The Oversized Challenges Of Project Cargo Shipping
Break-bulk and project carriers find themselves in quite a squeeze these days. Global economic conditions have worked to their detriment and they face stiff competition not only among themselves, but also from bulk, RO/RO and container carriers. The upshot has been downward pressure on rates.
While the global economy has largely moved past the 2009 financial crisis, project carriers are still operating in the shadow of that meltdown. The drop in oil prices has worked against them and the stronger U.S. dollar is depressing exports.
“The global, financial crisis that started in 2009 affected the project market,” says Waldemar Poulsen, president and CEO of Rickmers-Linie (America), Inc., a break-bulk and project carrier based in Houston. “Lately the strengthening of the U.S. dollar has hit U.S. exports badly. This coincided with the sharp drop in the price of oil, which has forced oil companies to reduce production and investments. The overall market is weak, which is putting pressure on freight rates.”
Rickmers-Linie operates round-the-world services. “Within the various trade lanes we operate in, the market from Asia to the U.S. seems to be holding up fairly well,” says Poulsen. “But exports to Asia and Europe in particular have declined considerably. This makes it very difficult to run a profitable service.”
North of the border, Gerald Hess, president of BNSF Logistics Canada, Inc., has much the same perspective. “We haven’t seen much project cargo exports even with a low Canadian dollar,” he says. “But these things often take a while to mature.”
BNSF Logistics still handles project imports destined for oil sands projects in Alberta. “That equipment was ordered long ago,” says Hess, “and those projects aren’t getting cancelled. Those people are looking long term.”
For Rickmers, large liquified natural gas projects in the U.S. Gulf, particularly in Texas and Louisiana, are driving most of the project imports. Shipments of import commodities like iron and steel from countries like China and South Korea are also still fairly strong.
“Although,” Poulsen notes, “anti-dumping legislation currently being contemplated by the U.S. government could put a damper on these commodities.”
As far as exports, shipments of bulk minerals are down together with most other export commodities. “Most project and break-bulk carriers participate in these exports in competition with pure bulk carriers,” says Poulsen. “The project carriers are also up against strong competition from container and RO/RO carriers. These carriers are ordering more specialized equipment to expand within the segment of heavy-lift and oversized cargo. Combined with the fact that container carriers offer weekly service and often better transit times, this is making the competitive environment fierce for the project carriers.”
Rickmers is coping with the situation by implementing cost reductions. “Our organization has been right-sized,” says Poulsen.
“Expensive charter vessels have been redelivered to their owners. The service speed of our vessels was reduced to a more economical speed.”
Despite these measures, Poulsen adds, “it continues being a challenge to operate profitably.”
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OCEAN LOGISTICS: CARRIERS