The seesaw effect

Breakbulk and project cargo that floated over the last downturn have been brought back to earth: both the squealing of brakes on Chinese growth and flat-lining oil prices have taken their toll on volumes through ports. “It’s like a Kings Cross station notice board after a blizzard,” explains Drewry’s Susan Oatway, “There’s a storm of ‘delayed’ and ‘cancelled project’ notices everywhere”.

However there are, she says, “pockets of resistance”: at the last count, the US Gulf’s liquefied natural gas drive was still demanding steel; Houston seemed to be returning to near normal levels at the end of last year; and many European wind projects are proving resilient, despite various governments’ lacklustre support.

Further, the seesaw nature of economics has even given some facilities a boost.

“What’s happened in Russia is that although imports have decreased substantially, exports – especially with regard to bulk and breakbulk cargoes – have in many cases been on the rise,” says Dan Pershin of Solvo. “It’s not like China where there’s been a complete slump.”

Although Russia has seen a number of under-used box facilities trying their hand at different kinds of cargo for the last three or four years – Ust Luga and Novorosysk, for example – the present climate has speeded up the trend. Mr Pershin adds that since the end of last year and the beginning of this year Solvo has seen a rush of orders from facilities which want to “turn around”; he cites St Petersburg’s Commercial Sea Port, DFCT, APMT, and MSC St Petersburg among them. It’s not limited to Russia, he adds; there’s also been take up from places as diverse as Africa and Italy.

However, there are a number of practical considerations to think about when handling breakbulk and project cargoes, as the different cargoes have very diverse needs. It’s not just handling equipment, even labour intensity can vary wildly – plus as time at berth is very variable it’s more difficult to schedule arrivals to avoid idle time. So, he says a terminal could find that certain elements, especially the need for human resource planning, take it by surprise. “For example, there’s a lot of documentation, billing and cost accounting associated with breakbulk; manual processing can take a very, very long time.”

More, a truly multipurpose facility will find cargo quite often ‘morphs’ along the way: “It’s not just that one palette may be split and rebundled with others, but also cargo that comes in a box can then be unstuffed and processed, finally going out the gate as ro-ro. Unrecognisable. The only chance you have is putting a system in place that can track it all… better, one that can integrate the software, interfaces and so on of each of the smaller, specific processes.”

Different start

Diversification isn’t just a move for struggling box ports: there are now a few new Russian facilities that are looking at multipurpose cargo from the outset. These include eastern ports and others closer to home such as the big greenfield port development at Bronka on the Baltic. This started off with a box system, is moving onto breakbulk and general purpose cargo and will soon be putting in a warehousing system to round it off, explains Mr Pershin.

For such a large project to be investing in an ‘integrated’ multipurpose terminal operating system from the off, rather than seeing the extra cargo types as a sideline, seems to him to be indicative of a change in long term strategy by ports faced with an extremely volatile market.

Having said this, other areas aren’t necessarily seeing a silver lining and Ms Oatway says for many places the projected figures for this coming year “already look dire” with no sign of a rebound until mid-2017.

So outside certain warm spots, it’s a chilly forecast even for ports with the flexibility of being able to switch cargoes, adds Ms Oatway’s colleague Neil Davidson. He points out that since most freight routes in mature markets tend to be established, it means either “offering something better” – or getting hold of a cargo stream that’s not quite so embedded.

Is this plausible? Despite everything there are still some areas that have new opportunities on offer. For example in South and Southeast Asia, wind energy-related cargo is about to rise, especially in Taiwan and India, says Chris Garrett of DNV GL.

Surprisingly, India isn’t following the usual route of cutting its teeth on landside projects before getting to the big offshore deployments: here, the wrangling over land rights has resulted in the feeling that it’s easier to tackle large-scale engineering than endless court hearings. Then there’s the US, although its offshore wind sector is far too immature to be exerting any kind of market pull – yet.

Asian boost

Mr Garrett points out that some ports in SE Asia and India could do quite well as initially wind turbine or component supply will rely on imports. However, the big boost is time-limited: if it follows in the footsteps of the US onshore wind market, domestic manufacturing capacity will rise to meet demand, eventually cutting ports out of the deal – although deployment facilities will still be needed.

Interestingly, he adds the ports that will benefit won’t necessarily be the big ones because 7m depths are adequate for a sea deployment gateway, even less if there are bargeable sections of the route. Given the need to keep costs down (an ongoing bugbear of European wind), lower-tech ports with space to spare and fewer bills to pay might find they suddenly have a niche market in their laps. So it might not be the ‘Houstons’ of this world that get the offshore wind custom.

Counter intuitively, decommissioning is also rising in activity; not only has the oil crash started to push forward the removal of oil and gas rigs but the earlier offshore wind farms are now looking at decom plans – at least one has already been removed.

“Wind turbine towers and their foundations suffer extremes of fatigue, so unlike oil and gas platforms, opportunities for lifetime extension are limited. Decommissioning is only going to gain in profile, and not that far into the future,” says Mr Garrett and so some, mostly North European or UK ports, could find themselves as a base for either or both activities.

RISING RO-RO LIFTS US EAST COAST VOLUMES

One area that’s not doing badly at all, even given the dire state of the multipurpose market, is the US East Coast automotive sector. Assistant port director of New York-New Jersey Sam Ruda believes that the port’s 2015’s figures, up by over a quarter overall, have been driven higher by the drop in oil.

PANYNJ’s 2015 results rest squarely on the port’s record automotive throughput explains Mr Ruda, this in turn being boosted by the lower running costs: “When you start drilling down into the data and link it all together, the price of fuel seems to be presenting itself as a decisive factor.”

It’s not just the number of units that have been subject to change; he says there’s definitely more trucks and SUVs coming in, medium to higher price-point cars are supplanting the usual inbound flow of lighter vehicles from Japan and Korea with bigger models that are being made in the States and in Mexico – a growth region on the manufacturing map. Both imports and exports are benefiting from this turn of events and PANYNJ is also pushing out cars towards the Middle East and Africa with some (despite the US West Coast’s pre-eminence in this market) even going on toward Europe.

However, PANYNJ’s advantage is its huge and very populated hinterland: “You are talking 25m-plus people within 50 miles, so automobiles have a natural movement through here; the trucks that come into the port link us directly with the autodealer network and so our supply chain can go right to Chicago and the upper Midwest.”

He admits having such a large throughput in such a dense city might seem counterintuitive but its effectiveness is proved by the direct leaseholders: Toyota and BMW plus FATS, an auto-processing company that deals with Ford, Nissan, General Motors, Mazerati along with others, are all sitting on port land. He explains: “Because we have such a large local consumption, the supply chain from discharge to dealer network is fast and we can flow more autos over a smaller footprint. Basically, you can do more with less here.”