 million square meters in size » C an accommodate the fabrication of modules weighing more than 50,000 tonnes » C urrent capacity is 150,000 tonnes per year, with a planned capacity of up to 400,000 tonnes by 2019

CREDIT: ZHUHAI FABRICATION YARD / FLUOR

WORKSHOPS

Are changes ahead for China’s trade lanes because of the perceived trend toward isolationism under the presidency of Donald Trump?”

ASK AN EXPERT

Mac Sullivan, Trade Lane Manager GREC – Transpacific TOLL GLOBAL FORWARDING Mac Sullivan is currently the Greater China Trade Lane Manager (Transpacific) for Toll Global Forwarding. His primary focus is to lead and drive the overall budgeted volume and gross profit on one of Toll’s most important bilateral trade lanes: China-U.S. Mac works closely with Greater China and USA product and commercial teams.

Based on Trump’s policy rhetoric post-election, it is my personal opinion that he will very much lean towards whatever is the popular opinion in the U.S. at the moment, which makes this a hard question to answer.

While I believe some Americans perceive China as threatening American jobs, the facts don’t support this argument. Chinese investment and imports into the U.S. have had more positive aspects than negative, such as increased jobs and access to cheap goods.

Also, let’s not forget that China is America’s third-largest export trade partner. According to Seabury, U.S. to China trade is up 6%, while it was down 2% on Trans-Pacific eastbound from January to September during the pre-election period this year. I doubt Trump the businessman would want to

mess with this U.S.-advantaged trend supporting its GDP. U.S. multinationals and farmers have a lot at stake if he were to incite a trade war with China.

You know, while Trump has threatened a 45% tariff on Chinese goods, I personally don’t believe that he will even implement the 15% increase that he is allotted as president in the first 150 days. Breakbulk and project cargo on the TP trade lane have bigger problems to worry about, such as the slumping commodity markets, unclear direction of the global markets and the instability of the shipping industry.

In summary, if TPP does get nixed

by Trump, and the U.S. public gets access to more information about the potential price hikes, they will face the fact that the jobs that were lost to China in the past two decades aren’t coming back. BB

Mac is an American and has been in Shanghai, China since 2010.

He is one of six instructors for Breakbulk China’s Education Day and will provide an overview of land transportation. Here we ask him a question that has been on our minds since Donald Trump was elected president of the United States.

RELATED WORKSHOP Tuesday, 14 March, 09:00 – 16:00

EDUCATION DAY For information email Elizabeth Wetzel, Education Manager, at ewetzel@breakbulk.com CH14 BREAKBULK CHINA PREVIEW www.breakbulk.com/china

ISSUE 6 / 2016

SKILL BUILDERS FOR SHIPPERS & FORWARDERS

One-day Workshop in Project Freight Management » Tuesday, 14 March, 08:00 – 17:30

PROJECT FREIGHT MANAGEMENT – THE SHIPPERS’ PERSPECTIVE » O scar Li,

Project Manager, FLUOR CHINA LOGISTICS

All-inclusive pass covers the workshop, evening cocktail reception on Wednesday, 15 March, and the exhibition and conference on 15-16 March.

PRICING US$700 through 16 January US$750 through 12 March

USE CODE BBCH25 AND RECEIVE 25% DISCOUNT AT REGISTRATION (ONLINE ONLY)

This one-day intermediate level course is for those EPCs, cargo owners and project forwarders who strive to better understand the responsibilities and requirements in project freight management. From the proposal preparation to frame agreements, and from the project planning of the FEED, to the PEP – project execution plan and the application of BCM – best cost management, as well as calculation of TIC – total installed cost, this course will cover these steps and more in the process of successful project freight management.

If you are looking to learn about project planning, project and shipping strategy, and network with shippers, forwarders and service providers, then this is a good choice for you.

PPG Certificate in Project Forwarding » Monday-Tuesday, 13-14 March, 08:30 – 17:00

The PPG Certificate in Project Forwarding Workshop is ISO accredited and has been designed for project forwarders seeking to fast track skills and knowledge, or to refresh their approach on how to achieve success. » Kevin Stephens, » Rodger Hall, founder of 3PL heavylift network

founder of

SUN COMMUNICATIONS

PROJECT PROFESSIONALS GROUP

REGISTER www.wwproject.net/education

The instructor-led training includes applied exercises and case studies. The non-technical course has been held at venues around the world and has received excellent feedback.

This training is offered to industry professionals and “rising stars” who wish to take the opportunity to register for a project cargo training course especially designed to fast track skills that otherwise could take many years to acquire.

DOWNLOAD THE BREAKBULK APP

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E:\百度云同步盘\ITE\Event\2017 Events\Breakbulk 2017\5-平面图源文件\150428\QQ图片20160518171729.jpg

FLOOR PLAN

CH16 BREAKBULK CHINA PREVIEW www.breakbulk.com/china

Check-in to Breakbulk China to schedule meetings, promote your 13-16 MARCH 2017 company and get instant 13-16 MARCH 2017: Educational Workshops access to all event 13-16 MARCH 2017:details Exhibition & Executive Presentions and updates.

Shanghai World Expo Exhibition & Convention Centre(SWEECC) Hall-3 Shanghai, China

ISSUE 6 / 2016

THE BREAKBULK EXHIBITOR ADVANTAGE

THANK YOU TO OUR SPONSORS

New to Breakbulk? Great! We can’t wait to show you why exhibiting at Breakbulk China is a smart choice.

GOLD

Exhibit Planning Made Easy

Breakbulk has selected Milton for stand-building services.

Milton has an excellent online ordering system, which will streamline the process of exhibit planning for you. However, if you still prefer person-to-person assistance, Milton has that as well. Of course, the Breakbulk team is always available to help as well.

BRONZE

5 FREE Marketing Tools

1

As an exhibitor you will receive five complimentary VIP customer guest invitations to use with the clients that are most important to you. (These passes are in addition to your exhibitor allotment.) This is a great way to show your appreciation for your best customers and build a relationship with prospects.

2 3 4

Email signature banner customized with your stand number that you can easily add to your emails to promote your company’s presence at Breakbulk China 2017. Need an ad for your website? Just let us know.

HOTEL KEY

Submit your company video to be played during the event on the big screen HDTVs located throughout the hall.

All entries in the upcoming Dusk to Dawn Photo & Video Contest will be on display at the event. Entries may be submitted starting on 4 January 2017. Show us your most challenging after-hours transports! Exhibitors who enter the contest will have the opportunity to be filmed in our 2-Minute Challenge series — a $1500 value.

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DELEGATE BAG

Submit your press releases (up to three per exhibitor) to our online media center where they will be posted to breakbulk.com.

DELEGATE BADGE & LANYARD

EVENT GUIDE

FREIGHT FORWARDING PARTNER

DMC PARTNER

EVENT PARTNER

www.breakbulk.com/china BREAKBULK CHINA PREVIEW CH17

EXHIBITOR

COMPANY

CHECKLIST Use this handy guide to keep track of Breakbulk China exhibitors you don’t want to miss at the show.

COMPANY

STAND

3T Cameroun A-ship AAL AARAS Shipping Agencies ACC Logistics ADP Shipping Ahlers AICL Projects Allied Shipping FZE Aqua Dragon International Logistics BBC Chartering Bestbox Export Packing Limited BigLift Shipping Broekman Logistics C-NKKK C. Steinweg Capebulk Central Oceans Hong Kong Limited Chapman Freeborn China Pacific Maritime China Shipping Vastwin Chipolbrok

CH18 BREAKBULK CHINA PREVIEW www.breakbulk.com/china

911 6 304 1807 1805 628 314 912 106 814 604 322 708 212 18 918 915 808 214 620 520 508

Chuji Logistics Chun An Shipping CIMC CJ Smart Cargo CMA CGM CMEC Comtrans International Co., Ltd. Cosco Xiamen CTS International Logistics Eastern Car Liner (ECL) Eastern Shipping SRL Eukor Car Carriers Expeditors Express Global Logistics Fawaz Ali AlShammari Est for Transportation Fednav International FILOG Flogis International Gearbulk Global Project Logistics Network (GPLN) Goldhofer Aktiengesellschaft Grieg Star Shipping Hanssy Shipping Hareket Heavy Lifting & Project Transportation Höegh Autoliners Holmatro Hong Fa Shipping Hong Glory Shipping Huihai Logistics Ilya Shipping Ltd. Intermarine

STAND 426 404 528 910 318 422 622 320 820 1007 208 1808 1818 1809 425 324 316 908 1104 530 906 812 116 406 1016 804 720 8 913 614

ISSUE 6 / 2016

EVENT ESSENTIALS

COMPANY IPL JC Logistics Group Lift and Shift Luhai Shipping Maersk Line Martin Bencher Max Shipping Maxx Arabia MOL Project & Heavy Cargo Msharib Shipping & Logistics MUR Shipping Nansha Terminal Nepa Shipping Agency Hong Kong New Legend Group Ningbo Meixi Ro-ro Terminal Nirint Shipping BV Nordana NYK Bulk & Projects Carriers Ltd. Ocean Truck Logistics Group Pak Shaheen Group Polytra Port of Antwerp Port of Caofeidian Port of Duqm Port of Houston Authority Port of Portland Qingdao Sinotraffic Supply Chain Co., Ltd. Qingdao Yuedasite Rigging Co., Ltd. Red Hook Terminals Reserved Rickmers-Linie Sarjak Container Lines Sclashing Shanghai

STAND 1004 526 1014 1806 420 522 408 1010 416 113 1813 624 216 220 326 714 724 616 424 9 709 608 108 1815 806 112 323 1115 1819 612 504 308 1006

COMPANY Seahawks Seaports of Niedersachsen GmbH Sewota Lifting and Lashing Kunshan Col, Ltd. Shanghai Flowlink International Logistics Ltd. Shanghai Greenroad Intl Logistics Shanghai Portstar Rigging Co. Shanghai Shineway Shenyang Woka Large Cargo Transportation Siem Car Carriers Sinoeastern Sinotrans & CSC Holdings Co. Space WanShan Spliethoff Star Shipping Swire Shipping Taishen Webbing Tianjin Chaungyuan Shijia Tianjin Lingang Port Group Tii Group Topsheen Shipping Group Translink Varamar Wallenius Wilhelmsen Logistics Wan Bong Chartering Weco Project Winkey Shipping Winning International Group World Wide Shipagencies Association (WWSA) XLProjects Yantai Golden Ocean Shipping YN Logistics

STAND 1018 822 124 224 618 104 1015

816 524 1817 305 222 708 3 904 710 210 206 726 916 110 1017 704 716 724 712 1012 315 102 1811 109

www.breakbulk.com/china BREAKBULK CHINA PREVIEW CH19

IT’S HERE!

YOUR BRE AKBULK HOLIDAY 2016 GUIDE In our second annual Breakbulk Holiday special, you’ll find travel guide to cities where Breakbulk events are held, great winter transport stories, a tribute to the working women in our industry, a heartfelt look at generations of “breakbulkers” and 5 gift guides. Dive in and have a happy holiday season from your friends at Breakbulk Events & Media.

We’re also giving away several of our favorite gifts as pictured in our holiday guide. To enter, visit www.breakbulk.com/holiday-2016.

Deadline is December 22, 2016 at midnight.

RE AD IT AT BRE AKBULK .COM/HOLIDAY-2016

Credit: Shutterstock

cargo lens

ALTERNATIVE ENERGY Grinding out New Cargo Opportunities

BY LORI MUSSER

G

rain might feed the world, but it has always been a predominantly bulk business and hasn’t fed into the global breakbulk and project cargo industries in big way.

That might be changing, as new grain-related project cargoes emerge riding the coattails of record global grain production and a billion-gallon increase in global grain ethanol production last year.

In October, the U.S. Department of Agriculture released its Grain: World Markets and Trade 2016/2017 outlook, projecting that U.S. and global wheat, rice and

corn production will set records.

Moreover, according to the U.S. Energy Information Administration’s U.S. Fuel Ethanol Plant Production Capacity report released in June 2016, U.S. ethanol plant capacity has increased for the third consecutive year. America is home to almost 200 ethanol plants that offer up 15 billion gallons of nameplate capacity, the volume of denatured fuel ethanol that can be produced during the year under normal operating conditions. This figure is up a half-billion gallons over the prior year. U.S. capacity represents more than half of global production capacity, which increased by 1.13 billion gallons last year, according to the Renewable Fuels Association.

www.breakbulk.com BREAKBULK MAGAZINE 39

cargo lens

DIVERSE BUSINESS

The potential stream of ethanolrelated project cargo is diverse. First, the production plants require a plethora of large-scale equipment – pumps, milling equipment, driers, turbines, generators, tanks, distillery components, and so on. Second, because most ethanol is used as a gasoline additive, there is affiliated distribution, storage and blending infrastructure. Third, clean energy technologies and regulations vary between countries and regions, and continue to change, requiring infrastructure updates.

As economies introduce ethanol into their gasoline mix, or alter the ratio, new distribution equipment is sometimes needed.

Geoff Cooper, senior vice president of the Renewable Fuels Association, documented the infrastructure components subject to change: new railcars, new

Saskatchewan-based Viterra reopened its Pacific Terminal at Port of Vancouver last month. In May, multipurpose heavylift operator AAL delivered Chinese-built components for a grain ship loader, conveyor and tower for transferring product.

Credit: Viterra

tank barges, new tank trucks, new and retrofitted storage tanks and blending equipment at petroleum terminals, unit train receiving infrastructure, manifest rail receipt facilities, and marine terminal infrastructure.

As with other energy-related infrastructure, ethanol plants offer project cargo potential during construction.

There are also ongoing opportunities that persist long after start-up. Evolving technologies and dynamic expectations are especially prevalent in this sector.

Projects underway, such as the Iowa-based Summit Agricultural Group’s US$115-million project developing Brazil’s first corn ethanol plant,

Ener-Core Inc. delivered two 2-megawatt power oxidizers to the Stockton biorefinery site owned by Pacific Ethanol.

Credit: Ener-Core 40 BREAKBULK MAGAZINE www.breakbulk.com

are expected to generate project cargo opportunities for a number of years.

Examples of ongoing upgrades abound. In September 2016, for example, Pacific Ethanol Inc. announced installation of a 5-megawatt solar photovoltaic power system designed and built by Borrego Solar Systems for Pacific Ethanol’s Madera, California plant. The solar PV system is expected to reduce operating costs and improve its carbon score. In another example, in March, ICM contracted with The Andersons Albion Ethanol LLC to design and build an expansion to the Albion, Michigan, dry-mill ethanol location, doubling the facility’s capacity. The plant was originally engineered for future expansion. And, in late October 2016, Ener-Core Inc., a developer of gas conversion technologies for industry, delivered two of its 2-megawatt power oxidizers to the Stockton biorefinery site owned by Pacific Ethanol.

Industry experts suggest ethanol capacity, especially cellulosic capacity, in the U.S. and worldwide will continue to expand.

Numerous cellulose-fed plants are commissioned or have begun production in the U.S., including Abengoa’s facility in Hugoton, Kansas; DuPont’s biorefinery in Nevada, Iowa; and POET-DSM’s plant which opened in September in Emmetsburg, Iowa.

GRAIN OPPORTUNITIES

There are also several existing breakbulk trades in grain. Traditional bagged and palletized shipments to developing countries and remote markets persist, for now, according to Daniel B. Loughney, trade and business development director with the Port of Lake Charles, Louisiana. And there are finite but respectable markets for grain shipments moved in Gaylord bins, or in the proliferant super sacks and similar packaging.

The Port of Portland, for one, has a robust bulk grain business. There are three elevators in Portland harbor, contributing to its ranking as the top U.S. wheat port. Sebastian Degens, director ISSUE 6 / 2016

www.ssamarine.com

cargo lens

of marine marketing for the Port of Portland, said there has been a mini-grain infrastructure boom, with investments totaling US$500 million, by all seven terminal operators on both sides of Columbia River. Triggered by the deepening of the main port channel in 2010 from 40 to 43 feet, every grain operator has upgraded shiploaders, belts, and storage capability.

Much of the project cargo destined for the grain terminals went unseen by public docks. Degens said some arrived by rail from domestic fabricators and were delivered right to the elevator site.

“Because the elevators are on the water, what project cargo there was moved direct to terminal,” he added.

Other trends include customer concerns and requirements related to environmental issues, downtime, and a preference for a single contractor.

There has been a bevy of recent elevator and mill announcements. For example, on Sept. 28, Minneapolis-based Miller Milling Co. announced a production expansion at its Saginaw, Texas, flour mill to 24,000 hundred-weights.

The project will entail necessary infrastructure for grain handling, packaging, storage and load-out capabilities.

At the end of October, Viterra Pacific unveiled a US$100 million investment in its Pacific Terminal at the Port of Vancouver, Canada. The terminal can now accommodate more than 6 million tons annually, tripling its Around the world there is a steady stream of previous capacity. Improvements included a shiploader, new bulk milestone deliveries of grain hoppers, conveyors weighers, upgrades to shipping conveyors and rotary cleaners, and shiploaders for elevators or terminals. and improved electrical and dust control systems.

For Portland, the grain infrastructure casieu produced two-thirds of all rice And on Nov. 1, Archer Daniels Midimprovements are already paying divigrown in the U.S. in 1926 – the Port of land Co. announced plans to build a new, dends. Between 2015 and 2016, Columbia Lake Charles is today an important bulk modern feed facility to replace its curRiver total grain volumes were up about energy port. rent operations in Quincy, Illinois. The 23 percent for wheat, soybeans and corn, For Loughney, project cargo shipcompany also has a new plant in Glencoe, according to Port of Portland statistics. ments are a happy offshoot to US$102 Minnesota, new facilities in China, and a billion in announced natural gas and facility under construction in Effingham, FOOD FOR PEACE related infrastructure investments in the Illinois.

At the Gulf Coast Port of Lake region. In the ramp-up to the natural gas Some of the hot dialogues in mill Charles, Loughney talked about an build-out, the port has offloaded several and elevator infrastructure are about unusual grain-related breakbulk niche over-dimensional heavy-lift deconfacilities such as grain silos being built business: U.S. P.L. 480 cargo – the U.S. structed cranes. Loughney added that for seismic, wind or snow loads, silos Agency for International Development’s project cargo for grain-related industry with high grade galvanization, and “food for peace” program. is far from commonplace, but has been high-capacity silos and handling equipP.L. 480 is distributed primarhandled at the port. ment. There is also continued interest ily to third-world countries as bagged in energy efficiency. Any upgrade or cargo. Loughney said that the U.S. PORT INFRASTRUCTURE expansion to an existing facility presents donates more food aid than the rest of Around the world there is a steady an additional opportunity to the global the world combined, a fact borne out by stream of milestone deliveries of grain project cargo industry.

International Grains Council Food Aid hoppers, conveyors and shiploaders for Almost every grain terminal, elevator Committee statistics, which also lists the elevators or terminals, and similar infraor mill, and every grain ethanol producEuropean Union, Canada, and Australia structure for mills. tion project or expansion, will generate as important donors.

In an overview, published in Sepproject cargo opportunity that includes Loughney said the U.S. government tember, of its most recent survey of over-dimensional, overweight or other purchases food from American farmship loader and unloader manufacturcritical infrastructure components. ers through a competitive process, and ers, World Grain concluded that large While the niches for ports, carriers, exports the mostly bagged/palletized capacity equipment will enjoy greater 3PLs and other logistics providers may product through select U.S. ports. He demand in coming years, to help deliver be somewhat esoteric, they will remain has seen these cargo levels fall off in economies of scale. It said there is an solid during this growth period for grain recent years, with volumes now runespecially active equipment demand in and ethanol production. BB ning at about 120,000 tons per year, with South America and greater Asia, with Lake Charles’ share of the lift closing in emphasis on Brazil and China, where on 25 percent. Cautious about the profacilities are needed to accommodate Based in the U.S., Lori Musser is a veteran gram’s future, he said that technological increased grain production. shipping industry writer.

42 BREAKBULK MAGAZINE www.breakbulk.com

advancements are revolutionizing nutrient delivery. “The industry has changed.

It is now possible to fit all the nutrients a person needs into a squeeze pack.”

Lake Charles is the 11th-largest U.S. port by tonnage, moving bulk, breakbulk and other general cargoes. It boasts two general cargo facilities for breakbulk and project cargo. Those terminals are short-line rail served, offer 1.6 million square feet of covered storage, and can dock 12 ships simultaneously. In a unique twist, the Intracoastal Waterway bisects the port’s ship channel, enabling freight access as far north as Canada by barge.

While it was once a world-class rice port – the surrounding Parish of Cal-

ISSUE 6 / 2016

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

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

OVER 30 YEARS OF EXPERIENCE STEVEDORING & TERMINAL OPERATIONS

port focus

SPSP handles a diverse mix of breakbulk cargoes, including equipment for international projects.

Credit: SPSP

project cargo sector, with a more solid fiscal position, Russia hosting the forthcoming 2018 World Cup, and enhanced financial stability all expected to boost public and private investment.

David Lee, infrastructure analyst at BMI Research, believes that Russian infrastructure development will be buoyed by this gradually improving macroeconomic outlook, which will support an acceleration of project activity in the runup to the World Cup. David Lee “Government BMI Research expenditure is forecast to expand in 2017 on the back of higher oil and gas prices, much of which is slated to be spent on infrastructure projects as the country lays the groundwork for the 2018 World Cup,” Lee said.

PRICE STABILIZATION

STEADY AS SHE GOES Improved Economics Boost St. Petersburg’s Prospects

BY MARK WILLIS 44 BREAKBULK MAGAZINE www.breakbulk.com

F

ollowing more than a decade of rapid economic expansion, driven by buoyant global commodity prices, since 2014 the Russian economy has experienced a highly challenging two-year period, characterized by deep recession, elevated inflation and financial instability.

The short-term outlook for the Russian economy may finally be looking up, however. Economic analysts, including the International Monetary Fund, or IMF, forecast it will return to positive, albeit quite modest, expansion next year, as the country begins its recovery from the protracted 2014-16 recession.

The slowly improving economic picture should also provide a boost to the country’s struggling infrastructure and

Following the precipitous collapse in global commodity prices experienced during 2014-15, which resulted in widespread delays or cancellation of numerous infrastructure projects, a major driver of improving economic fortunes has been the stabilization in global commodity prices, with hydrocarbon export revenues comprising most of Russia’s federal budget.

An additional cause for cautious optimism over Russia’s economic prospects is a reduction in the financial market instability that characterized 2014-15, during which a sharp fall in the ruble’s value against the U.S. dollar and euro resulted in a corresponding spike in inflation and diminished purchasing power.

Enhanced financial stability and a stronger ruble also point toward a partial reversal in the deep contraction on imported goods over recent years, not ISSUE 6 / 2016

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port focus

least within the domestic energy sector and the public and private sector funded infrastructure projects that were most affected by the recent Russian recession.

“With Russia heavily dependent on imports to meet a wide variety of daily needs, the stronger ruble will simultaneously increase the purchasing power of ordinary Russians, lending a degree of demand support to Russia’s beleaguered residential building sector, and allow for the more economical importation of the raw materials and machinery necessary to underpin construction sector growth,” Lee said.

There are also tentative signs of a possible forthcoming détente between the West and Russia, with U.S. Presidentelect Donald Trump having outlined his intention to repair diplomatic relations between the two countries, which deteriorated sharply in the aftermath of Moscow’s annexation of Crimea in 2014.

Assuming no major re-escalation of regional tensions, the tough sanctions regime imposed by the U.S. and EU following the Crimea debacle, restricting exports destined for Russia’s energy sector and increasing bureaucratic complexity for shippers and project cargo firms operating in Russia, may also be gradually softened over the next several years.

BELLWETHER

As Russia’s historic maritime capital, commercial gateway to Europe and the U.S., and bridgehead for global trade supply chains connecting East and West, the volume of trade at the Port of St. Petersburg acts as an important bellwether of Russian and regional economic activity.

With about 1,500 employees, JSC Sea Port of Saint-Petersburg, or SPSP, is the largest operator providing dry cargo transshipment in the greater Port of St. Petersburg area and Northwest Russia, with a total cargo turnover of 5.55 million tons during the first nine months of 2016.

Consistent with the investment and infrastructure needs of the Russian economy, as well St. Petersburg’s strategic geographical location, heavy-lift, project and other breakbulk cargoes represent an integral part of the port’s business activities.

With existing port infrastructure allowing for the handling of cargo units weighing up to 300 tons, a modern 46 BREAKBULK MAGAZINE www.breakbulk.com

SPSP KEY FIGURES January-September 2016, compared to the same time last year:

RO-RO CARGO

15% 344,000 tons TRANSSHIPPED VEHICLES

30% 27,000 tons

PROJECT, HEAVYWEIGHT + OVERSIZE CARGO

50,000 tons FERROUS METALS

10%

NON-FERROUS METALS

5.5%

hinterland railway transport network, storage areas for large cargo consignments, and a 160,000-square-meter specialized roll-on, roll-off terminal, breakbulk cargoes remain one of the port’s key priority areas, confirmed Pavel Oleynik, managing director of SPSP. Due to its strategic location, SPSP also handles a diverse mix of breakbulk goods from all over the Pavel Oleynik world, including equipment for the SPSP leading industrial, energy production and transport enterprises participating in significant international projects.

Oleynik said significant breakbulk cargoes that have recently passed through

the port have included heavyweight steam generators and reactors for China’s Tianwan atomic power plant, tugboats for the Russian Pacific fleet, components for the Yuzhnouralskaya Waterpower plant in the Chelyabinsk region, and heavyweight equipment from Canada for the Russian oil and gas industry.

Since 2008, the port has also been handling boosters and space launch vehicles for the Guiana Space Center near Kourou in French Guiana, with equipment delivery carried out under the intergovernmental framework agreement on long-term cooperation on the development, building and use of space launch vehicles between Russia and France.

STEADY GROWTH

Consistent with the stabilization in Russia’s underlying economic climate and expectations of an improving outlook, Oleynik said that volumes of ro-ro cargoes have steadily grown this year, while project and heavy-lift breakbulk cargoes have remained stable.

“For nine months of this year our company increased handling of ro-ro cargoes by 15 percent, up to 344,000 tons, mainly due to inbound volumes arriving by ferry lines,” he said.

The volume of transshipped vehicles passing through the port has also increased by 30 percent to 27,000 units during January-September, compared with the same nine-month period in 2015, largely due to an increase in exports of Russian-built cars.

“The volumes of project, heavyweight and oversized cargoes in the port are mainly conditioned by the demands of the Russian industry and depend on implementation of investment projects by domestic enterprises. These volumes have remained at last year’s level – nearly 50,000 tons since the beginning of January,” Oleynik added.

Also during the first nine months of 2016, handling of ferrous metals increased nearly 10 percent, while nonferrous metals rose 5.5 percent due to rising Russian export shipments of steel and aluminum by iron and steel works.

To meet increased cargo volumes, SPSP has recently carried out significant upgrades to existing port infrastructure.

The 520.1 million-ruble investment carried out under the port’s development ISSUE 6 / 2016

program during January-September 2016 represents an eightfold increase on the same period last year, including the acquisition of new machinery, renovation of storage areas and reconstruction of existing facilities.

INVESTMENTS IN HANDLING

In preparation for an anticipated increase in future breakbulk volumes, Oleynik outlined how further construction and investments are also scheduled to take place over the coming years.

“To meet our customers’ expectations regarding handling of project, oversized and heavyweight cargoes, our company is constantly modernizing the existing port infrastructure,” he said.

Recently completed investments by SPSP include the reconstruction of surface areas for two existing breakbulk berths, with a total area of 8,500 square meters, in which the maximum load per square

meter has been expanded to up to 10 tons.

Also, experts at the port authority are designing specialized metal constructions for handling heavier cargoes. SPSP is working on a new reinforcement project for the additional 24,500 square meters of storage, which will increase the maximum load up to 20 tons per square meter.

In addition, two warehouses covering 11,000 and 2,400 square meters respectively, have been built so far this year, both of which retain the same enhanced maximum loading capacity per square meter, with a further two new warehouses scheduled for completion by the end of 2016. The port has also modernized its existing transport infrastructure, with further improvements scheduled for the coming months.

“In the framework of the railways modernization plan, our company renewed more than 700 meters of railways using geocomposite materials and

replaced four turnout switches,” Oleynik said.

“Our plans for the Credit: SPSP immediate future include capital repairs of 350 additional meters of railway and replacement of seven turnout switches,” he said.

To facilitate increased handling of all types of general cargoes, SPSP has also “put into operation two rail-mounted Mantsinen K-200(ES) cranes, two Volvo L60GZ lift-trucks, attachments for cargo hoisting devices and specialized rolltrailers for moving the cargo around the port,” as well as invested in 14 new forklift trucks, he said. BB St Petersburg has invested in its heavylift equipment.

Mark Willis is a Dublin, Ireland-based freelance journalist specializing in politics and economics. www.breakbulk.com BREAKBULK MAGAZINE 47

energy update

REVERSING THE DECLINE Investment Needed to Pump Bolivia’s E&P Activity

BY ALAN M. FIELD

A

fter two-and-a-half years of work, the Incahuasi gas field in Bolivia will be coming on stream this year, enabling French energy giant Total to produce 6.5 million cubic meters of gas and nearly 6,000 barrels of condensate.

Located 150 miles south of the economic capital of Santa Cruz, in the steep foothills of the Andean Cordillera, the project comprises three wells, a gas treatment plant and a pipeline connected to existing gas export pipelines.

But while Incahuasi holds great promise for one of South America’s least developed economies, it will not be yielding its riches without great effort, according to Stephane Venes, Incahuasi project manager for Total, which is developing the site on behalf of the Bolivian government.

Accessing a gas field buried more than 5,600 meters beneath the Andean foothills is a huge technical challenge, Venes said. To achieve that goal, Total has laid nearly 90 miles of pipeline along a rugged route through steep hills whose angle of inclination exceeds 30 degrees.

Elsewhere within its vast territory of 424,000 square miles – nearly twice the size of France – Bolivia challenges logistics providers with a wide range of topographies and altitudes, ranging from the frigid town of Colquechaca, in the rugged Andes at 13,680 feet, down to almost sea level.

Landlocked, most of Bolivia’s industrial imports are imported from the sundrenched Pacific port of Arica, Chile.

Historically famous for its tin mines, Bolivia has recently gotten serious about exploiting its huge reserves of natural gas.

In early November, Luis Guillermo Acha, head of Bolivia’s state oil and gas company, Yacimientos Petroliferos Fiscales Bolivianos, or YPFB, announced that by 2020, the state plans to expand its natural gas reserves by 11 trillion cubic feet (more than 310 billion meters cubed) from the current 10.5 trillion cubic feet (297 billion meters cubed). YPFB intends to invest nearly US$5 billion in geological exploration works by 2021.

According to Acha, the planned investments will be spent on construction of several gas and petrochemical facilities and factories for the production of liquefied hydrocarbons. In particular, this will involve commissioning of plants for the production of propylene and polypropylene, ammonia and urea, propane, butane and other refined petroleum products, as well as gas derived from several major domestic fields. Acha noted that total investments in Bolivia’s petrochemical industry from 2006 to the present totaled almost US$2 billion.

GAS DRIVE

Industrializing the gas industry and increasing hydrocarbon reserves are a national priority for this Latin American republic. Bolivia ranks third among top hydrocarbon producers of South America with a yield of more than 20 billion cubic meters of natural gas per year, most of which is exported to Brazil and Argentina.

Over the past decade, up-and-down cycles in commodities have allowed

Bolivia to accumulate record-high international reserves valued at almost US$15 billion by 2014, the highest such total in the country’s history. Armed with data about its reserves, the government of President Evo Morales has embarked on an aggressive investment program in energy infrastructure projects aimed at increasing the country’s natural gas connectivity.

Bolivia also plans to create a national fund for attractLuis Alberto ing investment in Sanchez exploration projects within the country, Bolivia’s Minister of Hydrocarbons and according to Luis Energy Alberto Sanchez, Minister of Hydrocarbons and Energy. The authorized capital of the fund will total more than US$3.5 billion, US$988 million of which will be utilized in the first stage between 2015 and 2020, and a further US$2.5 billion from 2020 to 2025.

Although it is largely a producer of natural gas, “Bolivia has become an important supplier for Brazil and Argentina and is connected with Chile with a pipeline and terminal that exports crude oil. Therefore, geographically it serves as a hub,” said Alfonso Canedo, a Bolivia-born energy expert.

Throughout his career, Canedo’s focus has been on the aggressive identification

RECOUPLING OF EXPORT PRICES

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Quarterly variations in the price of Bolivian natural gas exports in US dollars.

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to Argentina

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to Brazil

Source: HidrocarburosBolivia.com 48 BREAKBULK MAGAZINE www.breakbulk.com

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2010

2011

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of opportunities, strategy and tactical business solutions to expand presence in global markets for major oil and gas operators, and global EPC companies.

Although these multibillion-dollar projects generate a great deal of public support and economic activity in Bolivia, “most of them are not based on prudent market analysis nor a well-balanced development of the oil and gas industry,” said Canedo. “For example, the amount of investment in exploration and production in Bolivia is small considering that the main producing gas fields such as San Alberto, operated by Petrobras, will be depleted in the next five years.

There is urgency, and the government knows this, to rapidly increase the exploration and production investment in Bolivia.”

In Bolivia’s largest contract for natural gas Alfonso Canedo exports, Petrobras has a natural gas Energy Expert purchase-and-sale agreement with YPFB to supply the Brazilian market through 2019.

“In order to renew that export agreement for another 20 years, Bolivia will need to prove that it has sufficient reserves to support the take-or-pay obligations” written into the contracts, said Canedo. Thus, if Bolivia does not intensify its upstream investment activity by increasing its exploration activity, Bolivia may not retain its position as the core natural gas supplier for the Southern Cone of countries. Although President Morales’ government hasn’t faced major political headwinds, “there is growing uneasiness in the energy industry that they are running out of projects, and especially productive projects, in order to keep fueling the economy,” adds Canedo.

Commodity prices in the LNG sector are decoupled from international oil prices

Bolivia’s first natural gas liquids separation plant, in Rio Grande, in 2013.

Credit: Martin Alipaz/EFE/Newscom www.breakbulk.com BREAKBULK MAGAZINE 49

energy update

and operate on more flexible agreements. However, the current downturn in the global price of crude oil has caused Bolivian natural gas export revenues to fall by almost 50 percent, because Bolivia’s natural gas export prices are pegged to the West Texas Intermediate benchmark. During the second quarter of 2016, prices for Bolivia’s natural gas exports to Argentina and Brazil declined to historically low prices, 50.8 percent lower than in 2015 for Argentina and 50.9 percent lower in the case of Brazil.

PROJECT CARGO IMPACT

Those trends could have a disastrous impact on Bolivia’s plans to meet its development goals, while suppressing long-term demand for the breakbulk and project cargo activity vital for developing the country’s energy resources. Opposition Sen. Oscar Ortiz recently noted that the decline in Bolivia’s largest gas fields and the failure of exploration efforts

to find new reserves “is menacing the energy security of Bolivia.”

Noting the US$2.1 million dollar fine imposed by Energia Argentina, or Enarsa, on YPFB, for the latter’s failure to meet its gas delivery targets to Argentina in July 2016, Ortiz added “this shows that the Bolivian government is hiding the realities of the gas reserves in national territory.”

He said there had Oscar Ortiz been “a serious and Bolivian Opposition sustained decline Senator in Bolivian gas production,” and that based on the pace of consumption in Bolivia’s internal market and its exports to Brazil and Argentina, “Bolivia does not have guaranteed

gas reserves beyond 2025 … This is an extremely serious problem because it would put the national economy at risk and would mean other penalties would be imposed by [Bolivia’s] neighbors for [Bolivia’s] failure to comply with its export contracts.”

Ortiz argued that this problem ultimately stems from state-owned YPFB’s failure to find new reserves despite spending “millions on failed exploration projects.” Since Evo Morales nationalized the hydrocarbon sector in 2006, total exploration and production activity in Bolivia has drastically declined, especially in relation to exploration investment. Prior to the nationalization in 2006, all major producers could sell their gas independently to different markets. Thereafter, all operators must sell to YPFB, which is the only firm that can sell exports.

Nevertheless, YPFB’s Acha is optimistic. He argued that Bolivia “has

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ISSUE 6 / 2016

sufficient reserves to deal with the industrialization of its hydrocarbon sector, despite the opinion of some conservative sectors concerning a supposed lack of investment in exploration and development to guarantee that process, which is already under way.” For his part, Canedo believes that there are “certainly technical and valid reasons for these concerns. I don’t think they are fed by a political agenda.”

Although some major energy firms operating in Bolivia – such as Shell (British Gas), Total, Repsol, Petrobras, Pluspetrol and YPFB – have made announcements concerning their commitments to continue their work in Bolivia, none of these companies has been able to come up with sufficient investment or discoveries to reverse the declining field productivity in Bolivia, said Canedo.

“Another factor is the fact that the internal Bolivian market has grown considerably, and recently YPFB has been forced to prioritize its deliveries to the local market at the expense of [shipping Bolivian] exports to Argentina.

The security of supply is paramount to natural gas buyers, and the only way to achieve that is with proven reserves, reliable production, and a robust infrastructure and logistics network. There are clear signs that it is time for the Bolivian government to step up its game in terms of E&P activity before YPFB starts defaulting more regularly on its obligations to supply gas to Argentina and Brazil,” Canedo said.

There are obvious implications for providers of project cargo services, he explained. “If I were in that sector, I would be cautious and pay close attention to what is going to happen upstream.

I would certainly pay closer attention to the investment signals on the exploration side. If Bolivia is able to reverse the declining investment trend in the E&P sector, I think there will be many opportunities for many downstream projects to develop. Bolivia is strategically located to serve as a hub, not only for energy supply but possibly as a logistics hub.”

He added that the 2006 nationalization sent waves of uncertainty across the region, causing concern not only among companies operating in Bolivia, but also for potential newcomers considering doing business in Bolivia.

“Transparency, clear regulations,

institutional independence, stability, ease of doing business, and economic incentives are what companies will look for before investing in any country,” said Canedo. “The government must ensure that these aspects are present in order to improve the investment climate.” BB

International news correspondent 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 the past two decades.

Vessel: M/V Industrial Skipper

www.breakbulk.com BREAKBULK MAGAZINE 51

emerging markets

FUNDING FLOW New Finance Source for Developing Countries

BY LIESL VENTER

52 BREAKBULK MAGAZINE www.breakbulk.com

Credit: Shutterstock

A

frica needs to invest US$93 billion per year for the next 10 years at least if it wants to make any notable difference to its infrastructure deficit. At least half of this, if not more, remains unfunded, making this a near-impossible task for a continent renowned for political posturing, governance issues, land disputes and militant attacks.

Enter BRICS. Or rather the latest brainchild of the elite grouping of Brazil, Russia, India, China and South Africa – its New Development Bank, or NDB. Having opened its doors less than a year ago in Shanghai, it pulled off a coup, surprising even its biggest critics, when its first package of loans worth some US$811 million Leslie Maasdorp was approved in April 2016. Two New Development months later, two Bank more loans worth US$100 million were announced.

This was the first major international institution created without participation from the so-called West since World War II, yet it has quickly found its feet.

Nothing makes more sense than the establishment of this bank, says Leslie Maasdorp, the NDB’s vice president and chief financial officer. And the five shareholder countries are just the starting point.

“We are operationalizing as we speak. We are getting staff, open-

ing offices, putting project pipelines together, but one thing is for sure: we are open for business,” Maasdorp said.

SOUTH AFRICA LOAN

In South Africa, state-owned power utility Eskom has been granted US$180 million to build transmission lines to

connect 670 megawatts of renewable energy from independent power producers to the country’s national grid, reducing its global-warming carbon emissions by 2 million tons a year.

“As it stands now, South Africa is the only country in Africa that can borrow from the bank,” explained ISSUE 6 / 2016

emerging markets

Maasdorp. “Our first loans have all been to the five members of the bank, and are all supporting Credit: Halden Krog renewable energy projects, mostly for power generation and a part for transmission.”

Brazil received a loan of US$300 million for on-lending to projects for generation of 600 megawatts of additional renewable energy capacity in the country; while China was awarded a loan in local currency equivalent to US$81 million for generation of 100 megawatts of rooftop solar power; and India, a loan of US$250 million, with the first tranche of US$75 million for on-lending to projects for the generation of 500 megawatts of additional renewable energy capacity in the country.

The Russian project approved in July involves two loans, each for US$50 million, for a small hydropower generation project in the Republic of Karelia in the Russian Federation with an installed capacity of 49.8 megawatts.

“Each loan modality is different, A road in Nigeria indicative of the transport infrastructure required in Africa.

54 BREAKBULK MAGAZINE www.breakbulk.com

based on project-specific features and borrower preferences,” said Maasdorp.

“We are hoping to significantly increase the loan issues in 2017, and are aiming for between 15 and 20 projects.”

Odds are that these loans will once again only be in the five membership countries. “There is very strong demand from the five member countries at this stage, but this is just the beginning,” he said. “One cannot view this NDB with short-term lenses. You have to be forward looking, which is what we are doing and that means knowing where we want to be in 30 years’ time.”

Increasing the membership is therefore key, he said.

“Opening our membership to other countries is the next step. Our policies make provision for this. The legal treaty that gave rise to the bank ensures that all members of the United Nations will have the right to be members of the bank.”

It is too early, he said, to say when this will happen and which countries will be targeted.

That it will be emerging markets is pretty much a given, said Martyn Davies, managing director of emerging markets and Africa at Deloitte Frontier Advisory.

However, Davies is pessimistic about the bank, and said that it is doubtful it will make any significant impact on the immediate infrastructure financing on the wider African continent.

“I remain convinced that the bigger challenge in Africa is not financing of infrastructure but rather finding bankable projects,” he says.

“The biggest obstacle to infrastructure development – ports, rail and to a lesser extent airports – is state ownership.

Governments insist on ownership, meaning they want to be the referee and player at the same time, and projects in such an environment are just not bankable.”

Seeing actual project cargo volumes grow significantly on the continent will take years to achieve, he said.

Johannesburg-based project expert Paul Runge of Africa House agreed, saying that while theoretically another source of funding is to be welcomed, it is still a far cry from translating into real-term projects across Africa.

“The idea behind the bank made sense, this whole notion of a rising tide will float all the boats, but there are some big Martyn Davies questions that need Deloitte Frontier to be answered Advisory before Africa as a continent will see benefit,” Runge said.

And, it must not be forgotten, noted Davies, that despite all the best of intentions, the bank will operate on economic principles.

“The bottom line is that it must be commercially viable,” he said. “The projects it chooses to loan to therefore have to be commercially viable.”

ISSUE 6 / 2016

Anuja Arun Bakare, a research analyst with Frost & Sullivan, said she is hopeful that the bank will make some difference to infrastructure funding across Africa.

“The bank’s development model indicates it wants to include other developing countries provided it can complement US$10 billion contribution or any other entry conditions.”

PROJECT VIABILITY KEY

Bakare said there are many projects across Africa stuck only because of insufficient funding or lack of investors.

But, like Davies, she said there are also questions around project viability.

The analog-to-digital broadcasting Hanging powerlines and barely existing roads are a common sight in Africa. / Credit: Halden Krog

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www.breakbulk.com BREAKBULK MAGAZINE 55

emerging markets

Credit: Halden Krog

DEVIL IN THE DETAIL FOR NDB How the BRICS’s New Development Bank plans to operate, which countries it accepts as members, what criteria it will apply in the future, and how it will choose projects and give loans is unclear.

Leslie Maasdorp, the NDB’s vice president and chief financial officer, said this is all under discussion.

“The bank in composition will always be dominated by emerging markets, there is no question about that, but what it will look like is not yet clear. At some stage the BRICS will dilute and make way for more members,” Maasdorp said. “We are unable to say which countries will join, but it is safe to assume there will be African countries, especially if one looks at the need for infrastructure on the continent.”

He said loans to projects will also not be allocated equally, but that does not mean the BRICS countries will always get the bigger portion of the slice.

“We have approved a billion dollars worth of loans for projects in our first year. We anticipate that will increase to US$2.5 billion in 2017. The project allocation will never be equal. We want to see our portfolio over time be in equilibrium,” he 56 BREAKBULK MAGAZINE

said. “The bank is run on the single principle that no one country has a veto, as is the case with most multilateral banks. It is not dominated by any given country based on its size or economy. There is no dictating to smaller players. Equality is at the heart of this bank and it was the need for this that gave rise to the NDB. It is a different model of international governance; it is about giving a voice to the emerging markets.”

Countries are interested in what the NDB is doing, he added. “There is definitely an indication that countries across the emerging markets are keen to understand the bank better, and they are even more interested after seeing that six months after opening our doors we advanced the first loans.”

migration project in Nigeria is one example. Initially planned to be commissioned in 2015, lack of funding has seen it delayed to 2017.

“There is the development of Konza Techno City in Kenya that has experienced delays due to lack of investor participation as concerns over the successful outcome of the project exist,” she said. “The commissioning of the Thai Mozambique rail line has been delayed to 2018 due to funding issues. The Abuja-Abaji-Lokoja road project and Kano-Maiduguri dualization road project of Nigeria that commenced in 2006 are still in the development phase due to inadequate financing issues.”

The development of the second runway at Jomo Kenyatta International Airport in Kenya has encountered delays due to the slow release of funds from the African Development Bank; the development of Lamu Port and the LAPSSET corridor was suspended in 2014 due to land disputes and shifting of the land owners; while the Abuja light rail project in Nigeria was delayed for three years due to lack of funds.

“But there are also examples of projects taking place,” said Bakare.

“In 2015, over 300 active infrastructure projects worth US$375 billion were recorded in Africa with major developments observed in the Southern African region. Overall, the developments are mainly visible in the transport sector, followed by energy and power infrastructure.

Some of the key projects in Southern Africa were in South Africa and Mozambique.”

PROJECT PROSPECTS

Cyril Prinsloo, a researcher in the Economic Diplomacy Programme at the South African Institute of International Affairs, said the prospects for projects – and ultimately project cargo volumes – is good if the NDB achieves what it sets out to do.

“The bank has some very real chance of success if it does simplify and decentralize loan approval processes. If it can standardize procedures for loans it will be far more efficient than what we are seeing ISSUE 6 / 2016

with multilateral banks at the moment,” he said. “If it can successfully approve loans faster using country systems from borrowing countries it will also make a significant difCyril Prinsloo ference.”

He added that South African Institute of International Affairs while the jury is out on the longterm success of the bank and the actual impact on projects, NDB is saying the right things.

“BRICS through the NDB is essentially saying that as developing countries they know their own issues and chal-

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lenges and that they know how to address them. They are doing a number of encouraging things to show they are serious about doing business, from extending loans in local currencies, to fast-tracking loan processes and actually getting projects going to introducing systems that the countries can actually use.”

Does that mean projects are going to kick off and African infrastructure is going to find the funding it so desperately requires?

“Not necessarily,” said Prinsloo, “but it is undoubtedly a step in the right direction. It is doing something which is better than doing nothing at all.” BB Liesl Venter is a transportation journalist based in South Africa.

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thought leaders

answer about the operational and safety implications of using 3D printed parts, the licensing arrangements for the 3D blueprints and the value of the manufacturer’s guarantee.

MAKING A DIFFERENCE

THINKING IN 3D A Place for Additive Printing in Breakbulk?

M

ultipurpose shipping may not be at the cutting edge of global technological advances, but we like to think of ourselves as fast adopters. So, it is with great interest that we have followed the advancement of 3D, or additive, printing. Will a day come when it will be more cost effective to print out a windmill blade or huge industrial plant component in one country, rather than go the trouble of manufacturing it and shipping it from another

BY NICOLA PACIFICO country?

Threedimensional printing technology has been touted as having the potential to bring about a second industrial revolution and a manufacturing sector without tooling, assembly lines or supply chains.

It is incredible technology, and although it has been around for 20 years, is still in its infancy. It has traditionally been used for rapid prototyping and in industries like aerospace and defense, automotive 58 BREAKBULK MAGAZINE www.breakbulk.com

and healthcare, as well as small-scale retail manufacturing like household goods, jewelry and fashion accessories.

As the accuracy and size of printed objects increases, 3D print services are being used to create even more substantial things such as topographical models, light engine parts, aerodynamic bodies and custom prosthetics.

However, it has yet to disrupt the manufacturing and supply chain of heavy-lift and breakbulk shipping cargo, and I cannot foresee a time just yet, when a 550-tonne reactor or 60-meter-long windmill blade can be reproduced using a 3D printer. After all, the largest 3D item ever “printed” to-date was a 5-meter wing trim for Boeing, which weighed just over 750 kilograms.

The most immediate impact of 3D printing is likely to be felt within the shipping supply chain for smaller components, particularly in the market for vessel and hardware spare parts. Shipping companies could theoretically print their own components, either with a 3D printer on board, or a 3D print workshop in port. The benefits are obvious at first glance, particularly for a relatively simple but high-value component, and the long-term impact on the supply chain could be profound. However, there are many important questions still to

In the planning, engineering and risk management stages of project shipping, the case for 3D print technology is very different. Here, I can see a time soon when physical and scaled 3D modeling of ships, cargo and stowage plans will replace virtual imaging and add a totally new dimension and level of transparency and service for customers.

Courier companies and container lines may need to be cautious of the advancement of 3D print technology. As these machines creep into homes, businesses and retail stores, it may prove cheaper to download a file off the Internet and have a product printed at home, or a local 3D printing hub, rather than it being shipped. This will significantly cut down on the number of items shipped, and we could become a future society demanding raw materials rather than finished goods – which is actually good news for bulk carriers.

No one can predict the future and some may say 3D printing is over-hyped.

After all, this technology has only begun to step outside the walls of prototyping facilities. However, there is no denying that in the last three years we have seen more progress in the 3D printing space than in the previous 20 years combined.

The world may change and the nature of the cargoes we carry will evolve, but shippers will continue to rely on logistics partners that can operate across their diverse supply chains and distribution networks. This doesn’t, however, mean that we can afford to rest on our laurels. The physical assets, skills and service offerings of many breakbulk carriers are the result of current market conditions and customer expectations.

The challenge for us all is to anticipate and prepare for tomorrow’s problems, requirements and technologies. BB Nicola Pacifico is head of transport engineering at AAL Shipping, based in Singapore.

ISSUE 6 / 2016

PUPPET MASTER Who’s Pulling Ownership Strings?

E

arlier this year, the “Panama Papers,” an unprecedented leak of 11.5 million files from the Panama-based offshore law firm Mossack Fonseca, shocked the global compliance community and underscored the value of robust and meaningful due diligence.

The Panama Papers exposed the link between more than 200,000 offshore companies and prominent public officials and

BY KATYA LYSOVA other wealthy individuals.

The scandal emboldened regulators and immediately prompted numerous global tax investigations against public officials and companies worldwide.

Secret company ownership can make it easier to engage in illegal activity, including bribery, tax evasion, embezzlement and money laundering. By some estimates, opaque beneficial ownership contributes to the more than US$2 trillion that is stolen from developing countries every year by corrupt officials, drug dealers, tax evaders and other criminals.

Individuals – beneficial owners – can exercise control in a company not only through ownership but by other means, such as board positions, shareholder agreements on voting rights, financing structures and family relations. The anonymity of shell companies and their often complex, multilayered structures can make it difficult to identify beneficial owners and links to government officials. Many multinational Image credits, both pages: Shutterstock

companies now require their third parties to disclose beneficial ownership information as part of their compliance with anti-corruption, trade-related sanctions and anti-money laundering regulations.

What can project cargo and heavy-lift sector companies do to avoid compliance violations? Most importantly, meaningful due diligence on existing and prospective business partners, particularly those that have been identified as high risk, should always include information on beneficial owners. That means going beyond the first – and often second and third – level of shareholders, down to individuals who ultimately own or exercise control over a company.

It is a good business practice to ask potential business partners to disclose their beneficial owners as part of the on-boarding process. Companies can use detailed questionnaires to get ownership down to an individual. This information should then be crosschecked and verified by conducting Internet and database searches, collecting business references and searching public records. If a prospective partner is unwilling or reluctant to disclose its beneficial owners, a company must be prepared to walk away.

TRACE developed TRACEpublic, the first global register of beneficial ownership information, in direct response to the risks inherent in secret company ownership. The database is designed to increase commercial transparency and to provide companies with a starting point for due diligence. Unlike other databases of beneficial ownership, it is not country-specific and is voluntary. Any company, regardless of headquarters, may share their beneficial ownership information, or search the database, at no cost.

With changing expectations regarding anti-bribery compliance and commercial transparency, project cargo and heavy-lift companies should operationalize collecting beneficial ownership information on prospective and existing business partners to avoid costly investigations and reputational damage. BB Katya Lysova is a Russian-trained lawyer with a background in fraud and corruption investigations focused on Eastern Europe and Central Asia. She is an associate in TRACE’s Member Services and Advocacy department.

www.breakbulk.com BREAKBULK MAGAZINE 59

event recap

F

OLLOWING THE SUCCESS of the inaugural Breakbulk Middle East event, the second conference and exhibition saw even more of the world’s largest EPCs, logisticians and transport providers come together in Abu Dhabi. Megaprojects in the region – oil and gas, electricity, water, renewable energy and infrastructure – were the key focus, as was the importance of risk management and mitigation for industry players. The four-day event included heavylift workshops and an educational day.

60 BREAKBULK MAGAZINE www.breakbulk.com

Breakbulk Middle East 2016 saw a double-digit increase in exhibitors over 2015, as well as dozens of speakers and more than 2,400 visitors in all. Total attendance increased 20 percent, and 73 countries were represented, according to Mark Rimmer, event director – EMEA for Breakbulk Events & Media.

Sponsors of the event were Abu Dhabi Ports, Almajdouie, DP World, Bahri, Rickmers-Linie, Ceekay Shipping, Höegh Autoliners, Röhlig, Sarjak, APM, Geodis and Modulift. » ISSUE 6 / 2016

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event recap

GCC GIRDS FOR ‘NEW NORMAL’ Fiscal Policies Sought to Curb Unsustainable Spending

BY GARY BURROWS

D

espite signs of oil prices climbing upward, oil-exporting Middle East governments face a “new normal” of budget deficits, requiring diversification and new fiscal policies to succeed, said Richard Thompson, editorial director for MEED. While oil prices had doubled since the start of the year for Brent crude, from about US$26 per barrel to US$56 per barrel at the time of writing, “it doesn’t change the fundamental equation, which is the region is spending beyond its means,” said Thompson, who served as a keynote speaker at Breakbulk Middle East in Abu Dhabi.

After experiencing US$100-plus-perbarrel oil prices in 2011 to 2014, which drove a huge spending spree as revenues were recycled back into production, current prices do not cover Gulf Cooperation Council economies’ expenditures, let along projects, he said.

The International Monetary Fund, or IMF, in its most recent economic outlook for the region forecast oil prices would average US$50.10 per barrel in 2017, gradually climbing to US$57.50 a barrel by 2021.

“This underlines a sense of the new normal, which is the US$50 per barrel price range,” Thompson said.

Countries of the Middle East and North Africa region lost US$360 billion in

oil revenue in 2015, down 23 percent, and faced a 16 percent decline in 2016. With the exception of Kuwait, all GCC oil exporting states face a budgetary deficit in a US$50per-barrel environment, he said.

The combined fiscal deficit of the six GCC member states is estimated at US$160 billion, or 12.8 percent of GDP. Bahrain, Oman, Kuwait and Saudi Arabia are expected to run average deficits of 10 percent from 2016 to 2019, while Abu Dhabi and Qatar will see about 4 percent.

All GCC states need to finance a combined budget deficit of US$560 billion through 2019, led by Saudi Arabia which needs to cover US$389 billion to finance government spending and investment, according to MEED, a senior management media group covering the Middle East.

GCC governments “have to maintain spending to drive diversification and job creation, so they’re going to be running deficits,” Thompson said.

In 2015 and this year, governments have tapped into savings and reserves to fund deficits to maintain spending. “This is not a sustainable position,” he said.

BALANCING THE BOOKS

To mitigate deficits, these monarchies are embarking on new policies that are “going to shape the people who are deciding project spending, project market activity.”

New transport master plans are being developed in Dubai and Abu Dhabi, while

GCC PROJECTS CONTRACTS 2016 Gulf Cooperation Council projects planned or in the works were down 16 percent in 2016, and could fall to US$120 billion, down 27 percent from 2015.

Bahrain Oman

US$2.8* US$13

Qatar Kuwait UAE Saudi Arabia * Project awards in US$billions / Source: MEED Projects 62 BREAKBULK MAGAZINE www.breakbulk.com

US$22 US$24 US$37 US$41

Saudi Arabia has launched its Vision 2030, and Oman has announced an economic master plan, Thompson said.

A prominent goal is to diversify, creating non-oil revenue streams. Last December, the GCC governments agreed to introduce value-added taxes in 2018.

While they agreed in principle, “none of them have agreed exactly to what, how much or when,” he said. But if any two states agree to introduce a VAT in 2018, then they can go ahead and do so.

“Every eminence of government revenues is being reviewed and tariffs or fees being added, and there’s talk of an income tax being introduced in Saudi Arabia,” he added.

Privatization of government services is another area ripe for revenue streams.

Saudi Arabia’s Vision 2030 strategy lists 146 government organizations and agencies with potential for privatization.

There’s already been talk of floating up to 5 percent of the National Oil Co. of Saudi Arabia on the Saudi and international stock markets.

Particular areas ripe for privatization are electricity generation transmission and distribution, and the ports sector, he said.

Key to this diversity approach is the use of public-private partnerships, or PPP, and transport-oriented development, or TOD, delivery models, exchanging capital investment for long-term concessions to operate these projects.

“Pretty much every government is looking to use the PPP model in a range of areas in their public government: sewage treatment, housing projects, education, healthcare and transport,” Thompson said.

However, he noted the track record for PPP in the region has been weak, and transport projects have particularly struggled, due in part to a lack of confidence in the revenue models.

Closer to home, GCC governments are making unprecedented public sector wage cuts, as well as reductions ISSUE 6 / 2016

BB MIDDLE EAST 2016:

this year in the region,” Thompson said. In the broader perspective that growth will be marginal. “It’s not going to be back to what we had during the boom years.”

It doesn’t necessarily reflect in the project outlook, though. MEED’s projection for 2016 contract awards MEED Editorial Director Richard Thompson was a keynote speaker has dropped from at Breakbulk MIddle East in Abu Dhabi.

US$140 billion for the GCC at the start in public spending across the board. of the year to as low as US$120 billion by While the region spends about US$60 end-October, which would be off 27 perbillion a year subsidizing energy costs, cent from 2015. effectively providing free power and According to MEED’s Gulf projects water to locals, those subsidies are index, the GCC has US$2.82 billion in being cut, with Saudi Arabia anticipatprojects either planned or underway, up ing delivering water supplies at cost to 0.8 percent. Saudi Arabia accounts for users within five years. about 42 percent of the GCC, at US$1.18 For energy, savings are being trillion, down 1.1 percent, followed by explored through diversification from U.A.E., up 2.6 percent year on year to burning hydrocarbons to using renewUS$867 billion. ables and nuclear. Thompson anticipates “The Saudi market pretty much stagUS$30 billion being spent on power, nated, and we will start to see delays in electricity and diversification away from bringing new projects forward to the the traditional hydrocarbon-based fuel market. As existing projects get comsources. These projects would be accompleted and fall off our data list, we’ll plished under either IPP (independent start to see the market shrink, unless we power project) or IWPP (independent start to see new projects in the immediwater and power plant) delivery models. ate future,” he said.

After tapping savings to fund deficits, Meanwhile, MENA nations outside GCC states are reaching the unthinkable, of the GCC – particularly Egypt, Iran and turning to borrowing. Saudi Arabia and Iraq – will see GDP growth of 3.1 recently closed on a US$17.5 billion bond percent in 2016, falling to 2.9 percent that oversubscribed by an enormous in 2017. amount, Thompson said.

Iran’s projects planned or under“There’s a lot of confidence from way in 2016 jumped 17.5 percent to international banks in lending to the US$286 billion. With the lifting of region,” he said, and it’s a direction sanctions “we’ve seen trade missions you’re going to see over the next few and governments and people from all years to sustain spending levels and to over the world trying to get an early fund the deficit.” advantage in Iran,” he said. Several international airports and many OUTLOOK regional airports and railways are the In a recently published outlook, the focus of European and Chinese EPCs IMF projected 1.7 percent growth for and technology companies. The power GCC regional GDP growth in 2016, rissector anticipates about US$26 billion ing to 2.3 percent in 2017. in investment to deliver 70 gigawatts “Next year we’re going to see a return of additional generating capacity by to stronger growth than we have had 2020, he added. BB www.breakbulk.com BREAKBULK MAGAZINE 63

event recap

RISKY BUSINESS

Vetting carriers is also vital.

“First of all we have an obligation to keep our clients safe,” said Guenther Bielfeld, chief commercial officer, Asia Pacific of freight forwarder F.H. Bertling.

Mitigating Through Breakbulk “It starts with the financial statements …

Industry Downturn The freight forwarder and the breakbulk company want to know the company is in financially sound state.”

BY GARY BURROWS going to be the last,” he said, adding Understanding the financial viability of a carrier is vital, Ziegler agreed. that consolidation is expected, as competitors, losing money on a daily basis, “There’s a lot of financial information here was no crystal ball to be attempt to remain in the market waiting available online. Look at it.” found among industry executives on the next wave of business to come.

However, this process is complicated talking about mitigating risk Each step towards market correction, by the often complex structure of vesfrom the breakbulk industry’s downturn however, presents risk for shippers and sel ownership, depending on whether at Breakbulk Middle East. vessels are owned or chartered, which their cargo, with the potential for vessel But faces wore concerns that could be makes it difficult to ascertain where arrests, and safety of cargo vessels operread like tea leaves over a downturn that’s ating at well below compensatory rates. liability truly falls. “much longer than we thought it could be,” Due diligence has its limits. “As “You have to take practical steps in said Cyril Varghese, logistics director of Hanjin showed, you can’t quite predict the first place,” said Melke Ziegler, assoFluor, moderator of the panel in Abu Dhabi. ciate, Holman Fenwick Willan LLP. This that anymore,” Ziegler said.

“We’ve seen Hanjin file for bankVarghese suggested that for carriers, includes knowing terms of insurance and ruptcy over the last couple of months. contracts. providing the financial information in We’ve seen Flinter declare bankruptcy.

“Know what your contract says,” the process of negotiating with a shipper What kind of risks are we facing as cargo Ziegler said, including understanding should be viewed as a selling point, rather owners?” Varghese asked. carrier liability. than forcing a potential partner to wade Hanjin’s bankruptcy was “to a cerContracts should have a solid through the dirty work to vet the carrier. tain extent expected,” Varghese said, but In the event of compromised cargo, recourse section which protects the it was also surprising in that Korea did shipper. “That makes my life easier as a Ziegler acknowledged that shippers have not bail out its national carrier. lawyer in trying to recoup money at the legal recourse, but that a better option may However, recent bankruptcies “aren’t end of the day,” she said. come in working with the carrier to find a solution. “You have to weigh up how much it’s going to cost to sue a carrier against the likelihood of a successful solution,” she said, whereas a practical option may cost a bit more but will release cargo and save in the long run.

Panelists also discussed the shifting models of vessel owners, from traditional carriers to commercial management firms controlling fleets, and how they affect cargo risk.

“Project forwarders are stepping into the carrier market. Carriers are stepping into the project forwarder market, local hauliers propose to be project forwarders. It’s just a matter of the situation we have right now. Everyone is trying to find a niche, find something to work on to stay in the market,” said Arne Koester, executive Fluor’s Cyril Varghese moderated the panel, with participants Guenther Bielfeld, of F.H. Bertling; chartering manager, dships Melke Ziegler, of Holman Fenwick Willan LLP; Arne Kosthler, of dships Carriers; and Denis Bandura, BBC Chartering Middle East.

Carriers.

T

64 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2016

Consolidation and bankruptcies won’t cure the industry ills on their own, as analysts have pointed out that overtonnaging remains in the market. While there are ships old enough to begin scrapping, it’s not happening.

Despite a history as adversaries, shippers are sympathetic of the carriers’ plight. “Everyone in the room understands that vessel owners have to stay healthy,” Varghese said.

Reduced competition also can create risk when business picks up again as fewer lines can command higher rates.

Denis Bandura, managing director, BBC Chartering Middle East, argued that “breakbulk is traditionally a bit more stable” and a more difficult segment to enter than container shipping.

Despite going through its own tough times, the breakbulk industry’s knowl-

“It’s just a matter of the situation we have right now. Everyone is trying to find a niche, find something to work on to stay in the market.”

UPCOMING EVENTS:

– Arne Koester

edge, talent and technology base helps to insulate it from attempts to encroach by container and bulk lines.

As to when and how a market correction comes in terms of shipping rates, “that’s a very good question,” Bandura said. “If I had the answer, I wouldn’t be sitting on this panel.” BB

www.breakbulk.com BREAKBULK MAGAZINE 65

event recap

CAPACITY FOR GROWTH Oil and Gas Investment Returns to GCC

BY GARY BURROWS

A

s oil prices begin a slow creep upward from a precipitous fall, interest is already building for oil and gas investment in Gulf Cooperation Council countries, said an energy analyst at Breakbulk Middle East.

Several factors are at work in the Middle East where there has been a 3.3 percent growth in exploration and production capital investment since oil prices nosedived in 2014, said Eduard Gracia, principal, A.T. Kearney Energy Practice Middle East, during a keynote address. That growth comes despite a 60 percent drop in oil prices since January 2014, and the stockpiling of reserves as countries refused to cut production.

Likewise, in that time global upstream capital expenditure in oil and gas fell 41 percent, as oil companies could not recoup capex costs. That decline has created an overcapacity in oil and gas related services, which nudged pricing downward. Add to that a reduction in prices for raw materials such as iron ore – necessary in oil and gas projects – and investment has become more plausible for some projects at the current oil price of about US$50 a barrel, Gracia said.

Key to the GCC’s growing investment is developing refining and petrochemical capacity “to extract maximum value from every barrel of oil produced,” Gracia said at the Abu Dhabi event.

Development of capacity will boost transportation demand for crude as well as for refinery products moving from the Middle East to Asia, Africa and Europe.

“Middle East demand is going to grow fast, but production is going to grow even faster,” he added.

Regions such as Europe are actually decommissioning more refining capacity than they are building, creating grow66 BREAKBULK MAGAZINE www.breakbulk.com

2016 marked the second year that Eduard Gracia presented at Breakbulk MIddle East. He spoke at the inaugural event last year (pictured here).

Gracia projects heavy investment in Saudi Arabia, Iran and Iraq, which will lead to those countries joining Qatar and Oman as GCC net exporters of gas by 2030. ing export opportunities for Middle East capacity, he said.

Burgeoning refining capacity will also produce simple petrochemical products – olefins (including ethylene, propylene, and butadiene) and aromatics (including benzene, toluene, and xylenes). Middle East production is expected to grow 4 percent annually through 2030, ahead of the Americas,

Europe, Near East and Asia, he said.

Middle East countries won’t be as able to compete in export markets for specialty petrochemical products, where the U.S. has an advantage, Gracia said on the sidelines.

Demand for gas and petrochemical products are expected to grow much faster than oil in the coming years, the A.T. Kearney analyst said. While oil demand is projected to grow 1 percent per year through 2040, gasoline demand is projected to grow at a 2.4 percent rate and petrochemicals are to grow at a 2.8 percent clip over that same period.

Gracia projects heavy investment in Saudi Arabia, Iran and Iraq, which will lead to those countries joining Qatar and Oman as GCC net exporters of gas by 2030.

Investment in gas and petrochemicals also has the added benefit of serving as a clean fuel alternative, and carries a strong need for infrastructure development, Gracia said. BB ISSUE 6 / 2016

Experienced.

Professional.

Expert.

bb index

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

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

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

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. $8.00

TIME CHARTER RATE PER DAY

$7.75 $7.50 $7.25

$7.178

$7.168 $6.963

$7.00

$6.902

$6.860 $6.778

$6.75

$6.645 $6.389

$6.50

$6.370 $6.280

$6.25 $6.00

Jan ‘16

Feb ‘16

Mar ‘16

Apr ‘16

May ‘16

Jun ‘16

Jul ‘16

Aug ‘16

Sep ‘16

Oct ‘16

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

68 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2016

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

150 125 100 75 50 25 0

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASO 2010

2011

2012

2013

2014

2015

2016

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

200 150 100 50 0

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASO 2010

2011

2012

2013

2014

2015

2016

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

250 200 150 100 50 0 JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASO 2010

2011

2012

2013

2014

2015

2016

Source: RISI, www.risi.com

EUROPEAN FREIGHT FORWARDING INDEX The index, based on European forwarders’ actual and expected freight volumes, was 56 in November, compared to 56 the previous month.

Expectations suggest an increase in volumes in the coming two months. Values below 50 on the zero-to-100 scale indicate a decline.

100 90 Actual

80

Forecast

70 60 50 40 30 20 10 0

MJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASOND 2010

2011

2012

2013

2014

2015

2016

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

bb index

LOGISTICS PERFORMANCE INDEX INTERNATIONAL LPI GLOBAL RANKINGS LPI is an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance. The LPI 2016 allows for comparisons across 160 countries.

LPI COUNTRY RANK

LPI CUSTOMS INFRASTRUCTURE SCORE

1 Germany 2 Luxembourg 3 Sweden 4 Netherlands 5 Singapore 6 Belgium 7 Austria 8 United Kingdom 9 Hong Kong, China 10 United States 11 Switzerland 12 Japan 13 U.A.E. 14 Canada 15 Finland 16 France 17 Denmark 18 Ireland 19 Australia 20 South Africa 21 Italy 22 Norway 23 Spain 24 Korea, Rep. 25 Taiwan 26 Czech Republic 27 China 28 Israel 29 Lithuania 30 Qatar 31 Hungary 32 Malaysia 33 Poland 34 Turkey 35 India 36 Portugal 37 New Zealand 38 Estonia 39 Iceland 40 Panama 41 Slovak Republic 42 Kenya 43 Latvia 44 Bahrain 45 Thailand 46 Chile 47 Greece 48 Oman 49 Egypt, Arab Rep. 50 Slovenia 51 Croatia 52 Saudi Arabia 53 Kuwait

4.23 4.22 4.20 4.19 4.14 4.11 4.10 4.07 4.07 3.99 3.99 3.97 3.94 3.93 3.92 3.90 3.82 3.79 3.79 3.78 3.76 3.73 3.73 3.72 3.70 3.67 3.66 3.66 3.63 3.60 3.43 3.43 3.43 3.42 3.42 3.41 3.39 3.36 3.35 3.34 3.34 3.33 3.33 3.31 3.26 3.25 3.24 3.23 3.18 3.18 3.16 3.16 3.15

4.12 3.90 3.92 4.12 4.18 3.83 3.79 3.98 3.94 3.75 3.88 3.85 3.84 3.95 4.01 3.71 3.82 3.47 3.54 3.60 3.45 3.57 3.48 3.45 3.23 3.58 3.32 3.50 3.42 3.55 3.02 3.17 3.27 3.18 3.17 3.37 3.18 3.41 3.13 3.13 3.28 3.17 3.11 3.14 3.11 3.19 2.85 2.76 2.75 2.88 3.07 2.69 2.83

70 BREAKBULK MAGAZINE www.breakbulk.com

INTERNATIONAL SHIPMENTS

4.44 4.24 4.27 4.29 4.20 4.05 4.08 4.21 4.10 4.15 4.19 4.10 4.07 4.14 4.01 4.01 3.75 3.77 3.82 3.78 3.79 3.95 3.72 3.79 3.57 3.36 3.75 3.49 3.57 3.57 3.48 3.45 3.17 3.49 3.34 3.09 3.55 3.18 3.02 3.28 3.24 3.21 3.24 3.10 3.12 2.77 3.32 3.44 3.07 3.19 2.99 3.24 2.92

LOGISTICS COMPETENCE

3.86 4.24 4.00 3.94 3.96 4.05 3.85 3.77 4.05 3.65 3.69 3.69 3.89 3.56 3.51 3.64 3.66 3.83 3.63 3.62 3.65 3.62 3.63 3.58 3.57 3.65 3.70 3.38 3.49 3.58 3.44 3.48 3.44 3.41 3.36 3.24 2.77 3.07 3.32 3.65 3.41 3.24 3.28 3.33 3.37 3.30 2.97 3.35 3.27 3.10 3.12 3.23 3.62

TRACKING & TRACING

4.28 4.01 4.25 4.22 4.09 4.07 4.18 4.05 4.00 4.01 3.95 3.99 3.82 3.90 3.88 3.82 4.01 3.79 3.87 3.75 3.77 3.70 3.73 3.69 3.95 3.65 3.62 3.60 3.49 3.54 3.35 3.34 3.39 3.31 3.39 3.15 3.22 3.18 3.26 3.18 3.12 3.24 3.29 3.38 3.14 2.97 2.91 3.26 3.20 3.20 3.21 3.00 2.79

TIMELINESS

4.27 4.12 4.38 4.17 4.05 4.22 4.36 4.13 4.03 4.20 4.04 4.03 3.91 4.10 4.04 4.02 3.74 3.98 3.87 3.92 3.86 3.82 3.82 3.78 3.59 3.84 3.68 3.72 3.68 3.50 3.40 3.46 3.46 3.39 3.52 3.65 3.58 3.25 3.42 2.95 3.12 3.42 3.42 3.32 3.20 3.50 3.59 3.09 3.15 3.27 3.16 3.25 3.16

4.45 4.80 4.45 4.41 4.40 4.43 4.37 4.33 4.29 4.25 4.24 4.21 4.13 4.01 4.14 4.25 3.92 3.94 4.04 4.02 4.03 3.77 4.00 4.03 4.25 3.94 3.90 4.27 4.14 3.83 3.88 3.65 3.80 3.75 3.74 3.95 4.12 4.08 3.88 3.74 3.81 3.70 3.62 3.58 3.56 3.71 3.85 3.50 3.63 3.47 3.39 3.53 3.51

ISSUE 6 / 2016

LPI COUNTRY RANK

54 Mexico 55 Brazil 56 Malta 57 Botswana 58 Uganda 59 Cyprus 60 Romania 61 Tanzania 62 Rwanda 63 Indonesia 64 Vietnam 65 Uruguay 66 Argentina 67 Jordan 68 Pakistan 69 Peru 70 Brunei 71 Philippines 72 Bulgaria 73 Cambodia 74 Ecuador 75 Algeria 76 Serbia 77 Kazakhstan 78 Bahamas, The 79 Namibia 80 Ukraine 81 Burkina Faso 82 Lebanon 83 El Salvador 84 Mozambique 85 Guyana 86 Morocco 87 Bangladesh 88 Ghana 89 Costa Rica

LPI CUSTOMS INFRASTRUCTURE SCORE

3.11 3.09 3.07 3.05 3.04 3.00 2.99 2.99 2.99 2.98 2.98 2.97 2.96 2.96 2.92 2.89 2.87 2.86 2.81 2.80 2.78 2.77 2.76 2.75 2.75 2.74 2.74 2.73 2.72 2.71 2.68 2.67 2.67 2.66 2.66 2.65

2.88 2.76 2.78 3.05 2.97 3.11 3.00 2.78 2.93 2.69 2.75 2.78 2.63 2.55 2.66 2.76 2.78 2.61 2.40 2.62 2.64 2.37 2.50 2.52 2.65 2.65 2.30 2.55 2.73 2.37 2.49 2.40 2.22 2.57 2.46 2.33

INTERNATIONAL SHIPMENTS

2.89 3.11 2.94 2.96 2.74 3.00 2.88 2.81 2.62 2.65 2.70 2.79 2.86 2.77 2.70 2.62 2.75 2.55 2.35 2.36 2.47 2.58 2.49 2.76 2.72 2.76 2.49 2.67 2.64 2.25 2.24 2.24 2.46 2.48 2.48 2.32

LOGISTICS COMPETENCE

3.00 2.90 3.09 2.91 2.88 2.80 3.06 2.98 3.05 2.90 3.12 2.91 2.76 3.17 2.93 2.91 3.00 3.01 2.93 3.11 2.95 2.80 2.63 2.75 2.80 2.69 2.59 2.73 2.84 2.82 3.06 2.66 3.09 2.73 2.71 2.89

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

TRACKING & TRACING

3.14 3.12 2.85 2.74 2.93 2.72 2.82 2.92 2.87 3.00 2.88 3.01 2.83 2.89 2.82 2.87 2.57 2.70 3.06 2.60 2.66 2.91 2.79 2.57 2.74 2.63 2.55 2.78 2.45 2.66 2.44 2.66 2.59 2.67 2.54 2.55

TIMELINESS

3.40 3.28 3.12 2.89 3.01 2.54 2.95 2.98 3.04 3.19 2.84 2.84 3.26 2.96 2.91 2.94 2.91 2.86 2.72 2.70 2.65 2.86 2.92 2.86 2.64 2.52 2.96 2.49 2.75 2.78 2.75 2.90 2.34 2.59 2.52 2.77

3.38 3.39 3.61 3.72 3.70 3.79 3.22 3.44 3.35 3.46 3.50 3.47 3.47 3.34 3.48 3.23 3.19 3.35 3.31 3.30 3.23 3.08 3.23 3.06 2.93 3.19 3.51 3.13 2.86 3.29 3.04 3.12 3.20 2.90 3.21 2.98

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

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

bb index LPI COUNTRY RANK

90 Nigeria 91 Dominican Rep. 92 Togo 93 Moldova 94 Colombia 95 Cote d’Ivoire 96 Iran, Islamic Rep. 97 Bosnia & Herzeg.

98 Comoros 99 Russian Federation 100 Niger 101 Paraguay 102 Nicaragua 103 Sudan 104 Maldives 105 Papua New Guinea 106 Macedonia, FYR 107 Burundi 108 Mongolia 109 Mali 110 Tunisia 111 Guatemala 112 Honduras 113 Myanmar 114 Zambia 115 Benin 116 Solomon Islands 117 Albania 118 Uzbekistan 119 Jamaica 120 Belarus 121 Trinidad & Tobago 122 Venezuela, RB 123 Montenegro 124 Nepal 126 Ethiopia 125 Congo, Rep. 127 Congo, Dem. Rep. 128 Guinea-Bissau 129 Guinea 130 Georgia

LPI CUSTOMS INFRASTRUCTURE SCORE

2.63 2.63 2.62 2.61 2.61 2.60 2.60 2.60 2.58 2.57 2.56 2.56 2.53 2.53 2.51 2.51 2.51 2.51 2.51 2.50 2.50 2.48 2.46 2.46 2.43 2.43 2.42 2.41 2.40 2.40 2.40 2.40 2.39 2.38 2.38 2.38 2.38 2.38 2.37 2.36 2.35

2.46 2.39 2.49 2.39 2.21 2.67 2.33 2.69 2.63 2.01 2.59 2.38 2.48 2.23 2.39 2.55 2.21 2.02 2.39 2.45 1.96 2.47 2.21 2.43 2.25 2.20 2.60 2.23 2.32 2.37 2.06 2.38 1.99 2.22 1.93 2.60 2.00 2.22 2.44 2.28 2.26

INTERNATIONAL SHIPMENTS

2.40 2.29 2.24 2.35 2.43 2.46 2.67 2.61 2.36 2.43 2.22 2.45 2.50 2.20 2.57 2.32 2.58 1.98 2.05 2.30 2.44 2.20 2.04 2.33 2.26 2.39 2.21 1.98 2.45 2.23 2.10 2.34 2.35 2.07 2.27 2.12 2.60 2.01 1.91 2.01 2.17

LOGISTICS COMPETENCE

2.43 2.67 2.62 2.60 2.55 2.54 2.67 2.28 2.58 2.45 2.63 2.58 2.50 2.57 2.34 2.46 2.45 2.42 2.37 2.48 2.33 2.41 2.58 2.23 2.51 2.55 2.28 2.48 2.36 2.44 2.62 2.31 2.47 2.56 2.50 2.56 2.37 2.33 2.57 2.38 2.35

TRACKING & TRACING

2.74 2.68 2.46 2.48 2.67 2.62 2.67 2.52 2.60 2.76 2.50 2.69 2.55 2.36 2.44 2.35 2.36 2.46 2.31 2.46 2.59 2.30 2.44 2.36 2.42 2.47 2.43 2.48 2.39 2.31 2.32 2.28 2.34 2.31 2.13 2.37 2.26 2.33 2.07 2.54 2.08

TIMELINESS

2.70 2.63 2.60 2.67 2.55 2.62 2.44 2.56 2.44 2.62 2.35 2.30 2.47 2.49 2.49 2.58 2.32 2.68 2.47 2.36 2.67 2.46 2.53 2.57 2.36 2.23 2.18 2.15 2.05 2.38 2.16 2.28 2.48 2.37 2.47 2.18 2.48 2.37 2.41 2.54 2.44

3.04 3.06 3.24 3.16 3.23 2.71 2.81 2.94 2.82 3.15 3.02 2.93 2.68 3.28 2.88 2.78 3.13 3.45 3.40 2.93 3.00 2.98 2.91 2.85 2.74 2.69 2.76 3.05 2.83 2.64 3.04 2.79 2.71 2.69 2.93 2.37 2.57 2.94 2.74 2.38 2.80

Source: International LPI Global Ranking The World Bank, lpi.worldbank.org/international/global

NEWS EDITOR FIELDS NETS AWARDS News Editor Carly Fields continues to collect hardware for her reporting in Breakbulk magazine.

The Seahorse Club at its annual awards Dec. 6 named Fields Environmental Journalist of the Year for a feature on the Northern Sea Route (“Melting Away,” Issue 2, page 46), and runner-up for Feature Journalist of the Year for the Issue 4 cover story on women in breakbulk (“Minority Movement,” page 10).

72 BREAKBULK MAGAZINE www.breakbulk.com

The Seahorse Club is an international networking forum for public relations, marketing, advertising and journalism professionals within the freight transport, shipping and logistics sectors.

Earlier this fall, Fields was runner-up for Journalist of the Year from the Chartered Institute of Transport and Logistics. She has reported on the shipping industry for the past 16 years, covering bunkers and broking and much in between.

ISSUE 6 / 2016

photo contest

CRAZY CARGOES PHOTO CONTEST WINNER:

Arkas Lojistik

LOCATION: Gemlik, Turkey YEAR: 2016 DESCRIPTION: This equipment went by road from Gemlik, Turkey, to the Tengizchevroil project in Kazakhstan. The cargo height – exactly 4.8 meters – presented the main challenge. During transit, the team encountered many bridges, tunnels, and signals as tall as as 4.85 meters.

EDITOR’S PICK: deugro LOCATION: Elabuga, Tatarstan, Russia YEAR: 2012 DESCRIPTION: The deugro Group contributed a logistics concept for the complete set-up of a fertilizer plant in a remote area of Tatarstan, in the Russian Federation. This oddly-shaped piece of cargo is just one part of a total project volume of 110,000 FRT. deugro executed this project for its client in Russia, working alongside the Dachser Group.

Next Issue: F rom Dusk to Dawn Submission Period: Jan. 4-18 Submit entries at www.breakbulk.com

www.breakbulk.com BREAKBULK MAGAZINE 73

the last word

THE NEW ANTI-GLOBALIZATION

BY JANET NODAR

Credit: Keith Necaise Photography

The Middle East sees an opportunity forming. Dubai, for example, is tax-free, stable, trade-friendly, and beautifully situated geographically. Can it become a global financial hub?

N

ot so long ago, we were all reading about the “rise of the south,” meaning the emerging markets of the southern hemisphere.

Remember that narrative? The mighty BRICS? Eternal globalization and an everrising middle class?

The world feels very different now, thanks to the rise in anti-trade, anti-establishment populism in western democracies, and a stubbornly stagnant global economy that’s been undercut by plummeting energy and commodity prices.

In truth, global trade growth has been close to flat since the recession of 20072008. Contributing factors, according to a recent paper from the U.S. Federal Reserve, include a slowdown in trade liberalization; another slowdown in the trend toward splitting production and supply chains across countries; and, more specific to China, a move towards domestic production, fewer imports of parts and components, and growth in domestic consumption and services.

What do these trends mean for globalization? Is it fading away? Unlikely. Trade expansion has added trillions of dollars in wealth to the world annually since 1946. Despite angry anti-trade rhetoric from some quarters, an unequal distribution of the wealth gained by it “is a failure of politics rather than of globalization,” said Sebastian Mallaby, an economist, in a recent paper for the International Monetary Fund. Technology that supports a digitally interconnected world has also had a profound effect on globalization, he noted. Small businesses are able to become exporters, for example; students can “study abroad” virtually. As long as this technology exists and politics does not impede openness, globalization will continue to be a positive force.

Which regions could turn the west’s antitrade sentiment and increasing political and financial instability to their benefit? China will certainly press to extend its influence, even more so now it is bolstered by the rejection of the TPP and President-elect Donald Trump’s desire to overhaul international relationships.

74 BREAKBULK MAGAZINE www.breakbulk.com

The Middle East is another region taking a long, interested look at the west’s increasing instability. The oil-rich GCC generates billions of dollars in income annually, but has always invested it outward. Richard Thompson, editorial director of MEED, a Dubai-based business publication, said in a recent conversation that these monies typically flow to western stock exchanges and other vehicles. Now the GCC is entertaining new ambitions: creating stability, building a ‘knowledge economy,’ improving governance levels and reforming regulations to entice not only its own fortune-holders but also large institutional investors into Middle Eastern stock markets and investment vehicles.

“In the past, [the GCC] has been too risky,” Thompson said. “Now, if the developed markets aren’t strong, if the liberal market and open trading are gone, if risk levels are rising, if Trump and the far-right nationalists are increasing trade barriers, this all adds to uncertainty.”

The Middle East sees an opportunity forming. Dubai, for example, is tax-free, stable, trade-friendly, and beautifully situated geographically. Can it become a global financial hub? “This is one potential consequence of the rise of populism in the developed world,” Thompson said.

Predictably, if ironically, immigration barriers, trade wars, anti-science ideology and the general xenophobia embraced by the populist surge now rising in the U.S., Europe and the UK can be expected to fail to make these nations “great again,” and instead lead to rising prices, labor shortages, damaged political relationships and other ills.

It’s difficult to know how much of this divisive rhetoric will become reality. Perhaps the powerful business interests put at risk by these impulses will intervene before they gain much purchase. But perhaps not: perhaps fundamental political changes that were thought to be a remote possibility only a few months ago will continue reshaping the post-WWII economic and political order.

Then we may be looking at a new globalization, one that leaves the west behind.

Janet Nodar Content Director ISSUE 6 / 2016

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