SHIPPING & TRANSPORT
Loko Creek Logistics
elegant solutions to complex challenges river coasters may seem more expensive but after adjusting for improved export capacity, reduced OGV demurrage costs and laytime, river coasters are actually significantly cheaper on dollar per tonne, when compared to a traditional towedbarge. Such tradeoff analysis is unfortunately an afterthought by the miners, which Loko Creek intends to change by getting involved with its clients at the early stages of their development. Another area which can be further optimized is in the chartering of OGVs — by far the largest cost component in bulk commodities. Most mining companies do not have an inhouse freight or trading desk, and are typically reliant on offtakers/ traders to arrange and provide OGV services. In the absence of a COA, most miners are held captive to the spot OGV freight market and not monetizing the inherent volatility in the freight market. Loko Creek’s analysis shows a 2mtpa (million tonnes per annum) West African iron ore miner, exporting one Capesize vessel per month, would have saved ~$10m YTD if they had simply hedged their 2021 freight. Said differently, miners are leaving
AUGUST 2021
significant value to its clients, especially in bulk commodities where every dollar counts. The challenge for iron ore miners, or bulk commodity miners in general, is the desire to over-spec its logistics assets from the start, understandably so, given benefit derived from the economies of scale. The common mistake is using desktop analysis and simulation analysis to arrive at a decision point. This is a fatal flaw, given the numerous variables (i.e. weather, environmental factors) which cannot be forecasted. Using Marampa as an example, the former owners started exports using towed dumb barges with LOA greater than 200m, a traditional export solution used in bulk mining, which was certainly unsuitable given the draught constraint and narrow river bends of the Loko River. Corrective actions were subsequently implemented to use smaller 2,500 DWCC river coasters. While smaller in carrying capacity, the improved navigability of the river coasters and improved cycle time resulted in greater export capacity compared to towed barges. From an economic standpoint, analysis shows, the
www.drycargomag.com
Founded in 2019 by the former Partner of Marine Energie Louis Pensivy and the ex-VP of Principal Investments for the Gerald Group Herwin Yip, Loko Creek Logistics took its name from the very sinuous Port Loko Creek River located in the Western-African country of Sierra Leone. The company’s first major contract award was the management of barging and transshipment operations for the Marampa Iron Ore Mine in the Port Loko District, Sierra Leone, a project with over a billion tonnes of high-grade ore. Over the course of the contract, the principals exported over four million tonnes of iron ore concentrate via over 1,600 barge trips and loaded 56 OGVs (oceangoing vessels). The genesis of the company came from the principals’ experience operating in Marampa and advising other bulk mining clients. Logistics was always held as an afterthought after operations for mining and processing have been put in place. A strange proposition considering logistics can easily be 50–70% of total operating costs, and for some commodities, the majority of CIF China sale price. There clearly lies an opportunity for Loko Creek to arbitrage this disconnect and add
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