By Michael A. Moore
The last 12 months have seen rough sailing for the global project cargo logistics and shipping industry. The dynamics behind the stormy project seas are complex, but the two engines driving the global mine-building and oil-drilling frenzy – oil and mineral prices – have stalled, causing numerous large projects to be placed on hold or cancelled.
Major projects from Canada’s Arctic North all the way to the southern latitudes of Peru and Chile have come to sudden dead halts. Canadian mining giants Barrick and Teck have cancelled green-lit billion-dollar projects as they struggle to deal with the plummet in gold, silver, and copper prices. Offshore oil exploration and development in Canada and worldwide is also in full-speed reverse.
The journey through the dark and stormy project seas promises to be a long one. Goldman Sachs forecasts that global copper supply will exceed demand until 2020 – more than four years away. “Copper has historically been a gauge of global expansion and a barometer for raw-material demand,” a Sept. 1 report by Bloomberg News noted. “The cool-down in China has pushed the Bloomberg Commodity Index to the lowest level since 1999. More than half the 22 components it tracks are stuck in bear markets, with crude oil in New York down 52 percent in the past year.” Two dozen mega-projects have been shelved or scrapped worldwide, the Bloomberg report stated. For oil, many projects are complex, deep-water fields in the Gulf of Mexico, the North Sea, West Africa and Southeast Asia.
“A total of U.S.$200 billion of oil and gas projects has been deferred or cancelled,” said Andy Brogan, global oil and gas transactions leader at Ernst and Young, during a July presentation to the World National Oil Companies Congress.
Canadian shippers and logistics providers have felt more than their share of pain from the nearly complete halt of large mining and petroleum development projects. “From the Montreal perspective, we call on the engineering companies and find out that in some of them, the logistics guy has been let go, that the project manager is also handling logistics,” said Guy Tombs, president of project forwarder Guy Tombs Ltd. in Montreal.
Mr. Tombs does see bright points of light in the project cargo dead of night. “There is still Canadian project cargo,” he said. “Project cargoes are still going to the Arctic, it’s inevitable, it won’t stop. The Canadian government and miners are still working up there. What we are witnessing is the rollercoaster part of this business – we ride a rollercoaster, we may be going down now, but it won’t be long before we will be climbing back up.”
“The difference between project cargo and general cargo is that project cargo is when you move a whole steel plant, while general cargo is anything at all that can be carried cubically ,” said Dennis Pfeffer, Liner Manager, Federal Atlantic Lakes Line (FALLine), a division of Fednav International Ltd. Mr. Pfeffer explains that general cargo includes project-bound machinery and equipment, from wind nacelles and turbines to transformers and grinders.
“We carry a mixed bag of general cargoes,” he said. “A good part of it is machinery in crates, plus there is a lot of agricultural rolling stock such as tractors and bulldozers coming into the North American heartland from Europe. Our numbers have been fairly consistent on the average over the last several years.”
The secret to Fednav’s consistency is the company’s commitment to general purpose bulk freighters with box holds, and its strategy of minimizing empty voyages, Mr. Pfeffer said. “Our FALLine vessels bring in general cargo such as steel and machinery from Europe to Great Lakes industrial ports, then load up in Thunder Bay with grain bound for the return voyages to Europe and Morocco,” he said. “Our non-FALLine Fednav vessels sail worldwide from Brazil up to the Gulf of Mexico, from the Lakes out to the Far East or the Med and Northern Europe.
“We carry project cargo on contracts, but we also participate in the global tramping market,” Mr. Pfeffer said. “If we carry a load of project cargo to Brazil, we will go into the market and bid on orders for whatever we’re allowed to lift. We will tramp the ship to whatever might be available. “We offer good service, competitive rates and we quote hundreds if not thousands of queries every month. A lot of those queries are for projects that won’t happen until 2016 or 2017,” he said. “We don’t know from one month to the next how much cargo we will have booked.” Mr. Pfeffer said Fednav’s consistent cargo numbers are bouyed by the vagaries of global economics – the strong U.S. dollar against the Euro spurs capital goods purchases by U.S. buyers that become inbound cargo, while the weak Canadian dollar spurs exports.
Project cargo skies are not so dark, nor the seas as stormy on Canada’s Eastern Seaboard – where ports such as Halifax are busy with general breakbulk and project cargo bound for major infrastructure, shipbuilding, energy, mining and oil exploration projects in the Maritime Provinces. “We have not seen any slowdown at our docks, this has been a good year on the breakbulk and project cargo front,” said Patrick Bohan, Director of Supply Chain Solutions at Halifax Port Authority. “Shell has a committed billion-dollar offshore drilling program 200 miles from Nova Scotia, BP also has exploration leases and plans, Nalcor is moving forward with its 824-megawatt hydroelectric facility at Muskrat Falls as well as the 480-kilometre High Voltage direct current (HVdc) transmission link between the islands of Newfoundland and Nova Scotia.”
“We made the decision to go forward with our infrastructure improvements at the worst part of the recession,” said Mr. Bohan. “Over the last five years, Halifax Port Authority has invested over $100 million and the private sector has invested over $250 million in port-related infrastructure. The port has two major gateway infrastructure projects under way to enhance breakbulk and containerized cargo terminals.
“The $73 million first phase of the Richmond Terminals Project is complete,” he said. “This phase included the reinforcement of Piers 9 and 9B as the piers date back 100 years and the addition of 1,500 feet of berthing with a five-acre, lay-down area.”
The port of Sheet Harbor is another HPA port dedicated to breakbulk and project cargo. Sheet Harbor is ice free and located 80 kilometers from the great circle route between Europe and North America with direct access to the Trans-Canada Highway. The port’s 152-metre wharf, with a minimum draft of 10 metres, allows it to handle vessels up to 214 metres long (draft permitting). The terminal includes a MARSEC secured, 12-acre common user laydown area adjacent to the wharf.
“Project and general breakbulk cargo from all over the world is arriving at our ports,” said Mr. Bohan. “We are the only port in Canada with liner service through both the Suez and Panama Canals – we actually have two Suez services. Ro-ro carriers such as Wallenius Wilhelmsen, ACL, Bahri and Oceanex call at our terminals. NIRINT offers regular service to Cuba and the Caribbean, and BBC, Spliethoff and other major breakbulk shipping companies make regular calls to our ports.
HPA’s decision to move forward with major infrastructure investments in the darkest days of the recession is starting to pay off, Mr. Bohan said. “We handled a combined 94 vessels at our four terminals in Halifax this past August, versus 82 in August 2014,” he said. “We attribute that ability to easily handle the extra ships to the improvements we made to Pier 9. Our total vessel count for 2014 was 1107 ships; we are looking forward to beating that this year.