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  April 6th, 2016 | Written by


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  • Project logistics industry entered 2015 with full order books
  • Project cargo on the rise
  • Driver shortage for growing project cargo needs

Assuming their overseas clients don’t recoil in horror over the exchange rate of the dollar, these are relatively good times for exporters of outsize equipment or goods needed for large projects outside the United States. The equipment needed to move this cargo is readily available at competitive rates, as logistics providers compete for business.

The U.S. project logistics industry entered 2015 with full order books, buoyed by booming oil business, with most other sectors going reasonably well. Twelve months later, the picture is starkly different. The precipitous drop in oil prices caused a sharp correction in drilling activity, and the slump in demand for commodities put the brakes on projects in other key sectors such as mining. Given the long lead times for projects, operators are still busy with contracts signed before the downturn, but they are bracing themselves for tougher times ahead.

“The mood in the industry is more subdued,” says Greg Tansey, president of heavy-haul specialist Omega Morgan.

Getting ahold of transportation equipment is not an issue these days. After sharp declines in oil and coal volumes, the railroads are more open to moving outsize shipments, which hamper their schedules in busier times. A year ago, special rail cars for such loads were heavily booked, prompting some forwarders to consider acquiring their own equipment. Now some units are still not readily available, but overall it is not hard to get rail cars, forwarders report.

The same applies to heavy-haul equipment for moves on the roads and to ocean vessel capacity. On the latter side, competition has intensified as some container lines have targeted project cargo to boost their loads.

“There is no problem booking your freight on the water,” reports Willy Hoffmann, senior vice president of BNSF Logistics, adding that the same applies to road and rail shipments.

Project shippers using the inland waterways system have benefited from the launch of a regular barge service last spring which runs all the way from the Gulf of Mexico to the Great Lakes. “We compare it to FedEx on the waterways, in that we can get it there when you need it to fit your schedule,” says John Mickler, national logistics development manager of heavy-lift specialist Barnhart Crane, which launched the operation using multiple ship operators.

The Port of Albany, a long-established marine gateway for project cargo, is looking to establish a weekly container barge service in partnership with the Port of New Jersey. While this is still in the air, the port has moved to develop a new wharf. Back in 2014, it acquired a second mobile harbor crane. Used in tandem with the first unit, this gives the port the capability to lift loads up to 200 tons.

A number of ports—from Albany to Vancouver, Seattle and Stockton; from Duluth and Wilmington to Corpus Christi—have invested in infrastructure to support project cargo, from terminals to cranes and rail spurs. However, with federal stimulus funding running out, it is getting tougher for port authorities to finance expansion projects.

 “These are difficult times to find funding for ports,” says John LaRue, executive director of the Port of Corpus Christi, adding that the biggest challenge has been to fund channel expansion.

Hoffmann does not see much hope for public money to fund infrastructure projects this year. “This is an election year. I don’t see anything that will happen,” he says.

 With less project work to go around, forwarders that specialize in this sector and haulage firms are scrutinizing their strategic options. Diversification is high on some operators’ radar. “We look to expand into other sectors,” says Ross McLaren, a founding partner at HLI Rail & Rigging, which specializes in the movement and lifting of over-dimensional loads.

 Omega Morgan expanded its reach last year through a partnership with Action Specialized Transportation & Rigging. Under the terms of the agreement, Omega Morgan took on the staff of the smaller operator and signed a rent-to-own agreement for its fleet of trailers, tractors and slide systems over a five-year term.

 “We see more creative scenarios of people seeking to rent equipment,” notes Tansey, adding that this opens doors to new forms of partnerships. He is in negotiations with two other firms to find ways of working together.

 “We don’t have any acquisition plans at this time. I believe you can expand through partnerships,” he says.

 Others go for outright growth through acquisitions. Barnhart Cranes took over two heavy-lift operators in New York and Washington states last year. Following a similar move in 2014, the company acquired three smaller players inside a year.

 Last summer, BNSF Logistics bought Transportation Technology Services, a specialist in rail solutions for over-dimensional cargo with particular expertise in the wind energy sector, one of the major areas of project work in the United States. This move came two years after BNSF Logistics established its presence in the project forwarding sector through the acquisition of specialist forwarder Albacor Shipping.

 The number of project forwarders is on the wane, as consolidation is widely expected to continue. For those who remain on the scene, a major headache is the shrinking pool of drivers to move cargo.

 “The main problem is the driver shortage,” according to Hoffmann, who notes this is projected to worsen in the years ahead. So far it has chiefly affected the general cargo sector, especially the truckload segment, but the outsize haulage is headed in the same direction, as more drivers near retirement, he adds. “Most drivers on the heavy rigs are older guys,” he says.

 New trucking regulations mandating electronic logging devices and speed limits have prompted clarion calls about a further squeeze on trucking capacity, but this is not a concern for the heavy-haul segment, according to Gerald Wheeler, president of heavy-haul specialist Contractors Cargo.

 “In most cases you are restricted to daylight hours. Some states don’t permit moves on weekends,” he says. “We usually run out of daylight hours before we run out of hours of service. And we usually don’t work on Sundays, which helps with the three-hour reset.”

A bigger concern is the lasting headache of obtaining permits for outsize loads moving on roads. In the absence of a federal authority, this presents a patchwork of regional regimes ranging from relatively easy to highly restrictive areas.

 According to one recent study, some local jurisdictions charge as much as $125 per mile, but this often pales compared to time and money spent on chasing permits and working out alternative routings, forwarders find.

 “The process of getting permits is so bureaucratic,” says a forwarder executive who asked not to be named. “It’s lengthy, and it is also expensive.” n