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Break bulk markets squeezed by ports and alternative competitors

Break bulk is a shrinking market. Pure-play break bulk operators are being squeezed as governments and seaport operators around the world boost local infrastructure while ro-ro, box ship and dry bulk operators simultaneously try to grab market share.

At one end of the break bulk market are crane-equipped general cargo ships. They tend to run a liner-like service and seek “triangulation” — i.e. to carry cargo on each leg of a long sea-going voyage consisting of several trade lanes. The end goal is to return to the point of origin without ever having suffered an empty ship.

“The ability of MPPs [multipurpose ships] to carry a broad mix of different cargoes simultaneously means that they are normally employed on trades where the volume of bulk or containerised cargo is too low or geographically dispersed to support employment of larger bulk or container vessels. MPPs are normally equipped with cargo-handling gear, making them highly suitable to call at ports with less developed infrastructure,” says Niklas Carlen, research director at Maritime Strategies International.

Developing seaports
But that might be changing as nations and seaports develop their infrastructure.

“Port infrastructure is getting better even in places like West Africa,” Rob Aarvold, general manager of bulk shipping at Swire Bulk Shipping in Singapore, tells FreightWaves.

Port development can be a bit of a double-edged sword when infrastructure, particularly marine container terminals, are built, as the market for break bulk operators can be diminished.

“It [port development] will benefit the market in terms of cargo — with more break bulk and project cargo being needed to develop these countries. In the longer term it will mean fewer multipurpose vessels are needed if everything is going by container,” Susan Oatway, a break bulk analyst with shipping consultancy Drewry, tells FreightWaves.

Comoros Islands
An example of this happened in the Comoros Islands, which lie to the north of the Mozambique Channel between the island of Madagascar and the southeast African nation of Mozambique.

Prior to 2007, the islands did not have a lot in the way of marine terminal infrastructure and it could take weeks — literally weeks — to unload a general cargo ship. The Comoros Islands were well suited to self-working break bulk vessels. That changed in or about 2007, when port operator Gulftainer of the United Arab Emirates won a licence to operate. Gulftainer installed container-handling equipment. The landed cost of freight dropped as the time taken to offload ships fell from weeks to mere hours.

Still, there are plenty of places in the world, such as Samoa, Tonga, Nauru and Tuvalu, all island countries in the South Pacific, that don’t have populations with high disposable incomes to support a large merchandise trade. Nor do they have exciting resources projects that would justify sinking a lot of cold hard cash into major infrastructure works. It’s likely that such nations, for a long time at least, will rely on the liner type of break bulk shipping for the transport of general cargo.

Project cargo
Another type of break bulk is the “project cargo” market. Operators in this market handle large, oddly shaped and heavy unit-cargoes (i.e. not bulk and not containerised cargo), which require a lot of forethought, engineering skill and planning. That kind of project cargo shipping can be demanded in both developed and less developed nations.

In Australia, for instance, there were numerous oil and gas projects that were completed between about 2005 and 2015. One example, which has opened opportunities for the break bulk market, was the Dampier Marine Supply Base in or near the dry bulk port of Dampier in northwest Australia.

Built to support the local offshore oil and gas industry, particularly with the importation of large, bulky and out-of-gauge equipment, it was later bought for A$44 million by the logistics giant Toll. It offers a wide range of services, including cranes with a safe working load of up to 150 metric tonnes (a metric tonne is equivalent to 2,204.6 U.S. pounds) and a heavy load wharf capable of taking unitised cargo with a weight of up to 2,000 metric tonnes.

Aarvold says that previously remote areas, such as Papua New Guinea at the eastern end of the Indonesian archipelago, or New Caledonia, a remote Pacific territory of France, also have become “hotbeds of investment.” In the case of Papua, it is because of the liquefied natural gas exports. In the case of New Caledonia, it’s the nickel mines. In both cases it has led to intensive infrastructure investment.

New infrastructure technologies
Even though new projects can present opportunities for project cargo and break bulk shipping, new infrastructure technologies can also potentially reduce the size of the project cargo and break bulk markets too.

Aarvold notes that, today, instead of building new infrastructure or using break bulk ships, there is the option of using floating mobile infrastructure. These include such things as the floating crane.

“With big, heavy, out-of-gauge cargoes, we use floating cranes,” he tells FreightWaves.

There are now also whole floating harbors and transshipment systems for installation or hire. There’s one at the Dampier Marine Supply Base.

“The Floating Deck Transhipment System (FDTS) is a privately operated facility located adjacent to the Dampier Cargo Wharf. The floating deck enables optimum operability of the FDTS through the installation of a specialised ramp and ballast system capable of handling a range of cargo from small, unitised freight through to giant preassembled modules. The floating deck dock and barge ramp are rapidly interchangeable through the use of giant steel wedges to allow access for conventional landing craft and larger liner shipping,” says the Pilbara Ports Authority, which oversees the Port of Dampier.

Meanwhile, Sea Transport of Queensland, Australia, for instance, specialises in offering floating harbors and transshipment services to junior miners. It spares them the difficulties of finding hundreds of millions of dollars to build a dry bulk port. Floating harbors also enable project developers to access otherwise stranded resource assets that would be uneconomical to exploit.

Aarvold points to the West Africa bauxite trade. Bauxite, the ore from which aluminum is extracted, forms one of the minor dry bulk trades. “It’s only a few million dollars to set up floating vessel infrastructure. The cost of mobilising from Southeast Asia to West Africa is cheaper than ever before. I think, in the global project market, it is becoming a lot easier to progress a project using different solutions. And that’s got to be having a big impact on the MPP [multipurpose ship] bread and butter,” Aarvold tells FreightWaves.

Increased competition from roro and pure car carriers
The other main reason that the break bulk market is shrinking is competition for break bulk cargo from non-break bulk operators.

The most obvious example are the pure car and truck carrier (PCTC) ship operators, such as Wallenius Wilhelmsen, and the various types of roll-on, roll-off (ro-ro) operators. MSI’s Carlen notes that the PCTC and ro-ro operators tend to target the higher value cargoes. It is simplicity itself to get a heavy out-of-gauge cargo of some description, such as an electrical transformer, put it on a roll trailer, a multipurpose bogie or a jack-up trailer, and then drive it onto a giant vehicle carrier.

It is even easier if the machinery already has wheels on it. The big PCTC operators have been offering a liner-like break bulk service for decades. Apart from, obviously, helping to boost revenues, it can create a contribution to cost on the backhaul when the ship otherwise would be empty or would only be carrying a very small cargo.

There are several obvious advantages to shipping break bulk cargoes by ro-ro or PCTC. Ro-ro operators are already very experienced at cargo care — no-one wants the paint jobs on all those shiny new autos to be scuffed and chipped upon arrival at the port of discharge. And PCTCs have huge internal volumes and entryways, so there are few worries about whether the ship can handle a big or odd-shaped out-of-gauge cargo. Wallenius Wilhelmsen says it can handle unit cargoes up to 6.1 meters high and 12 meters wide and weighing up to 400 metric tonnes (20 feet high by 39 feet wide and weighing up to 881,849 U.S. pounds).

Some break bulk services potentially can expose cargo to the elements but this is not so with PCTCs — everything’s effectively indoors, reducing the potential for damage and the requirement for costly packing. The cargo just rolls on and off the vessel so there’s little in the need for warehousing or distribution costs. Although it’s not free, of course, as a driver will have to be paid to load and discharge it.

Then there’s the fact that PCTCs operate on a liner service with scheduled regular port calls on specified routes. Great if it matches the needs of the shipper, a pain if it does not.

“This will tend to be a limiting factor where shippers require direct port calls that fall outside the liner route,” Carlen says.

Box ships and dry bulkers muscle-in
Box ship operators and even dry bulk ship operators are muscling in on break bulk too.

Obviously container ship operators have been encouraging shippers to stuff as much cargo inside the container as possible. Shippers are now even containerising bulk liquid cargoes such as wine (inside specialised bladders inside the box), liquefied natural gas (inside tank containers) and dry bulks such as grain in food-grade containers.

“You can put pretty much any cargo in a container as long as it fits. There is probably a ceiling with respect to economic sense but it’s not possible to calculate. Shipping — and ships — always change and evolve,” says Drewry’s Oatway.

A spokesman for Swire Bulk added, “Containerisation of break bulk remains a constant challenge, low container freight levels combined with higher sailing frequencies and a lack of break bulk storage availability drives the market towards containerised freight. Only when cargo cannot fit into a container, or packing/unpacking is too costly or time consuming, [then] break bulk remains as the only viable method of carriage.”

Meanwhile, container ship operators are not necessarily trying to stuff heavy or awkwardly shaped cargo into the box. MSC, for instance, puts cargo on top of a “preprepared bed containing multiple flat racks,” or on a flat-rack or open-topped unit. Box ship operators may also place containers around the out-of-gauge cargo to protect it.

However, Swire Bulk’s Aarvold sounds a note of caution for box ship operators about putting break bulk in, or on, container ships.

“If you talk to the big main line operators, point-to-point is about lower unit shipping costs and the move to transshipment. Big lines will be looking long and hard at containerising cargoes owing to their lower unit costs. Some bulk grain and even iron ore can go in containers. Big ships are all about speed and turnaround — it’s all about unit cost — but if they start putting on flat racks and out-of-gauge, then they may [undo] what they’ve achieved.”

Meanwhile, even dry bulk operators are attracting some break bulk cargo, particularly the blades of energy-generating windmill turbines.

“Look at wind-power — windmills had always been more of an MPP [multipurpose] play. But the majority of blades are carried on dry bulk ships,” says Swire’s Aarvold.

He points out that windmill blades got more robust and dry bulk operators were seeking to boost their return on investment.

“People got better at cargo care,” says Aarvold.
Source: Freight Waves

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