bb magazine

JANUARY-FEBRUARY 2013JANUARY-FEBRUARY 2013

Going West ■ Ghana’s Bright Future ■ NE India Roadblocks ■ Wind Credit Reprieve

Developing regions drive breakbulk momentum

WARILY MOVING AHEAD

outlook

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CONTENTS

4 BREAKBULK MAGAZINE www.breakbulk.com

6 Editorial ■ 40 Insurance: Force Majeure ■ 42 Special Report: Facilitating Payments ■

62 Breakbulk Index ■ 73 Port News: Stevedore Stalemate ■

COVER STORY

JANUARY-FEBRUARY 2013

18 SHIPPING TRENDS

ROADBLOCKS TO NE INDIA

Lack of access hurts economic development.

26 MARKET SPOTLIGHT

GOING WEST IN CHINA Development program tackles interior logistics.

32 REGIONAL REVIEW

GHANA’S BRIGHT FUTURE Stable government bolsters economy.

50 CARRIER PROFILE

STARTING FRESHHansa builds new heavy-lift competitor.

56 TRADE NOTES

NAFTA’S UNINVITED GUEST The conundrum of international

anti-bribery enforcement.

70 EXECUTIVE PROFILE

OUT OF THE BOXNew Rickmers-Americas chief

jumps into breakbulk.

75 ENERGY UPDATE

REPRIEVE FOR US WIND INDUSTRY

Tax credits may be short-lived.

77 INFRASTRUCTURE

BUILDING UP BRAZILGovernment initiative to modernize ports.

8 BREAKBULK OUTLOOK 2013

Developing regions drive breakbulk momentum.

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JANUARY-FEBRUARY 20138 BREAKBULK MAGAZINE www.breakbulk.com

breakbulk outlook 2013

breakbulk outlookWARILY MOVING AHEADDeveloping regions drive breakbulk momentum

B reakbulk magazine has again prevailed upon a disparate group of industry executives to break out

their crystal balls and predict the breakbulk transportation industry’s direction in 2013.

We’ve focused on the developing regions whose momentum drives the industry. Energy projects in these regions will “rule the breakbulk waves,” as Ahler’s Luc Maton puts it. However, this reality will also exacerbate the conundrum of growth outstripping infrastructure that will have profound effects on project cargo movement for years to come.

Evolving piracy and security challenges, and an escalating scarcity of skilled labor, are discussed by Africa-based commentators.

The multipurpose fl eet, although it has avoided the overbuilding that continues to haunt the bulk and container segments, remains vulnerable to competition, soft rates and volatile bunkers.

Overall, although aware that economic tremors could still derail a fragile recovery, the sector remains warily optimistic.

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www.breakbulk.com BREAKBULK MAGAZINE 9

CONTROL RISKS SOUTHERN AFRICA

DAVID BUTLERManaging Director

Piracy continued to domi-nate maritime security issues across Africa in 2012, with activity off the east and west coasts the two main hot spots. What piracy issues can the maritime industry expect this year?

On the East African coast, Somali piracy dropped dramati-cally in 2012, with a 56 percent reduction in attacks, a 33 per-cent reduction in hijackings and a 72 percent reduction in ransom payments. The combi-nation of a more aggressive and coordinated naval strategy, the increased use of onboard armed teams and implementation of best management practices made Somali pirate groups less successful.

Before declaring victory, remember that conditions onshore still enable piracy despite small improvements in local governance. Vessels and hostages continue to be held offshore, and pirate attacks will continue.

Somali pirate groups will focus on assessing the vul-nerability of vessels before committing to an attack. The recent boarding of a vessel in the Gulf of Oman was preceded and followed by a number of suspicious

approaches in that area. In the Gulf of Guinea,

threats are more varied. Criminal activity extends from low-level anchorage crime to hijacking vessels for cargo theft and kidnapping personnel.

This year is likely to see further hijack-for-cargo inci-dents, in which tankers are hijacked by Nigerian groups and held while the vessel is moved and part of the cargo is siphoned off to another vessel.

In 2012, these attacks extended farther west to Abi-djan anchorage, Cote d’Ivoire. Expect to see commercial ves-sels targeted farther offshore

the Niger Delta, with violent armed robbery and persistent kidnapping threats.

In addition to the high-profi le hijackings, shipping has become increasingly aware of the problem of opportunistic anchorage crime. While trends in East and West Africa constantly change, 2013 will see anchor-age crime across the continent targeting cash, valuables, equipment or ship’s stores.

As threat areas change and new trends develop, informa-tion and awareness become essential tools for the mari-time sector. With security threats ever-changing, a thor-ough risk assessment should be the fi rst step before any new project or voyage.

ITATRANS AGILITY BRAZIL

BERNARDO CURIProject Development Manager

One of the biggest bottlenecks in Brazil is poor infrastructure. This affects ports, airports, roads, railways and energy.

In past years, Brazil has invested only 2 percent annu-ally of gross domestic product on infrastructure. Other countries such as China, India, Chile and Colombia have invested more than 5 percent of their respective GDPs.

The World Economic Forum ranked Brazil’s infra-structure at 104th among 142 countries.

As the fi fth-largest country in the world in land mass, 58 percent of all domestic cargo moves by trucks on bad roads. Only 6 percent of Brazil’s roads are paved.

The remainder of domes-tic transportation is by rail, 28 percent, and water, 13 percent. In countries such as Germany, U.S. and Canada, railways account for more than 60 percent of domestic transportation. Rail reduces costs and time, making those countries more competitive in the global market.

Brazil is trying to improve the situation. In 2007, the government started up its Growth Acceleration Pro-gram, known as PAC, with

estimated investments around BRL955 billion. The second stage, known as PAC 2, began in 2011 and is sched-uled to be complete in 2014.

Offi cials say 40 percent of PAC 2 is complete, but this is not what we see on a daily basis. Our infrastructure is still chaotic.

The government has been trying to stimulate the private sector to invest in infrastruc-ture, but Brazil remains one of the most expensive and bureaucratic countries in the world.

KITA LOGISTICS

EMRE ELDENERGeneral Manager,

Kita Logistics Istanbuland President, Heavy Lift Group

Turkey has been growing at an average of 5 percent to 6 percent in recent years. It looks if as the growth rate will drop slightly to 4 percent in 2013.

Projects under construc-tion or starting up in Turkey this year include: the third Bosphorus bridge, the Istan-bul-Izmir expressway, two nuclear power plants, two large oil refi neries, power plant installations totaling about 4,000 megawatts (com-bination of wind, hydro, coal and gas), about 10 subway sys-tems in different cities, the Ankara-Istanbul high-speed train, and the Izmit

BEFORE DECLARING

VICTORY, REMEMBER THAT

CONDITIONS ONSHORE STILL

ENABLE PIRACY...




Bay suspension bridge.Istanbul needs a new air-

port. The tender will be out early this year for the new 150 million passenger-capacity airport project, which will be the largest airport in the world. Considering a global slowdown of investment activities, these projects are appetizing for contractors, logistics service providers and fabricators.

Additionally, the recon-struction of northern Iraq will continue at a high speed, including new refi neries, oil exploration projects combined with new gas-fi red power plants, and housing projects.

It is becoming more diffi cult for any cargo to pass through Iran in transit. Traders are forced to use the land route via Turkey to reach countries in CIS countries, of which Azer-baijan looks to be especially active with natural gas-related projects. In the Balkan coun-tries of Greece, Bulgaria and Romania, the outlook does not look as bright as that of south-ern Europe in 2013.

TWP PROJECTS (PTY) LTD. SOUTH AFRICA

LARS M. GREINERHead of Materials Management

It may be a worldwide phe-nomenon, often talked about in hushed tones. However, in

Africa, the lack of any type of formal training and the dimin-ishing number of educated people entering the logistics sector are now leading to a cri-sis within transport as a whole and in the breakbulk and proj-ect sectors specifi cally.

While the seamen’s certi-fi cation is clearly documented and internationally recog-nized, the same cannot be said of landside staff. With few national fl eets left in Africa, there is a distinct lack of sea-experienced staff moving to work on the quayside.

Add to this the lack of any formal qualifi cations or requirements to open a ship’s agency or forwarding com-pany. The result is that anyone with an interest in the industry and a bit of cash or political clout can open one of these companies.

Shipping lines and shippers alike are left at their mercy, trying to pick from a plethora of potential agents, or worse, required by their local contract partner to choose a company based on politics.

It remains amazing that while years of training are required for engineers and cap-tains in the project-shipping realm, agents who are between the two often have little more than a school-leaving cer-tifi cate and a couple years of experience.

The time has come to set international standards again for agencies and forwarders alike, with a rating scale. Such standards should be linked with some form of interna-tional minimum training requirements.

Shipping and transport remain attractive industries to enter. They are considered “sexy” industries by young

people because of their global nature and the possibility of working internationally.

There is an opportunity to tap into this willing resource, and begin to nurture a well-trained group to drive the development of Africa. It’s time to take the skills gap seriously.

MARTIN BENCHER (SCANDINAVIA) A/S

PETER JENSENCEO

The last couple of years have been very good for Martin Bencher. We have opened new offi ces and increased turnover and profi t. However, we are not really sure what to expect from 2013.

We hear mixed signals from both customers and suppliers. Some business areas expect growth. Others are more cautious, and some expect a tough year with few projects.

We believe our custom-ers in the energy sector will provide most of the growth through equipment for the oil and gas industry, power plant projects and wind. Port expan-sions and upgrades of port facilities will also be an impor-tant area for us in 2013.

Most activity will be in

China, Southeast Asia and Latin America. Africa, Central Asia and Australia are areas with great potential.

Our main suppliers, the shipping lines, seem to be on a roller-coaster ride. Rates go up and down; it is very challenging to do anything long-term. Imbalance and overcapacity seem to be the key words. We do not anticipate much change to this situation in 2013.

Despite these mixed sig-nals, we allow ourselves to be optimistic. The project market is still very big if we look at it from a global perspective, and we fi nd plenty of room for expansion for a company of our size.

UNIQUE GLOBAL LOGISTICS PVT.

PAVITHRAN M. KALLADA

Managing Director

India will surely wit-ness growth in project and breakbulk cargo shipping, con-sidering the increased need for power to supply the country’s growing industries as well as consumers.

Increased investment in oil and gas fi elds is expected, both to upgrade old producing fi elds




and to pay for new exploration. Increased demand for fossil fuels in this part of the world will require more refi ning capacity, which will fuel proj-ect investment and breakbulk cargo shipping. Overall, the growth outlook for breakbulk cargo is reasonable.

India’s pool of engineering graduates will fuel growth in the EPC sector, since global EPCs are increasingly consid-ering India for engineering and fabrication facilities.

EPC and engineering com-panies have been increasingly active in the global market,

exporting to the Middle East, Africa and Southeast Asia. These increasing exports have signifi cant impact on India’s export of breakbulk cargo and represent a shift from the tra-ditional import market.

The breakbulk cargo movement in India faces these challenges:

— Infrastructure problems in ports and exit routes from ports to interior plant locations.

— Lack of quality roll-on, roll-off facilities, limited use of waterways and heavily con-gested highways.

— India’s major ports lie within centers of growing cities, which leads to port congestion.

— Compromises in safety to reduce costs.

What India needs is a Min-istry of Logistics to oversee and formalize logistics policies

that will prevent bottlenecks in supply chains.

JUMBO SHIPPING AUSTRALIA

JEROEN KOCKBusiness Development Manager

Australia is a unique mar-ket, with oil and gas, mining and port developments going on at the same time.

This means that for 2013 there are many planned shipments of equipment, including ship loaders, port infrastructure equipment and subsea equipment, such as reels.

Investments in mining and port development sectors have slowed; however, there are still many shipments to be executed in 2013. We feel these investments will not continue at the same speed, which might reduce the number of ship-ments in 2014.

Australian port develop-ment seeks to become more effi cient at handling com-modities such as iron ore and coal, or focuses on tasks such as building jetties at LNG terminals.

But handling project cargo and breakbulk at these ports is often a challenge. None of these projects are expected to

ease congestion or turnaround time for breakbulk and project cargo ships.

There is a lot happening in Australia for heavy-lift car-rier Jumbo, which will, for example, support the handover of reels to offshore installation vessel Normand Clough in February.

We expect a busy 2013, but this might change during 2014. Developers are tapping the brakes a bit, thinking about how to make existing assets more effi cient rather than investing in new facilities.

Some major projects are over budget. Australian labor costs are high. Other regions are beginning to look very interesting. And if the U.S. and Canada start export-ing shale gas, that will also change the game.

Interesting times are ahead of us. We are positive, but will proceed with caution.

MAERSK LINE LTD. INDIA

SUDHIR KUMARManager, Ship Management &

Chartering, Breakbulk & Project Cargoes

The shipping industry faced price-driven competi-tion across the globe recently because of excess capacity and a slowdown in demand.

But Indian project cargo play-ers view 2013 with optimism because end-users and ship-pers in India have always been price-conscious.

India is among the few regions that imports and exports similar breakbulk cargoes. Steel is imported from the U.S. and Europe while India exports it to the Persian Gulf, Africa, Europe, the U.S. and elsewhere. The same goes for power trans-formers, fabricated units and

other project cargoes.Volumes will grow and

rates will fi rm but fall short of touching their former dizzy-ing heights.

In capital investment, the Indian Reserve Bank has hinted at rate cuts to free capi-tal for infrastructure projects and ease debt on existing ones. Industry giants Reliance, Tata and other infrastructure majors have been tapping U.S., Indian, Chinese and European Exim banks for funds. The U.S. Exim Bank in November approved US$2.1 billion in funding for a new Reliance pet-rochemical complex on India’s west coast.

Cargoes for this project will begin moving in the third quarter of 2013, while the Indian east coast is abuzz with, power plant and gas explora-tion activity.

In the natural gas sec-tor, the year began with Petronet advancing on plans for a proposed third gas-based

OVERALL, THE GROWTH OUTLOOK FOR

BREAKBULK CARGO IS

REASONABLE

INDIAN PROJECT CARGO PLAYERS VIEW 2013 WITH

OPTIMISM...




power plant in Gangavaram. Petronet’s fi rst plant in Kochi on the southwest coast begins operating in March.

The gas sector augurs well for equipment manufacturers, drilling service providers and freight forwarders.

Traditionally, Indian rail-ways have been considered passenger lines or commodity and container transportation. To cater to the needs of an emergent India, the concept of dedicated freight corridors has gained momentum. These are aimed at easing highway congestion as well as bring-ing down transportation unit costs for project as well as containerized cargoes.

BBC CHARTERING SHANGHAI

JUERGEN KUNTZManaging Director

With high growth both in

exports and imports, China has taken over center stage in recent years in the global spot-light for breakbulk and project cargo shipments.

We currently see exports and sourcing out of China slowing down as local produc-ers deliver relatively “on time.” During the boom days, produc-ers often fell behind schedule.

Today, many fabrication plants and shipyards have increased spare capacity and lowered orderbooks.

As a consequence of the ASEAN-China Free Trade Agreement signed in 2010, we may see more Chinese state-owned companies investing and exporting in Southeast

Asia. This in turn may increase demand for shipping.

But we will continue to experience an oversupply of shipping capacity in China because of multipurpose ton-nage coming on the market. Although some older ships go for scrap, we see operators snapping up relatively cheap tonnage. That fuels pressure on rates, especially on intra-Asian business in both the multipurpose and heavy-lift business.

As a consequence, we expect the market to continue to be competitive on most trade lanes in 2013, with a focus on price rather than quality. At the same time, we see a lot of cargo

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being re-circulated because of fast-paced changes in the Chinese market. Operators and carriers enter and leave the stage quickly, and they often fail to perform.

We might see some inter-mediate short-term recoveries despite the challenges. But China continues to be a buyer’s market in 2013.

The International Mon-etary Fund projects 8.2 percent gross domestic product growth for China in its World Eco-nomic Forecast for 2013 under the assumption of “adequate” policymaking in the Euro-pean Union and the U.S. Such growth would be more-or-less in line with the previous year.

But policy failures may turn into a potential threat for all market participants.

China represents a key market for BBC Chartering. On a year-to-date basis, we had about 25 percent more vessel traffi c in 2012 com-pared to 2011. We continue to see much opportunity here and in the Asian region as a whole, and continue to increase BBC Chartering’s commercial footprint.

AHLERS

LUC MATONGeneral Manager-Asia Region

The unstable political and

economic climate will further increase the volatility of mar-kets and trade lanes in 2013.

The uncertain business environment may lead to last year’s scenario: delayed execu-tions of some projects during the fi rst half of the year, but a much stronger second half.

The energy business, and especially the oil and gas industry, will rule the break-bulk waves. The growth and potential of shale gas are shak-ing up the industry and may change the playing fi eld.

Solar- and wind-related projects are in the lift. Con-struction and steel businesses will remain relatively weak.

I see the Caspian Sea, Cen-tral Asia, the North Sea, APC and further emerging Africa as growth areas for the breakbulk and project business.

The manufacturing base of the goods will be increasingly in China as the main source and in India and Southeast Asia as secondary markets. In trade with Africa, there will be more and more competition between India and China.

Carriers will face heavy competition. The volatility of markets and diffi cult external circumstances, such as the bunker price, will not make things easier.

DREWRY SHIPPING CONSULTANTS

SUSAN OATWAYSenior Consultant

Drewry Shipping Consul-tants expects fi rm growth in demand for all dry cargo of 5 percent in each of the next two years. Most growth in demand is likely to be from the project cargo sector, with the main growth area expected in the Asia-Pacifi c region.

Drewry expects to see an overall growth in multipur-pose vessel demand of 8 percent per annum to 2014.

The multipurpose fl eet numbers around 3,108 ves-sels, with a combined total deadweight of 28.3 million tonnes and an average age of 14 years. The majority are classed as simply MPV, but 36 percent of the fl eet (by capacity) has enhanced lift capacity and is classed as project carriers.

The order book at the end of 2012 amounted to about 196 vessels totaling 2.7 million deadweight tons, representing 10 percent of the current fl eet.

Newbuilding is expected to drop back to levels seen before the boom of around 1 million dwt per year. Slippage is still running at 40 percent

at most shipyards. Taking this into account, we expect simple MPVs to see very little (if any) growth with little investment beyond replacement tonnage. But the project carrier fl eet shows growth of 3 percent per annum to 2014.

This difference in demand and fl eet growth should allow the market to perform on a more even keel. Rates are not expected to improve signifi -cantly over the period, but they are unlikely to crash again.

That said, competition from the container and bulk carrier fl eets is always the fl y in the market’s ointment. The former has capacity issues to address, but carriers could see small profi ts again during 2013.

Meanwhile, the bulk sector had a real “annus horribilis” in 2012, with rates falling another 22 percent in the Handysize and 37 percent in the Supra-max sectors, which compete directly with the MPV sector.

Dry bulk demand is set to improve, and the supply side is calming down if owners stop ordering new ships. But the competition for breakbulk and project cargo is still likely to be high — and this will keep rates down in the MPV sector until competition wanes or demand strengthens further.

It is a year to keep calm and carry on innovating, to offer shippers the extra value that only a multipurpose vessel gives. BB

I SEE THE CASPIAN SEA, CENTRAL ASIA, THE NORTH SEA,

APC AND FURTHER

EMERGING AFRICA AS

GROWTH AREAS...

NEWBUILDING IS EXPECTED TO DROP

BACK TO LEVELS SEEN BEFORE THE

BOOM...


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