Breakbulk Magazine Issue 6 / 2018

The Publication for the Industrial Project Supply Chain Industry

Issue 6 / 2018

+9.1%

US$2.94 TRILLION

POP: 7.6 BILLION

US$14 TRILLION

GTB SCORE: 58 2.1 MILLION BPD

1.2% GDP GROWTH

Getting to the Heart of Global Trends

BY THE NUMBERS tk

TK

DELVING INTO THE DARK ART OF CONTRACTING

CORPORATE GOVERNANCE IN THE AGE OF ‘FAKE NEWS’

LOOKING BEYOND OIL: DIVERSIFICATION IN THE MIDDLE EAST

IN THIS ISSUE Cover Story

28

12

46

12 BY THE NUMBERS Getting to the Heart of Global Trends

24 TRADE NOTES

FOSTERING GOOD GOVERNANCE Culture of Compliance Needs to be Nurtured

18 TRADE NOTES

28 TRADE NOTES

Complicated Logistics Contracts Pose Challenge for Forwarders

Sharp Edge of Tariffs Cuts Deep

CONTRACTING COMPLEXITY

TRADING DANGEROUSLY

36 LOGISTICS PERSPECTIVE

INSPIRED TO INNOVATE Emerging Digital Solutions for Project Supply Chain Progress

50

06 EDITORIAL

08 CONVERSATIONS

40 EMERGING MARKETS

OUTDATED ADDICTION Weaning the Middle East Off Oil Dependancy

44 EXECUTIVE SUMMARY

MARRIAGE MISCONCEPTIONS

Consolidation Alone Cannot Correct Overtonnage

46 MARKET SPOTLIGHT

DRIVING MEDITERRANEAN PROGRESS Recovering Sales Bode Well for Car Carriers

56

50 REGIONAL REVIEW:

INDIAN OPPORTUNITIES

54 ENERGY UPDATE: WEST AFRICA’S NUCLEAR REALITIES

56 BREAKBULK AMERICAS RECAP 62 ADVERTORIAL SECTION 65 BACK PAGE ON THE COVER: IMAGE VIA SHUTTERSTOCK / ILLUSTRATION BY CATHERINE DORROUGH

4 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2018

EDITORIAL

SILENT SCREAMS Halloween was still four weeks out when Capt. Bill Schubert came to Breakbulk Americas to tell his ghost story.

It’s a tale Schubert, a former Maritime Administrator, has woven many times before over the past few years. Some of the details get updated, but the scare leaves most of those familiar with the story as aghast as first-time listeners.

No, it’s not Michael Myers haunting Laurie Strode on another Halloween night.

It’s about a Pennsylvania senator holding the Export-Import Bank of the United States captive.

Schubert, president of Gary Burrows International Trade and Transportation Inc., joined a panel to speak about the changing trade landscape, but Ex-Im Bank’s plight is unchanged, caught in an ineffective limbo. His message has been delivered at Breakbulk and other leading industry events, as well as at organizations and within the pages of this magazine. It lands the appropriate outcry but any action eludes it.

Whether you’ve heard it or not, here it is in the nutshell: Ex-Im Bank is the U.S. export credit agency, or ECA. Roughly 50 percent to 60 percent of mega-projects require some form of export credit agency financing. There are dozens of ECAs throughout the world, which guarantee loans in exchange for buying goods and services from the ECA’s country. Ex-Im Bank authorized billions of dollars of projects in 1997-2015 – more than US$35 billion in 2012-13 alone.

But the bank was shelved in 2015 when it wasn’t reauthorized, and once it was finally reopened, it didn’t have enough board members appointed to form a quorum. That means that no transaction can be approved above US$10 million.

“There are US$745 billion of capital projects currently at various stages of 6 BREAKBULK MAGAZINE www.breakbulk.com

development requiring ECA support,” Schubert said at Breakbulk Americas.

Ex-Im is not popular with some conservative legislators, who feel loaning billions to large energy, oil and gas, petrochemical, mining and other businesses amounts to corporate welfare, even if it moves U.S.-made goods and creates U.S. jobs.

President Trump did his part and not only nominated four board members, he did it bilateral fashion with two Democrats and two Republicans appointees, which were voted out of committee last December.

However, Sen. Pat Toomey, R-Pa., objected to the nominees – along with some 300 other ones – over his objections to the Ex-Im Bank. The nominees require cloture, which at 300-plus nominees is procedural paralysis.

Schubert said there are about US$25 billion in major projects that are awaiting Ex-Im Bank approval. If the bank is unable to act, those projects will go to China, U.K., France or some other country whose ECA will benefit its own industries.

In a brief survey, Schubert queried five U.S.-based engineering, procurement and construction contractors and asked for a snapshot of projects bid on in the last 12 months. The bids, which all required ECA financing, totaled US$68 billion.

“If we don’t have an export credit agency, we’re not going to participate in East Africa and other places around the world. The U.S. is losing influence. China is there building through the Belt and Road Initiative and sucking up all of these projects. We don’t have a chance,” Schubert said.

Ex-Im also has a potential role to play with strategic national interests, he added. This includes 16 nuclear projects in Saudi Arabia, with total value of about US$80 billion, as well as satellite projects worldwide. (He further notes Ex-Im’s national security role on page 8.)

The Breakbulk Americas session tried to make sense of the uncertainties of trade and tariffs and with so many nightmares around, Ex-Im could be the industry’s surest bet. If you agree, let someone know about it: U.S. Sen. Pat Toomey, R-Pa., phone +1 610 434 1444, +1 202 224 4254; email www.toomey.senate.gov/?p=contact.

EDITORIAL DIRECTOR Gary G. Burrows / +1 904 535 5460 gary.burrows@breakbulk.com NEWS EDITOR Carly Fields carly.fields@breakbulk.com HEAD DESIGNER Catherine Dorrough DESIGNER Mark Clubb REPORTERS Paul Scott Abbott Amy McLellan Helen Campbell Lori Musser Kerry Dimmer Thomas Timlen Michael King

BREAKBULK EDITORIAL BOARD John Amos Amos Logistics

Ed Bastian

BBC Chartering

Murray Cooper

LV Shipping & Transport

Dennis Devlin Geodis

John Hark

Bertling Project Logistics

Dennis Mottola Bechtel Corp.

William Moyersoen

ArcelorMittal Antwerp Logistics

Albert Pegg

Atlas Breakbulk Alliance

Dirk Visser

Dynamar D.V.

Grant Wattman

Agility Project Logistics

PORTFOLIO DIRECTOR Nick Davison Nick.Davison@ite-exhibitions.com ACCOUNT MANAGER Robert Janusauskas / +353 87 414 3737 robert.janusauskas@breakbulk.com SUBSCRIPTIONS To subscribe, email gary.burrows@breakbulk.com, or call from inside the U.S. +1 904 535 5460 between 8:00 am and 5:00 pm EST. You can also subscribe at www.breakbulk.com/subscribe.

A publication of ITE Group plc Transport & Logistics business 105 Salisbury Road London NW6 6RG, UK.

ISSUE 6 / 2018

A VAN BEEST BRAND

hain of evolution

CONVERSATION

Conversation is a forum of thought leaders, commentaries, letters, editors’ notes and note-worthy social media from Breakbulk’s audience and staff. Join in the conversation – submit your views to gary.burrows@breakbulk.com, or through Breakbulk’s social media channels on LinkedIn, Facebook or Twitter.

AIIS CHALLENGES SECTION 232

‘ECONOMIC SECURITY IS NATIONAL SECURITY’ CREDIT: SHUTTERSTOCK

Capt. Bill Schubert, president, International Trade and Transportation Inc. Schubert, a strong proponent of the Export-Import Bank of the U.S., served on a Breakbulk Americas panel which discussed the bank’s inability to act due to the Senate’s failure to approve President Trump nominees to serve on the board.

Schubert speaks specifically to a recent opinion piece in the New York Times by Peter Navarro, assistant to the president for trade and manufacturing policy. In his piece, Navarro says “President Trump’s maxim that ‘economic security is national security’ comes with an important corollary: A strong manufacturing base is critical to both economic prosperity and national defense.*” “In my opinion, this should be the No. 1 basis to open the Ex-Im Bank, which also supports our strategic industrial base and U.S. supply chain.

If we fail to do this we will be virtually 8 BREAKBULK MAGAZINE www.breakbulk.com

handing over our satellite and nuclear industrial base to China and Russia.

Also, if we can build mining trucks in the U.S., those are the same industrial skills that can build tanks and other such military useful items. Virtually all major capital projects support a U.S. supply chain that supports our strategic industrial manufacturing base and a supply chain that includes large and small companies. All this with a program that has not cost the U.S. taxpayers a dime until one misguided U.S. senator single-handedly shut the program down.

Navarro is right with his thoughts, but note the authorities under the Defense Production Act actually cost the U.S. taxpayers $1 for $1 cash compared to Ex-Im, which in normal times generates a profit to the taxpayer.” *“America’s Military and Industrial Base is at Risk,” Peter Navarro, assistant to the president for trade and manufacturing policy (www.nytimes.com/2018/10/04/opinion/ america-military-industrial-base.html).

For related coverage see “Trading Dangerously,” page 28; “U.S. Trade Actions: ‘Policy, Not Politics,’ ” page 58; “U.S. Tariffs, Sanctions Impede Project Trade,” page 59.

John Foster, chairman, president, Kurt Orban Partners; chairman, American Institute for International Steel “Earlier this year we filed a complaint with U.S. Court of International Trade … asking for an injunction as for the use of the Section 232 statute.

(Section 232 of the Trade Expansion Act of 1962 authorizes the president of the U.S., through tariffs or other means, to adjust the import of goods or materials from other countries if it deems the quantity or circumstances surrounding those imports threaten national security.

President Trump initiated Section 232 investigations which led to the 25 percent tariffs on steel and 10 percent tariffs on aluminum.)

Our legal claim is that it’s unconstitutional for Congress to give such broad authority to the president on such critical trade matters without clear, valid principles, without the opportunity for judicial review; both of which are required by the constitution for such matters. Our suit was filed on June 27. And if we fail there, we designed our case to take it directly to the Supreme Court. … We also filed a motion to have a three-judge panel – a very rare request in the Court of International Trade. It’s even more rare to have that panel approved. Two weeks ago they did have the motion granted.”

For related coverage see “Trading Dangerously,” page 28; “U.S. Tariffs, Sanctions Impede Project Trade,” page 59.

ISSUE 6 / 2018

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CONVERSATION

A Vision With Drive

Saudi Arabia is United in its Growth Plan

I

BY JASON TRENCHFIELD AECOM

’ve been asked many times: is the Saudi Vision 2030 ambitious? My answer is always: “Yes, but it’s something that the country is ready for, in many different ways.”

I’ve spent most of 2018 working in the Saudi city of Jeddah with AECOM on a strategic project for the country’s Transport Ministry. Throughout this time, I’ve experienced firsthand the vigorous enthusiasm Saudis have towards their country’s growth plans. The younger generation, which makes up most of the population, is very much in tune with advancements in technology and innovation, while the older generation is providing expertise to steer the change in the right direction.

One of the many important strategic areas for growth is transportation. This ranges from the movement of freight to innovative public transport. There is a huge drive to enhance the country’s aviation industry, which includes development in Jeddah and the Saudi cities of Arar and Abha, as well as development of major infrastructure for high-speed rail – such as the Haramain high-speed rail project (a 453-kilometer-long, high-speed, inter-city rail network) – and its seaports – such as Duba Port on the Red Sea coast.

Many people have said that these are exciting times for the largest country in the Gulf Cooperation Council, but the cost of change doesn’t come cheap. Plus, the scale of developments, including associated transport infrastructure that has never been seen before in the Middle East, also comes at a price.

There have been many changes in Saudi Arabia in recent months, not only culturally, but also economically. The steady increase in the oil price has given the sovereign nation a boost, but it still maintains a goal to remove its dependency on oil. This includes the initial public offering of its own national commodity Saudi Aramco, which is being reviewed for the next few years to increase its capital ventures.

Such is the passion of achieving its goals that all options will not be overlooked.

10 BREAKBULK MAGAZINE www.breakbulk.com

CREDIT: STEPHEN KALIN/REUTERS/NEWSCOM

The country’s goal of adopting the latest technologies and its drive to improve its infrastructure network via every mode possible demands a workforce that is unparalleled. No mean feat for a country that is well known for importing various skills and knowledge. However, what has surprised me the most are the attitudes among Saudis — they are eager to play their part in the country’s transformation and are preparing themselves accordingly. This includes undertaking training in specialist areas to ensure men and women alike can contribute to the change.

This is a positive challenge for those in the transportation industry, and the Saudis are welcoming all nationalities to help them achieve this. BB Jason Trenchfield is AECOM’s freight and logistics leader within the UAE Transport Group.

Responsible for project management, he has more than 20 years’ experience in formulating operation and supply chain strategies for commercial designs, construction and material logistics strategies, and design and commissioning for specialist buildings such as airports, rail buildings and ports.

ISSUE 6 / 2018

A Motto For Breakbulk

Three Tenets of Belief, Clarity and Confusion

I

’ve been solicited by the Breakbulk editorial staff to contribute my thoughts on subjects relating to supply chain management and/ or that part of it which concerns most of us: transportation and logistics, or T&L. This is an honor and a privilege for me … and a bit of a risk for Breakbulk , as I am well known to say what I think! I hope you’ll indulge me if I write these essays as a series of letters. It makes it kind of folksy, but not, I hope, like one of those Christmas letters we all hate to receive (not my Christmas letters, of course… mine are fun!).

I must admit that I struggled for some time deciding what was to be my inaugural essay. Innovation and new technologies (such as 5G technology, virtual reality, bitcoin, blockchain and drone delivery)? Developing talent? Education or training? The future of the T&L industry? It was hard to decide.

Oddly enough, the answer was in a motto on my refrigerator — and one I hope which is still held dear by my most-esteemed associates Michael Schexnayder and Samuel Holmes.

It was the mantra around which we formed the Mustang Engineering T&L department. I wish I could take credit for it, but it was gifted to me and I freely shared it. It says: “Believe in your decisions. Be abundantly clear in your instructions. And be prepared for daily confusion.”

Believe in your decisions. How often are we challenged about the decisions we make?

Not just in business, but in life too. We’re challenged daily to make decisions based on what we know, what we’ve investigated, who/ what we’ve vetted and, most importantly, our experience. And we’re very often called upon to defend those decisions. If you’ve done your job right, then those decisions are correct. If those decisions are challenged, your judgement, knowledge and experience is challenged. Believe in the decisions you make.

Hopefully you know what you’re doing. If you do, you’re doing the right thing. If not, well …

God luv ya.

Be abundantly clear in your instructions.

Never, never give verbal instructions that are not followed up with written verification. Be

very clear in what you expect your contractors to do. They are not mind readers. You need to tell them your expectations and requirements.

But your instructions must be clear. It’s a partnership: if the mission succeeds, you all succeed, but nobody succeeds if they don’t know what is expected of them. There’s an old adage: “Begin as you mean to go on.” You must lead and you must maintain that lead. It’s on you — that’s your job.

Be prepared for daily confusion. You are the leader of your pack. You must stand above the confusion, organize the chaos and make the decisions that will right the ship. No matter how well you plan, something is going to go wrong. It’s inevitable and usually outside of your control. Plan for what you know could happen so that you can deal with the weirdness you don’t.

Thanks for reading. See you next issue…

All the best. BB

BY MARGARET J. VAUGHAN

Margaret Vaughan has more than 30 years’ experience in all facets of supply chain management; serving most recently as logistics manager for Wood PLC where she worked for 12 years.

ions Believe in your decis r in Be abundantly clea ns your instructio daily And be prepared for confusion.

CREDIT: SHUTTERSTOCK

www.breakbulk.com BREAKBULK MAGAZINE 11

COVER STORY

Getting to the Heart of Global Trends

BY CARLY FIELDS

BY THE NUMBE

S

tatistically speaking, only 6 percent of the people reading this magazine will have their dream job, against 18 percent who believe they’ve seen a ghost. There’s a one-ina-hundred chance that a reader has red hair, but a one-in-four chance that they do not get a hangover if they drink.

Only 6 percent of readers will suffer from an Internet addiction; they may also make up the 15 percent that are certain that the world will end in their lifetime.

While relating to one or more of these statistics is entirely possible, they likely have little foundation in fact. They do, however, do a good job of demonstrating the intriguing nature 12 BREAKBULK MAGAZINE www.breakbulk.com

of statistics and why as an industry we salivate at the opportunity to map statistics to the breakbulk and project cargo sector.

It is easy to get bogged down in the minutiae, but taking a macro view of the global outlook via statistics can be a worthwhile exercise.

At the top of the tree is economic growth. Who’s developing at a pace and will therefore soon come calling on the services of the project cargo industry for energy and infrastructure support, and whose development is on the wane, necessitating a measured retreat? The International Monetary Fund, or IMF, is a big hitter on this statistical front.

Its World Economic Outlook from October 2018 expected growth in

emerging market and developing economies to remain steady at 4.7 percent in 2018-19, and to rise modestly over the medium term. However, the forecast picture is less balanced than in previous outlooks. For example, in China, growth is projected to moderate from 6.9 percent in 2017 to 6.6 percent in 2018 and 6.2 percent in 2019, “reflecting slowing external demand growth and necessary financial regulatory tightening,” in conjunction with the “negative effect of recent tariff actions.” Medium term growth is expected to gradually slow to 5.6 percent as the economy continues to make the transition to a more sustainable growth path with continued financial de-risking and environmental controls.

ISSUE 6 / 2018

WORLD TRADE INDICATOR Trade growth has flattened off.

4% 3% 2% 1% 0% -1% -2%

Sep 2017

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

2018

Source: LogIndex, World Trade Indicator

ERS

Yet, elsewhere in Asia, growth is projected to remain strong: India’s growth is expected to increase to 7.3 percent in 2018 and 7.4 percent in 2019, up from 6.7 percent in 2017.

In the Americas, Mexico’s growth is projected to increase from 2.0 percent in 2017 to 2.2 percent in 2018 and 2.5 percent in 2019, supported by higher U.S. growth, while Brazil’s economy is expected to grow at 1.4 percent and 2.4 percent in 2018 and 2019, respectively, up from 1 percent growth in 2017, driven by a recovery of private demand as the output gap gradually closes.

TEMPERING OPTIMISM

Trade tensions are starting to bite and are already having adverse effects on confidence and investment plans.”

–L aurence Boone, OECD Chief Economist

But the Organisation for Economic Co-operation and Development, another redoubtable statistical source, is a little more downbeat. Its latest economic update, OECD Interim Economic Outlook from September 2018, spoke of “high uncertainty weighing on global growth,” and of expansion that may have peaked. Global GDP growth is projected to settle at 3.7 percent in 2018 and 2019, marginally below pre-crisis norms, with downside risks intensifying. Growth, it stated, has become less broad-based, with prospects diverging across the major economies, especially among the emerging market economies.

“Trade tensions are starting to bite and are already having adverse effects on confidence and investment plans,”

OECD Chief Economist Laurence Boone said. “Trade growth has stalled, restrictions are having marked sectoral effects and the level of uncertainty on trade stances remains high. It is urgent for countries to end the slide towards further protectionism, reinforce the global rules‑based international trade system and boost international dialogue, which will provide business with the confidence to invest. With tighter financial conditions creating stress on a number of emerging economies, especially Turkey and Argentina, a strong and stable policy framework will be key to avoid further turbulence.”

Boone added: “Growth had trended downward for decades, well before the financial crisis, partly due to demographics and the benefits of growth were not equally felt by everybody. We have not recovered the lost prosperity from the financial crisis. So, if we had an issue with the strength of prosperity before, it is an even bigger issue today.”

BIGGEST ECONOMIES

Having digested those figures, project cargo operators wondering where to focus marketing efforts might gain further insight from the IMF’s data on the world’s biggest economies.

The headline is that the U.S. economy increased from about US$19.4 trillion in 2017 to US$20.4 trillion this year, www.breakbulk.com BREAKBULK MAGAZINE 13

Canada

UK 2.94

1.8

France 2.93

U.S. 20.4

Italy

4.2

Germany

2.18 India

Japan 5.1

2.85

WORLD’S BIGGEST ECONOMIES U.S. trumps all... for now.

China 14.0

2.14

Brazil

Value in US$ trillions.

Source: International Monetary Fund

With a global economy worth an estimated US$79.98 trillion, the U.S. accounts for more than one-quarter of the world total.” followed by China at US$14 trillion, an increase of more than US$2 trillion in comparison to 2017. Japan was in third place with an economy of US$5.1 trillion, up from US$4.87 trillion a year previously. With a global economy worth an estimated US$79.98 trillion, the U.S. accounts for more than onequarter of the world total.

But behind the headline figures, U.S. dominance appears to be sliding.

According to data from the World Bank, the global economy will expand

by US$6.5 trillion between 2017 and 2019 with U.S. GDP expected to account for 17.9 percent of this growth.

China, however, is predicted to account for almost double this, at 35.2 percent.

Narrowing the scope a little further, there could be reason to smile on the trade front. Kuehne + Nagel subsidiary LogIndex AG uses big data and predictive analytics based on more than 25,000 time series to provide nowcasting estimates for economic indicators of the largest economies. Its gKNi World Trade Indicator revealed an upward track for much of 2018 to end-September, with pockets of continued optimism. The World Trade Indicator – a US$ value indicator 14 BREAKBULK MAGAZINE www.breakbulk.com

ECONOMIC OUTLOOK

Real GDP growth, percentage year-on-year.

Asia offers the most promise.

World G20 India China Indonesia Turkey Australia U.S. Korea Mexico Canada Euro area Germany Russia Saudi Arabia France UK Japan Italy Brazil South Africa Argentina

2017 2018 2019 3.6 3.7 3.7 3.8 3.9 3.8 6.7 7.6 7.4 6.9 6.7 6.4 5.1 5.2 5.3 7.4 3.2 0.5 2.2 2.9 3.0 2.2 2.9 2.7 3.1 2.7 2.8 2.3 2.2 2.5 3.0 2.1 2.0 2.5 2.0 1.9 2.5 1.9 1.8 1.5 1.8 1.5 -0.7 1.7 2.6 2.3 1.6 1.8 1.7 1.3 1.2 1.7 1.2 1.2 1.6 1.2 1.1 1.0 1.2 2.5 1.2 0.9 1.8 2.9 -1.9 0.1

Source: OECD, Interim Economic Outlook, September 2018

influenced by inflationary pressures, in particular higher energy prices – stood at 141.0 at the end of September, up 5.8 percent year-on-year. However, growth has flattened off.

World trade proved to be strong in North America (+9.1 percent), as well as in Central and South America (+9.4 percent). Asia, which had a strong start to the year, had proved to be “less dynamic” by the September analysis, while Europe was “the least dynamic.”

Compounding this, industrial production – measured by the gKNi World Industrial Production, a realtime assessment of the activity in the manufacturing and mining sector around the globe – reached a 38-month low in September.

TRADE STILL UPBEAT

Another trade focused index, DHL’s Global Trade Barometer, or GTB, forecasts trade growth through to the end of the year, but at a slower pace. As of September – the most recent quarterly calculation – the index stood at 63 points.

In the GTB methodology, an index value above 50 indicates positive growth, while values below 50 indicate contraction.

Launched in January 2018, the ISSUE 6 / 2018

INDIA’S PRIME POTENTIAL

GTB is an indicator based on trade of intermediates and early-cycle goods, drawing on import and export data from seven countries representing 75 percent of global trade to create a three-month outlook for global trade.

In a ranking, India topped the chart with an index of 83, indicating strong expansion, followed by South Korea at 69, Japan at 64 and China at 63. India’s development is fueled by growth for air (72 points) and ocean trade (89 points).

Tim Scharwath, CEO DHL Global Forwarding, Freight, said: “For the last quarters, India has performed very strongly in our DHL GTB. In September the country showed the highest growth prospects of all seven countries covered in the DHL GTB. We see the reason for India’s positive outlook in their strengths in key industries. Some Indian private companies are – in a global comparison – among the leaders in their sectors, for example, Tata or Infosys. The GTB predicts particular strong growth for the sectors: high technology, machinery parts and basic raw materials.”

While DHL points up India as a focal point for breakbulk and project cargo operators, there are reasons to be cautious on the statistics for Mexico.

oil is a crucial component of Mexico’s economy and earnings from the oil industry accounted for about 32 percent of government revenue in 2017.

Further, significant oil reserves have been documented in Mexico, which would under normal conditions drive investments from the private sector and offer global project cargo companies opportunities, either as project developers, operators, contractors, sub-contractors, or suppliers of equipment and/or technology.

However, not all in the Mexican garden is rosy. For Reggie Thompson, Latin America analyst at intelligence platform Stratfor, Mexico is becoming a cause for concern when it comes to providing future oil and gas-related project cargo work.

He explained that Mexico’s President-elect Andres Manuel Lopez Obrador’s and his administration are laying the groundwork to help their National Regeneration Movement remain Mexico’s strongest political party. To that end, they plan to increase social spending and also expand ties to the national teachers’ unions and federal oil and gas unions to garner votes. But they are also considering using their control of Congress to tighten authority over the exploration for and production of oil and natural gas, and in doing so, slow foreign investment in the sector.

“In broad terms, Mexican President-elect Andres Manuel Lopez Obrador intends to continue the Mexican energy sector’s opening to private capital but on terms that are more favorable to the Mexican government,” Thompson said. “He intends to do this mainly by granting Pemex a more central role in managing upstream oil and gas resources.”

This will give Pemex the ability to directly partner with private companies, rather than receiving approval from the National Hydrocarbons Commission.

WAVE GOODBYE TO MEXICO

COMPLETE CONTRACT REVIEW

DHL’s Global Trade Barometer, which shows expected trade development within the next three months, predicts Asian trade expansion. 50 = stable; >50 = expansion; <50 = contraction.

Global 63 India 83 South Korea 69 Japan 64 U.S. 63 China 59 Germany 58 UK 57 Source: DHL, Global Trade Barometer September 2018, www.logistics.dhl/gtb

Producing 2.1 million barrels per day in 2017, Mexico is one of the largest oil producers in the world and the third-largest in the Americas after the U.S. and Canada. According to the U.S. Department of Commerce’s International Trade Administration,

The Obrador administration also plans to review oil and gas contracts for areas auctioned between 2015 and 2018, apparently “to learn more about how the auctions were conducted so that fiscal loopholes can be closed,” Thompson said.

The new government will also try to find additional funding for Pemex activities, such as heavier exploration and production, possibly through an initial public offering, and it may slow or completely halt auctions through the National Hydrocarbons Commission, or CNH, for years. To do this, it would most likely slow or halt cabinet ministries’ cooperation with the CNH on competitive bidding rounds with the intent of slowing the entry of private capital through auctions that do not directly involve Pemex.

“It’s not clear whether Andres Manuel Lopez Obrador’s government is going to try to change the Constitution to sideline the CNH from any direct role in auctioning oil and gas blocks,” Thompson said.

The government is also attempting to get funding for a new refinery in Dos Bocas, Tabasco state, so that Mexico can eventually reduce its rising imports of U.S. gasoline.

The effects of these plans could be far-reaching, although they largely depend on what combination of reforms the president-elect is able to get through Congress. “If he successfully manages to sideline the CNH into a secondary role and makes Pemex the go-to institution for companies investing in oil and gas in Mexico, then Mexico’s attractiveness to foreign investors could decline if there are concerns over whether Pemex is being fully transparent and fair,” Thompson said.

“On the other hand, raising national content but leaving the roles of Mexico’s energy regulators broadly unchanged would have a lesser effect.” Downstream activity is far less likely to be affected by Obrador’s reform drive, as it mostly focuses on administration of upstream resources.

Certainly, the political moves in Mexico warn of changes to its future statistics on oil exploration and production. Weigh that against the India upgrades and the positive numbers on trade indices and the statistical scales may only just tip in the favor of breakbulk and project cargo business.

Carly Fields has reported on the shipping industry for 18 years, covering bunkers and broking and much in between.

www.breakbulk.com BREAKBULK MAGAZINE 15

POWER TO THE PEOPLE Population growth is a neat indicator of where project cargo-supported infrastructure will be needed most in the medium to long term. The United Nations updates its population projections every two years with the latest revision in July 2017. In this update it calculated that the current world population of 7.6 billion was expected to reach 8.6 billion in 2030, 9.8 billion in 2050 and 11.2 billion in 2100.

In its findings, it revealed that by about 2024, India’s population is expected to surpass China’s, and that among the 10 largest countries worldwide, Nigeria is growing the most rapidly. Indeed, the population of Nigeria, currently the world’s seventhlargest, is projected to surpass the U.S. and become the world’s third-largest country shortly before 2050. Other areas to watch for population growth, and therefore increased infrastructure demand, are the Democratic Republic of the Congo, Pakistan, Ethiopia, the United Republic of Tanzania, Uganda and Indonesia.

However, there is a fly in the ointment. There are concerns that

recent investment in infrastructure has not entirely achieved the desired effect, which may curtail further infrastructure spend in developing countries. The United Nations Conference on Trade and Development, or UNCTAD, in its Trade and Development Report: Power, Platforms and the Free Trade Delusion, found that infrastructure investment is not necessarily helping developing countries transform their economies and achieve sustainable prosperity.

It acknowledges that while infrastructure projects are “back on the agenda,” in part supported by scaling up of investment from multilateral financial institutions, these are not kickstarting necessary industrialization or structural transformation. There is, it states, “too much emphasis on infrastructure as a business opportunity and too little emphasis on its links to structural transformation.”

UNCTAD analyzed 40 national development plans from developing countries and least-developed countries to conclude that a “bankability” approach to infrastructure avoids the key question of “how infrastructure

can become a force of productivityenhancing structural transformation and deliver much needed economic and social change in most of the developing world.”

“Infrastructure is not just bricks and mortar, but a bridge to the future,” noted Mukhisa Kituyi, secretary-general of UNCTAD. One positive to be taken from the report is that UNCTAD advises that most developing countries must double current investment levels in infrastructure projects of less than 3 percent of gross domestic product to about 6 percent, if there is to be any transformational impact.

In a breakdown, in Latin America and the Caribbean, infrastructure investment needs are estimated at 6.2 percent against actual spending of 3.2 percent of the region’s GDP in 2015. In Africa, projected needs are estimated to be about 5.9 percent of the region’s GDP in 2016-2040, as against the current figure of 4.3 percent. In Asia, both current and projected investment needs in 2016-2030 are estimated at about 5 percent of GDP. BB

BELOW: A crowded street in Delhi, India. The United Nations predicts that India’s population

will surpass China’s by 2024. /

CREDIT: SHANTI HESSE / SHUTTERSTOCK.COM

16 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2018

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TRADE NOTES

BY PAUL SCOTT ABBOTT

CONTRACTING COMPLEXITY

Complicated Logistics Contracts Pose Challenges For Forwarders

I

n a business full of the unexpected, contracts that tend to be both rigid and complex are challenging project cargo forwarders in their efforts to serve engineering, procurement and construction firms, or EPCs. Project freight forwarding experts from UTC Overseas’ Mirko Knezevic to BATI Group’s Kaan Aydin concur with international shipping attorney Michael Wray in telling Breakbulk that flexibility and coordination may be keys to effectively putting together what Wray sees as a jigsaw-like puzzle.

“This is really, really tough,” said Knezevic, chief operating officer for global projects at Houstonheadquartered UTC Overseas, for which he has worked for nearly 20 years. “It’s totally getting out of hand.”

Knezevic, who has more than 35 years of project forwarding experience, 18 BREAKBULK MAGAZINE www.breakbulk.com

said today’s contracts may well be hundreds of pages in length, including extensive legal verbiage.

“It’s a whole lot of work to go through that, and sometimes they are very rigid and not negotiable, with absolutely no wiggle room,” said Knezevic, who is based in the Rochelle Park, New Jersey, office of UTC Overseas. “You have to be almost a legal wizard to understand all this. It can distract us from doing the work, from doing what we’re good at.”

LEGAL EXPERTISE NEEDED

UTC Overseas, like other project forwarders, found itself turning to costly outside trade attorneys and consultants before a decision was made to hire an in-house legal expert dedicated to addressing contracts.

Knezevic said lump-sum contracts from EPCs may require the forwarder to take responsibility for functions

such as vessel hull insurance – which, he said, is not technically feasible, as the forwarder does not own the ship.

“It’s an impossible situation for us to cover that,” he said. “Legal departments of the clients want to shift the complete responsibility not only for the cargo value but [for] everything else, like accidents or any delays, to the forwarders – but the fees are the same.

It’s very much an issue of compensation.”

Because, as Knezevic pointed out, “shipping is not an exact science,” it may prove beneficial to the client to adjust strict specifications of a given contract.

For example, UTC Overseas used contract flexibility to shift a kiln shipment from a scheduled ocean transit to transport on an Antonov An-124 aircraft, when the original unit at a cement plant in Guayaquil, Ecuador, suddenly failed irreparably. The shipment, from point of manufacture ISSUE 6 / 2018

UTC Overseas minimizes downtime for a cement plant in Ecuador by using contract flexibility to shift a kiln shipment to an Antonov An-124 aircraft from originally intended ocean transport following sudden irreparable failure of the existing unit. / CREDIT: UTC OVERSEAS

in China, required modification of packing and footprint to be able to fly on the heavy-lift cargo aircraft, but the replacement unit arrived at the plant much faster than if it had gone by sea, as intended prior to the existing kiln’s fatal breakdown. Thus, plant downtime was significantly minimized.

COORDINATION URGED

To account for the unexpected while keeping costs under control, having an in-house group overseeing the project at the forwarder is advisable, according to Aydin, who is business development manager at Istanbul-based BATI Group – which counts turnkey logistics management for projects among its areas of expertise.

“It is impossible to draw up a contract which will cover each and every cost and aspect in regard to a project, since one unforeseeable aspect will easily lead to another,” Aydin said

Kaan Aydin

Michael Wray

BATI Group

HFW LLP

from his office in Turkey. “The costs stipulated in the contract may be the lowest, yet once the contract is signed, all other unspecified costs which are accrued during the course of the project will lead to overspending on behalf of the EPC. “The most reliable way to prevent this situation is the appointment of an in-house team, which will control the project, decrease the costs and minimize the risk,” Aydin said. “This method is much more reliable when the service fee for every service area is discussed and determined before the beginning of the project. The service fee may differ from one service to another,

yet this difference can be determined by service clusters in advance.”

Aydin also urged greater coordination between EPCs and contractors.

“The biggest challenge is to appoint the same contractor for every aspect of the project and to collaborate with them for mutual performance,” Aydin said. “A single contractor is appointed for a project for the purpose of risk minimization. However, this brings along consequences such as overbidding.

By overbidding, the contractors aim to prevent the occurrence of any hidden costs which may put the EPC in a challenging position.”

BATI Group seeks to make the process easier and more controllable by appointing a team to work with the EPC in exchange for a fixed service cost, allowing the EPC to be in control of every decisionmaking process while knowing the contractor has offered rock-bottom rates, Aydin said.

FLEXIBILITY HOLDS KEY

Wray, a Houston-based partner in the shipping sector practice of HFW, a 135-year-old, London-headquartered global law firm, said thoroughness must be balanced with flexibility in www.breakbulk.com BREAKBULK MAGAZINE 19

a collaborative approach in order to achieve mutually beneficial success in project logistics contracting.

The environment of the project plays a large role in determining the risks that are important to the entities involved, as well as the appurtenant costs, he said.

For example, an offshore energy project by nature presents more challenges than a landside endeavor, as Mirko Knezevic everything from hurricane UTC Overseas seasons to tides may pose limitations while the number of available contractors is likely smaller as well.

“There are a lot more moving parts when you’re conducting an offshore project,” Wray said, noting that basic considerations include when work can be done, who will

undertake it, who is qualified to do so and when they are available – as well as overall shipping market conditions, all of which may impact the price, risk and timing.

Regardless of specific circumstances, a typical contract addresses such common issues as indemnification, insurance, warranties and regulatory requirements, Wray said. Also, considerations include market conditions and, more recently, cybersecurity concerns.

“You certainly see cyber risk clauses getting inserted into some of these contracts,” Wray said, pointing out this adds to complexity. “What you try to do in these contracts when you’re drafting them is allocate, ahead of time, basically all of the foreseeable risks and costs so, if there’s a problem, you just look to your agreement. You don’t want to have to go to court. You don’t want to have to go to arbitration, depending upon whatever dispute resolution mechanism you choose.”

Importance of appropriately thorough risk identification and allocation – balanced with flexibility

– is especially paramount in a world in which the unexpected seems to be inevitable.

UNFORESEEN LURKS

“You’re there to try to get a project done,” Wray said. “You’re there to try to make money. You’re there to try to safeguard life, property and environment and do things in a reasonable and safe manner, but there’s always the unforeseen, and – much like life – you look at what has happened in the past as sort of a benchmark for the future.”

That can mean parties may be tied to the “that’s how we’ve always done it” mentality.

“When you’re trying to account for the unknown, you have to be a little bit flexible, but sometimes, particularly in large organizations, there is inherent inflexibility,” Wray said. “They may say: ‘This is the contract we’ve used, and it has worked for umpteen projects in the past. Why would we change it now?’

“Well, maybe you should change it, or think about changing portions of it, because the world has changed. As the lawyer, you try to think of creative

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ISSUE 6 / 2018

solutions to protect your client from various risks and you also want to try to make sure it’s not so onerous that you can’t get the deal done.”

Wray noted that certain aspects may be deal-breakers for a specific client but not so important for others, or vital to a contractor but not to an operating company.

“There has to be a degree of flexibility when you’re preparing these contracts, but it all ties back to leverage,” he said. “If it’s a down market and contractors are hungry for work, the operating companies have more leverage. But if it’s a hot market and you can’t get a contract lined up, then the contractors have more leverage.”

Flexibility relates most directly to commercial terms, according to Wray, while parties tend to be less flexible when it comes to standard insuring and indemnification clauses. Some oil and gas-producing states, for example, have anti-indemnification statutes that modify or even prohibit indemnity in certain circumstances, so the choice of state and/or country for a contract may modify obligations as well as regulatory compliance remedies.

financing, regulatory compliance, shipping and construction.

“To have not just one contract work, but all of your contracts required for this project to be in sync, does create a lot of work and takes a very long lead time to make sure everything is in harmony,” he said. “It generally impacts the cost of the project when you have multiple contracts with multiple lawyers reviewing them and multiple vendors. It definitely creates cost and affects your risk allocation model.”

With all that said, UTC Overseas’ Knezevic said project forwarders may wind up coming to a questionbased conclusion when it comes to undertaking work under a highly restrictive contract: “Is it worth the effort?”

A professional journalist for nearly 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late 1980s.

‘COMPLEX JIGSAW PUZZLE’

“It’s really a bit of a sort of complex jigsaw puzzle,” Wray said. “It involves understanding your environment, where you’re working, who your regulators are, what law will apply, what law the parties choose and understanding the market conditions. From a technical side, we rely on our clients and what they need to get this job done. There’s definitely a balancing act. It’s kind of like a conductor managing a symphony.”

The sheer size of today’s contracts and the potential need to harmonize more than one such legal agreement are likely to be factors too.

“When you have documents with multiple schedules and parts, and you’re building large, complex structures, they can be very unwieldy,” Wray said of contracts. “These contracts tend to have long lead times.

It takes time, and it takes people to talk about this stuff, to understand it, to review it and to make sure all the moving parts are in order.”

Furthermore, the multiple contracts that may be required for an offshore wind energy farm project, for example, must be coordinated with each other. Wray said separate contracts are likely to cover project www.breakbulk.com BREAKBULK MAGAZINE 21

INTRICACIES BEGIN AT TENDERING STAGE

CREDIT: KOG TRANSPORT

Complexities in logistics contracting with engineering, procurement and construction firms, or EPCs, begin at the tendering stage, according to at least one project forwarding veteran, who urges better communication as part of a solution in an era of increasingly large shipments.

Juergen Osmers, who has recently retired after a 45-year career, including 35 years at the helm of New York-based project forwarder KOG Transport, said intricate tendering models have become the norm.

“They become more complex with the size of the project,” Osmers said, explaining that when he started KOG Transport in 1981, a 60-ton item represented a “super-heavy-lift,” but it is not unusual now for a shipment to comprise 2,000 tons or more.

“With these large projects, the tendering process from the EPCs, whether it’s GE or whoever, is extremely complicated,” Osmers said.

“When it moves through the logistics department in a group, they don’t have the final weights and dimensions on everything, so they basically put out some suggestion from an earlier project not knowing what is really coming up. The surprises come when the pieces have finally been ordered and are supposed to be shipped.

“Streamlining this starts with better internal communications at the client site, from purchasing to logistics, plus

22 BREAKBULK MAGAZINE www.breakbulk.com

maybe putting out better and more precise data to the vendors,” Osmers said, adding that the latter may not always be possible.

Osmers said that in years past, the movement of a heat recovery system weighing a total of 2,000 tons might entail the shipments of various parts for assembly at the job site, but the current norm is to ship the fully assembled system, even if it winds up being, at least in part, dissembled at the site.

“This is where you get these humongous pieces that are being moved around these days,” he said.

“That decision, to leave it in one or take it apart, is not always being made in the very beginning unfortunately, resulting in many challenges both at origin and destination.

“When you talk about streamlining, it all comes down to communication – internally within the customer’s departments, but also communication with the vendor. I always suggested to companies to get the logistics provider involved as early on as possible.”

SLOW TURNING CIRCLE

Whereas some companies, particularly smaller ones, may be open to innovative approaches to streamlining, it is harder to get the biggest EPCs to consider changing their methodology, according to Osmers.

“Unfortunately,” he said, “the very,

very large companies, in my opinion, think they are better off getting as many forwarders to bid on a project, then take the lowest bid.”

This seems to increasingly be the case with the electronic bid process now in vogue.

“It is almost impossible – not almost, it is impossible – to put every aspect of what could happen into an electronic bid,” Osmers said. “An electronic bid might be good if you have containers or certain transformers, but if you come to the real heavy-lift pieces – like turbines, for instance, even generators, considering every generator has a different base – you need to consider the design of the units and so on. That becomes extremely difficult to put into an electronic bid, and it becomes difficult for the customer to put all this out and be addressed when they ask for an electronic bid.”

Osmers said early communications can help elicit a wise split in contracts, commencing at the tendering stage.

However, imprudent splitting can prove costly, he added. For example, a company might decide to handle its own delivery to the port of origin, contract with an ocean carrier and contract with a party at the receiving port to take care of delivery to the site, which Osmers termed “the mostsuicidal split of a project,” perhaps saving money initially but ultimately costing more, including in demurrage and ocean vessel detention.

“You only have arguments,” he said. “The ship is not there. The truck is sitting there or the barge is sitting at origin port and cannot be loaded onto the oceangoing ship because it’s not coordinated precisely. And you have the same kind of issue at destination.”

Osmers said a preferable split may be to separate containerized cargo and pieces weighing 20 tons or less for bid by one provider while looking for a different provider to handle moves of larger units.

“Still, if you do a split that way,” he said, “you need to have, at least at the beginning of the project, a wellorganized coordination meeting in order to make sure that in the interest of the project, everything arrives timely and safely at the destination.” BB ISSUE 6 / 2018

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TRADE NOTES

FOSTERING GOOD GOVERNANCE Culture of Compliance Needs to be Nurtured

I

n an age of ‘fake news’ and untruths, corporate governance has become more important than ever.

Regulation has further heightened the need for good governance, with the UK Bribery Act having a significant impact. But has it not always been the case that without disciplined and strategic corporate governance, success is impossible, or at least more difficult for breakbulk stakeholders?

“I would say that there is some truth to all of those statements,” said Anna Larsson, head of communication and corporate social responsibility at Wallenius Wilhelmsen ASA. “For Wallenius Wilhelmsen, corporate governance is about being a responsible company, it’s an integrated and essential part of how we conduct business.”

She said that its suppliers, customers, investors and partners all need to be able to trust the company, so it puts managing business ethically and efficiently at the heart of how it works and as a basis for success. Along the entire supply chain, Wallenius Wilhelmsen is committed to fair competition, anti-corruption and anti-bribery, which is reflected in its company-wide code of conduct.

“Compliance to all relevant rules and regulations is a necessary base, but we also go above and beyond that,” Larsson added.

‘AS OLD AS THE HILLS’

Good corporate governance should encapsulate a company’s shared values, culture, systems and business approach, 24 BREAKBULK MAGAZINE www.breakbulk.com

Anna Larsson

Teik Poh Goh

Wallenius Wilhelmsen ASA

Global Maritime Talent Pte. Ltd.

according to Teik Poh Goh, managing director of Global Maritime Talent Pte Ltd. “It is as old as the hills,” he said, “and it sets the tone for what’s right and what’s not for the company. Hence I wouldn’t go so far as to say that it’s more important these days than before.”

In Goh’s view, “well-run organizations that ‘walk the talk’ put in place good corporate governance even when it wasn’t fashionable.”

Those procedures and processes may have been less formalized, but they still served to set the principles by which an organization operates.

“This doesn’t necessarily guarantee that companies with such robust systems will automatically be successful, but it ensures that the beliefs and operating philosophies, whatever they may be, are indeed known and complied with,” Goh said.

Those views were echoed by Kathy Canaan, Fluor’s global director trade compliance. “I believe that any company that hopes to build sustainable

BY THOMAS TIMLEN

success and positively serve all of its stakeholders must have a strong corporate governance system regardless of political climate or the prevailing winds of media culture,” she told Breakbulk. “Legislation, enforcement and negative attention may change the way companies behave; but, affecting actions is not the same as building culture. So, I wouldn’t say that corporate governance is more important than ever; it has always been critical.”

A company today must have a good understanding of its role in society, understand its stakeholders and be transparent. For Wallenius Wilhelmsen, that means having a Global Reporting Initiative, or GRI, platform for governance and reporting, starting with a structured process for identifying material risks and opportunities. That reporting is an audited, integral part of its annual report in line with a GRI framework.

Wallenius Wilhelmsen is also aligned with the UN Sustainable Development Goals. “We have commitment at the highest levels of the company and ensure good communication both internally and with external stakeholders to ensure we are aware of needs as they evolve and that they are aware of our performance, Larsson said.

Importance is also placed on sincere, active and ongoing communication with all stakeholders.

Mark van Herk, CEO of the LV Shipping & Transport Group, pointed out that corporate governance, trade compliance and code of business ethics procedures cannot be developed and ISSUE 6 / 2018

CREDIT: SHUTTERSTOCK

then left on the shelf. “We must live and breathe compliance with all relevant government regulations. Compliance is in the DNA of our culture.”

Good corporate governance that is well executed will rein in unsavory or unfair practices, in addition to ensuring that the company’s guiding principles are complied with. The buzzwords to watch for are transparency, accountability, trust, equality, lawful, compliance and ethics.

CHECK AND CHECK AGAIN

For LV Shipping one key factor to the success of all corporate governance programs is “Denied Entity/Restricted Party Screening.” This is explained by the need for continual and repetitive screening of employees, clients, vendors, subcontractors, service providers, legal, financial, business development consultants and visitors, which is essential to avoid trading or establishing relationships with companies or persons that are on financial or export control sanctions lists.

Kathy Canaan

Mark van Herk

Fluor

LV Shipping Group

Another incentive is reducing the risks associated with non-compliance.

LV Shipping has invested in the cost of compliance to mitigate the risk of the potentially higher costs of noncompliance. Operating globally in compliance with the relevant regulations of all governments is a continuous process that involves stakeholder awareness training together with the vetting and screening all customers, subcontractors and partners.

“We also conduct regular internal control audits as well as periodic audits of our partners worldwide,” said Murray Cooper, director of corporate governance at LV Shipping.

Achieving the desired goals requires concrete steps. Cooper outlines several: “Every six months, LV directors and the global strategy team meet up to review performance management indicators predicated on our value chain, composed of LV’s business purpose, business strategy, organizational capability, resources, management systems and customer feedback.

“We realize that our business purpose must be supported with a complementary business strategy.

Furthermore, our organizational structure needs to be capable of delivering our business strategy supported by the necessary resources and management systems. These links in our value chain coupled with our corporate governance, quality, health, safety, security and environmental, or www.breakbulk.com BREAKBULK MAGAZINE 25

SETTING THE DEFINITION What exactly is “corporate governance?” The definition and scope of the concept could vary depending on who you ask.

To clarify this, Murray Cooper, director of corporate governance at LV Shipping, points to the six principles developed and endorsed by the Organisation for Economic Co-operation and Development in order to help OECD and non-OECD governments to create legal and regulatory frameworks for corporate governance in their respective countries. These six principles are: • Ensuring the basis of an effective corporate governance framework.

• The rights of shareholders and key ownership functions.

• The equitable treatment of shareholders.

• The role of stakeholders in corporate governance.

• Disclosure and transparency.

• The responsibilities of the board.

In the eyes of the OECD, corporate governance should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities.

While the OECD was seeking to assist governments, commercial entities need to develop and implement slightly different strategies and procedures to maintain their standing with shareholders, management, customers, suppliers, financiers, governments and the community.

26 BREAKBULK MAGAZINE www.breakbulk.com

QHSSE, policies and procedures are only as strong as the weakest link in the value chain.”

For LV, the cornerstone for protecting its reputation is good corporate governance implemented in alignment with adherence to trade compliance regulations and following its QHSSE guidelines. It aims to foster a culture that promotes responsibility, accountability, mentoring, innovation, code of business ethics, trust, transparency, teamwork and achieving goals developed to maintain good corporate governance, enhance customer service, improve process and add value to the financial sustainability of the company.

ALONG FOR THE JOURNEY

It’s also important to engage all staff in the corporate governance journey, managing policies, procedures, strategies, goals and key performance indicators based on a top-down and a bottom-up communication and alignment strategy. Making completion of international anti-corruption and anti-bribery training, such as that offer by TRACE International, mandatory will further cement governance ideals.

Governance also has a role to play in attaining sustainability goals. Wallenius Wilhelmsen’s Larsson sees corporate governance as a necessity for sustainability.

“Sustainability is something we prioritize, not just because it is morally right, but also because it is fundamental for long-term value creation. We see sustainability as a driver for business development and growth.”

Wallenius Wilhelmsen’s vision is to enable the industry’s journey towards the next generation of propulsion solutions for deep-sea shipping, and as such it actively engages in the development and support of novel solutions that can take it there. The main initiative through which it seeks innovations is through the Ocean Exchange innovation forum at which its annual US$100,000 Orcelle Award is presented.

If any doubt remains regarding the importance of corporate governance, Goh puts it to rest: “While company stakeholders may have different objectives, good

corporate governance, in my view, is an embodiment of all that a company stands for and aspires to be. It is also assumed that such goals do not condone illegal means to achieve the overarching objectives, no matter how tempting these may be.”

Good corporate governance, properly executed, should enable stakeholders to embrace shared values and ensure that these operate concurrently to achieve desired goals and outcomes. “Stakeholders who are looking for shortcuts to success or are of the gunslinger variety should therefore look elsewhere to build their career or make their money,” Goh said.

But more can always be done, and the private sector could shoulder greater responsibility here, according to Canaan. She believed that corporations should lead from the front, be visible, proactive, and accountable – these go a long way towards creating and maintaining good standing.

“Sustainability is something we prioritize, not just because it is morally right, but also because it is fundamental for longterm value creation.”

–A nna Larsson, Wallenius Wilhelmsen ASA

“More practically speaking,” she said, “I think two things are essential: exceptional leadership and the empowerment of employees to speak up when they see something they think is not right. I am very proud to be part of a company that has a strong compliance and ethics program that encourages employees to seek guidance and report concerns.” BB Thomas Timlen is a Singaporebased freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

ISSUE 6 / 2018

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TRADE NOTES

Sharp Edge of Tariffs Cuts Deep

TRADING DANGEROUSLY

BY MICHAEL KING

W

hen history is written, 2018 is likely to be remembered as the year the world’s two largest economies embarked on a trade war of unprecedented scale, at least in modern times. Indeed, if a year could be a place, then 2018 is Las Vegas.

The gambling protagonists – U.S. President Donald Trump and China’s President Xi Jinping – have spent most of the year embroiled in an intense staring contest with both steadfastly refusing to blink. And, even though this is a struggle that most analysts expect to be mutually damaging, each roll of the trade policy dice raises the stakes – and the potential losses.

28 BREAKBULK MAGAZINE www.breakbulk.com

CREDIT: KYODO/NEWSCOM

Given the weighty risks and the tangible and intangible outcomes most economists associate with protectionism and mercantilism, make no mistake, this is high-stakes poker.

The United Nations, no less, warns that the trade war between the U.S. and China could destabilize global movements of goods and commodities.

“While the prospects for seaborne trade are positive, these are threatened by the outbreak of trade wars and increased inward-looking policies,” said Mukhisa Kituyi, secretary general of the United Nations Conference on Trade and Development, or UNCTAD. “Escalating protectionism and tit-for-tat tariff battles will potentially disrupt the global trading

system which underpins demand for maritime transport.”

For project shippers and their transport providers, the difficulties are two-fold: keeping up with rapid shortterm changes to the trading landscape, while also planning for the long-term repercussions inherent in a trade war if the U.S. and China are unable to find common ground and strike a new trading deal.

TARIFF STATUS QUO

First, what we do know. As 2018 has progressed, the value and volume of products subject to tariffs by China and the U.S. have exponentially increased. As Breakbulk goes to press, ISSUE 6 / 2018

TARIFFS WILL HIT COASTAL PROVINCES HARDER Ratio of export value to gross regional product.

0% to 10%

10% to 20%

20% to 30%

30% or more

11 18

29

15

5

22

28 26

27 23

12

16 1

13

3

17

14

8 30

10

25

20

21

2

19

7

24 31 4

6

9

PROVINCES 1

Anhui

8

Guizhou

15 Inner Mongolia

22 Shaanxi

29 Xinjiang

2

Beijing

9

Hainan

16 Jiangsu

23 Shandong

30 Yunnan

3

Chongqing

10 Hebei

17 Jiangxi

24 Shanghai

31 Zhejiang

4

Fujian

11 Heilongjiang

18 Jilin

25 Shanxi

5

Gansu

12 Henan

19 Liaoning

26 Sichuan

6

Guangdong

13 Hubei

20 Ningxia

27 Tianjin

7

Guangxi

14 Hunan

21 Qinghai

28 Tibet

more than US$250 billion worth of Chinese goods imported to the U.S. are subject to tariffs. This represents about half of China-to-U.S. trade. Moreover, tariffs on most of these products will jump from 10 percent now, to 25 percent on Jan. 1, 2019.

According to Asia-headquartered financial services group Nomura, in the first US$34 billion tariff list applied by the Trump administration, the machinery sector bore the brunt, accounting for 41 percent of products hit with tariffs, while computers (32 percent), electrical machinery (18 percent) and transport equipment (9 percent) sectors made up the remaining 59 percent. “Chemicals and

Ministry of Commerce, National Bureau of Statistics / Stratfor

Escalating protectionism and tit-for-tat tariff battles will potentially disrupt the global trading system which underpins demand for maritime transport.”

–M ukhisa Kituyi, UNCTAD Secretary-General

basic metals were added in the second tranche, comprising 22 percent of US$16 billion in merchandise exports,” the analyst added in a note.

The latest round of tariffs introduced in September 2018 and set at 10 percent before rising to 25 percent at the start of 2019 are likely to be more damaging for Breakbulk’s audience given their far wider scope.

“The initial round of tariffs from the U.S., at 25 percent targeting US$50 billion of Chinese imports, focused primarily on capital goods,” explained Nomura. “However, the new tariffs targeting US$200 billion effective from Sept. 24, are almost equally split between capital and consumer goods.”

Beijing has retaliated with its own punitive tariffs – a policy course President Trump has promised will result in further new tariffs on an additional US$267 billion of imports from China. There is no reason to believe, based on previous form, that this is a bluff by Trump.

This final step would essentially mean all Chinese imports to the U.S. would be subject to hefty tariffs.

China, which has now mostly run out of non-critical U.S. exports to slap tariffs on, does still have cards to play, however.

“China still has some room to retaliate in case trade tensions further escalate,” Nomura said. “Should the U.S. impose additional tariffs and further escalates trade tensions with China, we would assign an increasing likelihood to China using non-tariff measures, in addition to tariff measures.”

REACTIONS AND RETALIATIONS

For those in the business of trade, there is nothing positive to see here.

Indeed, the escalating tariffs imposed this year have the capacity to redraw the global trading landscape and damage global economic growth.

According to Nomura, in the shortterm China has the fiscal and monetary tools to limit the impact both of U.S. tariffs and its own anti-U.S. retaliatory actions on economic growth. Longerterm, the impact is likely to be more severe. “There could be bigger indirect impacts through rising uncertainty, www.breakbulk.com BREAKBULK MAGAZINE 29

especially when considering mounting domestic challenges – more credit defaults, a problematic property sector, overloaded debt and ill-planned financial deleveraging,” the analyst noted.

“Moreover, rising trade tensions may seep into investment, as exporters, including multinationals, could shift their factories to other countries to avert the tariff.”

In the U.S., Trump’s tariffs on China, and China’s various retaliatory tariff and non-tariff measures, are likely to impact the economy in various ways.

At a basic level, tariffs increase the prices of goods because imports become more expensive and domestic and foreign manufacturers not subject to tariffs are able to charge higher prices.

This will have a widespread impact on consumer and business decisions.

For breakbulk shippers, just to take one example, higher input prices and uncertainty about future costs are expected to delay or cancel big ticket infrastructure and engineering, procurement and construction projects. But all areas of the economy will be impacted in myriad known and, at this stage, unknown ways as business verticals adjust and supply chains are reimagined.

30 BREAKBULK MAGAZINE www.breakbulk.com

ABOVE: A Chinese worker surveys the production of steel at a plant of Qingdao Special Iron

and Steel Co., Ltd. in Qingdao city, east China’s Shandong province. “We don’t want a trade war because it will bring us losses, but we are not afraid of a trade war, as it will also inflict losses on them,” said Liu Zhenjiang, secretary-general of the China Iron and Steel Association.

CREDIT: IMAGINE CHINA/NEWSCOM

BEATING THE TARIFFS

The impact on container, bulk and tanker trades has already been pronounced. U.S. importers have, for example, been front-loading retail imports to beat various tariff schedules, a trend that is likely to continue ahead of the further escalation of tariffs on Jan. 1, 2019. Chinese buyers of soybeans have shifted purchases to Brazil and U.S. crude oil exports to China fell off a cliff in August.

“The tanker shipping industry is hurt when distant U.S. crude oil export destinations like China, are swapped for much shorter hauls into the Caribbean and South, North and Central America,” said Peter Sand, BIMCO’s chief shipping analyst. “The trade war is all around us now. What appeared on the horizon half a year ago is now impacting many seaborne trading lanes. All commodities may be impacted regardless of them being officially tariffed or not.”

Longer-term, more fundamental shifts in trade are expected to follow as manufacturers realign production to avoid tariffs. For example, more production could be moved back to the U.S., and away from China, while U.S. manufacturers might shift some production abroad to avoid tariffs on exports to China, but also to evade the higher costs of inputs such as steel. Indeed, these trends are already apparent.

A number of carmakers with plants in the U.S. have already began shifting manufacturing capacity aimed at export markets overseas. Iconic American motorcycle brand HarleyDavidson has said it will be forced to follow suit.

Much the same is happening in Asia: • Komatsu is moving the manufacturing of hydraulic shovel parts out of China to Japan and the U.S. • Toshiba Machine Co. recently announced plans to shift production of ISSUE 6 / 2018

A depot used to store pipes for Transcanada Corp.’s planned Keystone XL oil pipeline is seen in Gascoyne, North Dakota, U.S. CREDIT: TERRAY SYLVESTER/REUTERS/NEWSCOM

U.S.-bound plastic molding machines used for making plastic components such as automotive bumpers from China to Japan or Thailand.

• Mitsubishi Electric is transferring production of U.S.-bound machine tools used in metal processing to Japan from its manufacturing base in Dalian.

PROJECT SOURCING QUESTIONS

Not all these trends have yet been reflected in project and breakbulk freight markets.

But if, for example, demand for U.S. energy or agriculture exports declines, then investment in those

industries will also fall with obvious implications.

“The projects business is not as volatile as the consumer goods sector, of course, and industrial projects are planned many years in advance,” said Erik Hutter, global head of energy and project solutions at Panalpina. “So far we have seen no immediate impact of the tariffs on our projects business.

However, it remains to be seen if, for example, higher prices for steel and different sourcing patterns will impact the business in the mid and long term.”

Felix Schoeller, general manager of AAL, said there would be multilayered impacts on global trade for multipurpose vessel operators.

He said tariffs on Chinese steel had seen customers sourcing elsewhere, while forestry products, machinery, manufactured products and backhaul bulk cargoes such as soybeans

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exported from the U.S. would also be affected. “Then of course there are U.S. project cargoes, which are a bit more of a complex thing because they are not really directly affected by specific tariffs, but of course they are very much affected by the business climate and investment decisions.

“For instance, the Keystone XL expansion project. We computed that it would be, with the tariffs in place, roughly Felix Schoeller US$300 million more expensive to AAL build this pipeline (because of higher steel import costs).

And, of course, the question then becomes, do you really want to go ahead with that decision?”

Schoeller believed that the industry is now in a situation where many projects will simply not happen

because they have become too expensive.

“When we talk to our project customers, companies that organize the supply chain for building large projects, oil and gas, pipelines and such, they definitely see the implications. Also, of course, in our line of business we often talk to the engineering, procurement and construction companies that actually build the sites. They say the same thing,” Schoeller said.

DOUBLE WHAMMY

Schoeller see the impacts as twofold. Firstly, investment decisions on energy projects had already been pushed back because of the depressed oil price – the numbers didn’t add up. Now those projects have been pushed even further out because of the uncertainty on whether raw materials for projects can now be sourced within the cost boundaries of the project.

Secondly, tariffs on alreadymanufactured pieces from China will affect many of the modularized oil

and gas or energy plants that have been built over the last few years, which mostly come in from Chinese or Korean industry firms and are then assembled in North America. North America does not have the capacity to pick up the production or engineering slack, hitting in-progress projects hard.

“So people are very conservative about making an investment decision on these large projects,” Schoeller concluded.

With no sign that the U.S. or China will back down on trade policy any time soon, simple uncertainty, even with all the negative business implications it brings, might not be the worst scenario. As a number of analysts have noted recently, any further escalation in the stakes could quickly move past trade and into diplomatic and perhaps even military conflict. BB Michael King is a multi-award winning journalist as well as a shipping and logistics consultant.

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the world is waiting for you Where the Networking Never Stops And New Project Business Is Made

2019 EVENTS

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LOGISTICS PERSPECTIVE

INSPIRED TO INNOVATE

BY LORI MUSSER

Emerging Digital Solutions for Project Supply Chain Progress

N

o supply chain participant wants to go the way of the buggy whip, but a failure to innovate may push them in that direction.

Successful companies are not those linked to their historical and consolidated supply chain choices — market leaders are those that are open to change, including digital solutions.

The breakbulk and project cargo industries are, at their core, “very, very traditional,” Carsten Wendt, who heads up sales of high and heavy cargo and breakbulk for Wallenius Wilhelmsen Ocean, said during his presentation at Breakbulk Americas in Houston.

“I personally believe we are just at the beginning,” Wendt said, citing the 36 BREAKBULK MAGAZINE www.breakbulk.com

potential to invent digital solutions to make things “better, smarter and more cost-effective.”

Stephen Spoljaric, Bechtel Oil, Gas & Chemicals’ deputy field procurement manager, said that for companies to stay relevant, new solutions should be found and integrated digitally across relationships in a transformative way.

DEARTH OF DIGITAL TO DATE For the breakbulk and project cargo industries, announcements for digital solution tests, pilot projects, platforms and apps have been few and far between.

It isn’t that there is a dearth of ideas, it is more that the industry is complex, and one-size-fits-all ideas rarely succeed.

Nevertheless, academics, digital

service providers, engineering, procurement and construction firms , ports, logistics companies and parallel industries are increasingly animated by the potential of blockchain. A select few trials have taken place and there are a few early results to share. Last September, the Port of Rotterdam put money on the table and launched a blockchain technology field lab.

In partnership with its municipality, the port created BlockLab for the development of concrete applications and digital solutions. Its basic premise is that logistics and energy industries can conduct transactions without involving a third party (making it possible to structure large-scale networks, chains and markets more efficiently and ISSUE 6 / 2018

BATAVIA REWIRES TRADE FINANCE

ABOVE: The launch of BlockLab, created as a

joint initiative between Port of Rotterdam and its municipality. / CREDIT: AAD HOOGENDOORN

without a regulating party).

During BlockLab’s launch at the end of 2017, the initiative’s first product was announced — a blockchain application for stock financing in the port logistics sector. It was developed in partnership with cloud business software company Exact and Dutch bank ABN AMRO. Port Authority President and CEO Allard Castelein said he anticipates “numerous applications that can be realized within logistics chains thanks to blockchain, allowing us to organize cargo flows more efficiently.”

Shared, distributed, secured digital ledgers make sense in a sector that transfers money and goods. They can streamline transactions, facilitate greater transparency among participants and increase efficiency. Batavia is being collaboratively developed by a consortium of five banks — UBS, Bank of Montreal, CaixaBank, Commerzbank and Erste Group — as well as IBM. The first live pilot transactions were completed earlier this year. The tests were with “a variety of transportation modes, across different geographies and with trading parties of various sizes to demonstrate Batavia’s ability to scale and manage diverse transactions. Cars were traded from Germany to Spain and raw textiles for furniture production were traded from Austria to Spain,” according to IBM’s announcement.

While documents related to bills of lading and letters of credit are already maintained electronically, they are not always accessible to all parties to the trade. Simplifying the end-to-end process of a trade means a single, distributed version of all documentation is shared across all the involved participants: buyers, sellers, banks, transporters, inspectors, regulators and others. In the end, payment is “automatically triggered by specified events in the supply chain and immutably recorded to the blockchain,” according to IBM’s release.

Batavia plans to build a productionready solution next.

PIONEERING DIGITAL COLLABORATION PLATFORM

In Southern California in the U.S., where containers are king, highvolume ports are testing the water for digital collaboration across modes for all cargoes. As their efforts meet with enhanced safety and efficiency, noncontainerized ports and supply chains will take note.

The Port of Oakland announced what it said was North America’s first broad-based online shipping platform in May 2018.

“This is what our industry is asking for,” said John Driscoll, Port of Oakland’s

maritime director. “We’re providing a comprehensive digital view of ships, cargo and terminal information all in one place on the computer ... no more clicking through multiple websites.”

The platform aggregates shipping information from every marine terminal and for all cargoes in the harbor. The data already includes vessel schedules, cargo status and live camera views.

There are specialized functions for cargo status updates, trucker appointments and paying terminal fees. The portal will soon incorporate real-time performance metrics and dashboards customized for users such as motor carriers and cargo owners.

The Port of Oakland said supply chain operators will be able to better manage trade flow. Cargo owners, for example, will know with greater precision when to expect merchandise.

Trucking companies will know exactly when and where to dispatch drivers for pickup; truckers are often hamstrung by supply chain delays.

Based in Pennsylvania, PGT Trucking serves various heavy and project industries.

President Gregg Troian is a cautious convert to sensor-based decision making Gregg Troian and digitization to enhance processes. PGT Trucking PGT Trucking has tested several technologies to improve internal decision-making and supply chain collaboration.

Collaborating with supply chain partners such as EPCs, the company is testing online digital platforms.

EPC projects can have high-volume truck activity, and to avoid delays that can reach five or six hours or more, collaboration is key. It improves supply chain efficiency overall, which can ultimately help with the truck driver shortage, Troian said. Online EPCscheduling programs that tie to trucking companies will allow drivers to get into a laydown yard or project site, unload and then get out as quickly as possible. www.breakbulk.com BREAKBULK MAGAZINE 37

Andrea Patrucco, Penn State’s assistant professor of project and supply chain management.

CREDIT: PENN STATE BEAVER

FRESH YOUNG MINDS SUPPORT EFFICIENCY

Fresh young minds that look at traditional project supply chain challenges sometimes come up with unorthodox solutions.

Bechtel Corp. has been testing that theory for a number of years, first with students from the University of Houston, and now also with students at Penn State Beaver in Pennsylvania.

The students have developed low-tech and high-tech solutions. Both have their place, Spoljaric said.

The current supply chain efficiency project with Penn State Beaver started out as a blank canvas. Bechtel gave a general overview of their receiving, inventory, preservation and material issuance program — intentionally without providing internal documents.

Students analyzed and identified improvements for an EPC warehousing and laydown site.

“Our intent was not to give them our procedures, but to force the students to make their own process map,” Spoljaric explained. The initial focus was related to inbound processes, especially inbound truck management. “Every large project site should have a standard that sets out what should be done when trucks arrive.”

After creating a low-tech, but clever and workable, magnetic board solution for the truck receiving inbound process, the students were given direction to dream big, perhaps incorporating 38 BREAKBULK MAGAZINE www.breakbulk.com

everyday technology into a reservation app, incorporating Uber-style ratings and feedback, codes for scanning, and so on.

They created an OpenTable-esque reservation and information-sharing system for trucks, and a half-dozen trucking companies were able to make reservations online for project deliveries.

PGT Trucking is one of those trucking companies.

“The tech is there,” Troian said.

“The need is there. It is important to work collaboratively to find these types of solutions.”

Andrea Patrucco, Penn State’s assistant professor of project and supply chain management, said: “The model developed … can definitely be used and implemented in any country, and always leads to a situation with mutual benefits for all the parties involved.”

CELEBRATING NEW APPROACHES

According to Patrucco, some of the trends that are generating new approaches for industry and in the classroom include: • Cloud storage services (which have revolutionized project management and collaboration in every area of business and will soon do the same for supply chain management).

• The Internet of Things (for example, tracking technology can help companies adjust shipping routes in real-time, saving time and fuel).

• Augmented reality (superimposing computer models over a person’s physical surroundings, typically through a wearable glass display, which can enhance, for example, order picking and management).

• Multi-channel sourcing (because today’s buyers demand choice) Patrucco tells his students to go beyond the “as is” state. “Always seek more effective and efficient configuration of the supply network, the production systems and the logistic activities,” he noted. “Usually, [students] have this creative thinking at the early stage of their careers ... the objective is to continue to cultivate that kind of thinking over time, without yielding too much to current dynamics … of companies.”

Student Dominic Masciantonio worked on the Bechtel-Penn State partnership project. He said that while some long-term industry practitioners may find it a challenge to look for uncommon solutions, that wasn’t a problem for the student team.

“We were asked to look at every little aspect that could be improved,” he said. The team began with the idea that Dominic new, everyday Masciantonio processes and Penn State Student technologies can create value and provide continuous improvement.

A next step for the Penn StateBechtel project will be to include other supply chain aspects. Teaming up IT and supply chain students may very well spark new ideas as complex supply chains are broken down into additional segments for future study.

Project supply chain management is always evolving. Keeping up to date is an ongoing challenge, Patrucco said, but solutions are all around us. BB Based in the U.S., Lori Musser is a veteran shipping industry writer.

ISSUE 6 / 2018

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EMERGING MARKETS

BY AMY MCLELLAN

OUTDATED ADDICTION Weaning the Middle East Off Oil Dependency

T

he 2014 oil price collapse was a timely reminder for the oildependent economies of the Middle East of what could happen when the age of oil comes to an end.

A protracted price slump saw budget deficits balloon, debt escalate and austerity measures bite. Analysts have subsequently said that it is increasingly clear that for these

petrodollar economies, it is not just diversification that is required but whole-scale structural transformation in order to build resilient modern economies and support jobs and living standards.

According to the World Bank, infrastructure needs in the region are estimated to be US$100 billion annually, with a focus on electricity generation, transportation, water and sanitation,

and information and communication technologies. These needs won’t be met unless economies can be weaned off an addiction to subsidy and state control.

There’s a ticking clock on this reform process. Growing international pressure, supported by fast-paced technological advance, aims to curb the world’s appetite for fossil fuels in order to avert catastrophic global warming later this century.

ABOVE: An expanded refining industry in the Middle East will require a huge amount of power generation.

40 BREAKBULK MAGAZINE www.breakbulk.com

/ CREDIT: AGILITY

ISSUE 6 / 2018

In early October, the Intergovern­ mental Panel on Climate Change issued one of its sternest warnings to date that urgent action – and annual average investment in the energy system of US$2.4 trillion through 2035 – will be required to limit warming to 1.5 degrees Celsius. Should this final call from alarmed scientists start to translate into policies and measures that accelerate renewable and clean energy solutions, the vast oil reserves that currently power the region’s economic growth will become stranded assets.

THE DIVERSIFICATION PATH

It’s clear that some in the region are taking the diversification agenda seriously. But this doesn’t mean turning off the oil tap; instead, the focus is on adding value so that every barrel not only generates more income, but also builds skills and knowhow and spawns new industries and commercial opportunities. A huge expansion of the refining sector is underway, both in the development of existing facilities and the construction of greenfield sites.

“This is an industry that we expect to gain a lot of traction,” said Mohammad Jaber, chief operating officer of Agility Abu Dhabi and regional director for project logistics Middle East.

“Many of these projects are now Mohammad coming to the Jaber bidding stage, suggesting we will Agility Abu Dhabi soon see a shift from selling crude oil to value-added products.”

Indeed, Jaber reported that the outlook for new projects is very strong, with bidding for new refinery projects in Bahrain, Saudi Arabia and Oman opening in the next three to six months — all of which exceed US$20 billion in capex — along with bidding on logistics contracts for huge new offshore and petrochemical projects.

“This will create new local industry

within countries in the Gulf Cooperation Council, or GCC, which will help to boost and diversify their economies,” he said.

An expanded refining industry will require a huge amount of power generation, and a range of energy sources, from fossil fuels to renewable energy and nuclear, are being developed to feed into the grid.

“As all of these projects will require large amounts of construction, in the next four years, we expect that Middle East/Africa, Iraq and, particularly, the GCC region will need high volumes of project cargo and other shipping and freight forwarding in order to obtain the necessary materials,” Jaber explained.

These projects are being developed in synergy with new industrial zones – and the roll-out of new, investor-friendly business packages – along with the development of allied infrastructure, from the construction of commercial buildings to airports and healthcare.

“All of these will fuel local economies and require excellent logistics in order to run smoothly and source the relevant materials,” Jaber said.

FRONTRUNNERS ALREADY SEE BENEFITS

Of course, the Middle East isn’t one homogenous area. Some countries are making better progress than others, with the UAE and Saudi Arabia leading the charge, not only making huge investments in clean energy, tech and infrastructure, but also reforming their regulatory regimes, VAT and immigration policies to support investment and diversification.

Oman, Kuwait and Bahrain are also making solid progress. Oman, for example, has established special economic zones, privatized management and strengthened academic and professional training, and is focusing on manufacturing, chemicals, mining, logistics and tourism to strengthen its economy. Progress to date is encouraging, with the World Bank noting that oil’s contribution to Oman’s GDP dropped from 46 percent in 2011 to 20 percent in 2015, while employment and labor force participation increased steadily over the same period.

OPEN FOR BUSINESS?

Middle East Business Receptiveness is Mixed Doing Business (out of 190, a higher score indicates greater difficulties in doing business)

Global Competitiveness (out of 137)

UAE 21 17 Bahrain 66 44 Oman 71 62 Qatar 83 25 Saudi Arabia 92 30 Kuwait 96 52 Jordan 103 65 Iraq 168 Source: World Bank 2018, World Economic Forum 2017-2018

For those in the logistics and project cargo industries, the emergence of new sectors presents an opportunity for those with the right skill set.

“All of the new projects being developed in the region, and the numerous products that they will produce, are going to stimulate high demand for local logistics and project cargo companies,” Jaber said. “It won’t be possible to succeed with this increased volume and turnover by using the old style of logistics. To scale up effectively, logistics providers will need to start using digitalization, automation and robotics to be able to meet demand.

They will also need to be able to adapt to the changing business environment by being agile and using this to increase productivity.”

Agility, for example, has invested in a new fleet of vehicles in Abu Dhabi, with the lower-emission 2019 models automating many driver functions, especially those related to quality, health, safety and the environment, and addressing the need for double-trailer transportation.

“This extra capacity allows us to deal with high volumes of freight efficiently and to support shippers and end users by offering better value for money,” Jaber noted.

IN-COUNTRY PRESENCE

Scott Wilcox, CEO of Dubai-based Sicuro Group — which this summer was appointed the exclusive operations www.breakbulk.com BREAKBULK MAGAZINE 41

region, welcomed the diversification push, including the growth of a local steel industry as well as construction.

However, he said it’s still not enough to soak up an oversupply of tonnage in the region or stimulate newbuild activity.

Even so, he’s cautiously optimistic about the future.

“I hope the outlook for 2019 and 2020 will be further growth and diversification in the region, but there’s so much volatility, it’s difficult to make predictions. Who would have thought that Iran would be closed again?”

Bandura said.

DERAILING DIVERSIFICATION?

ABOVE: Volatility in the Middle East region

could cast doubts over continued growth and diversification in 2019 and 2020. / CREDIT: AGILITY

partner of the Oil Operations Center in Basra, southern Iraq — also sees huge opportunities across the region, from the redevelopment of the southern oilfields of Iraq to emerging mining industry in Afghanistan and the impact of China’s ambitious Belt and Road Initiative.

Capturing those opportunities, however, requires an in-country presence.

“You have to be present,” Wilcox stressed. “Trying to do this from far away is impossible. You need to be there to understand the nuances of working in the region and manage expectations on timelines, and have the right systems in place.”

This is particularly the case when it comes to the import and onward transit of goods.

“There’s an ever-changing landscape of sanctions and import/ export restrictions that has to be navigated, and you can often do so by juggling rules for as many as three or four jurisdictions on just one shipment,” he explained. “Even goods that may be commercially benign can be sensitive if they could be repurposed by the end user, and that applies to common 42 BREAKBULK MAGAZINE www.breakbulk.com

equipment such as GPS, walkie-talkies, personal protective equipment and even pipes used in oil and gas fields. These restrictions can impact time for delivery or add expensive constraints, such as stipulations that they must be directly moved by air rather than road, and these are not always well understood outside the region.”

Seasoned operators like Sicuro Group, Wilcox said, act as a bridge, helping ensure the smooth and timely transit of goods.

“Experience matters,” he said. “To be successful here, you need knowledge of the region, cultural awareness and emotional intelligence,” he said.

Wilcox pointed out that the Middle East is a very diverse region, made up not only of countries with different cultures and languages, but also very cosmopolitan populations.

“India is a major trading partner and has a huge influence, so when you’re working here, you will be dealing with people from the Indian subcontinent along with South Africans, Brits and people from all over the world,” he said.

Shipping companies, however, continue to face the headwind of a glut of tonnage. Denis Bandura, managing director of Dubai-based BBC Chartering Mideast, a multipurpose carrier in the

The renewed U.S. sanctions on Iran lifted oil prices to four-year highs – on Oct. 3 Benchmark West Texas Intermediate peaked at US$76.41 per barrel before dropping to US$62.83 on Nov. 5 when the sanctions were re-imposed. Could fluctuating prices undermine the impetus for economic reform?

Sicuro’s Wilcox thought that oil revenues will continue to aid the diversification effort. “It’s the price of oil that’s going to pay for this,” he said.

“It will be reinvested into sustainable diversification projects.”

Agility’s Jaber pointed out that in-country value requirements mean diversification is here for the long term. “This has fueled growth for local factories and fabricators, allowing them to upgrade their technology and expand their business,” he said. “In Saudi Arabia, Oman and the UAE, this competitiveness means that products are beginning to be exported to other countries and even other continents.”

Instead, Jaber saw the potential brakes on the push to diversify as being geopolitical instability, the VAT learning curve and the region’s energy costs until such time as renewable projects and nuclear power begin to make an impact on the market. Given the investment and structural reforms already underway in the region, however, it looks like the push to diversify the region’s petrol-dependent economies could be slowed but will prove increasingly hard to derail. BB Freelance journalist Amy McLellan has been reporting on the upstream oil and gas and maritime industries for 20 years.

ISSUE 6 / 2018

HEAVY LIFT LEADERS.

EXECUTIVE SUMMARY

MARRIAGE MISCONCEPTIONS Consolidation Alone Cannot Correct Overtonnage

R

ecent talk of mergers and acquisitions in the multipurpose vessel segment has been cited as a potential cure to the sector’s overcapacity ills. But evidence to date suggests that the key beneficiaries are the acquiring companies themselves rather than the industry as a whole.

There has been a lot of talk of consolidation of the multipurpose vessel, or MPV, fleet over the last few months, not least with the recent announcement of a new joint venture between NovaAlgoma and Peter Döhle that will operate 26 vessels (13 MPVs and 13 mini-bulkers).

At the other end of the scale rumors still circulate around Zeamarine, as the company has publicly stated that it aims to have a fleet of 100 vessels in the near future (currently at 75) and it plans to achieve this by further M&A activity and not newbuilding. That last comment is cause for celebration, as there are still too many vessels that are overage, small and/or poorly equipped to compete in the global market.

Consolidation has, for a long time, been held up as the last hope for this industry. Theoretically, fewer owners should be able to share overheads and expenses over larger fleets. They should be more disciplined about ordering newbuildings and provide a united front against strong charterers. Other sectors – for example container shipping and steel manufacturing – have benefited from some form of consolidation over the years. But does the merger of shipping companies really help reduce supply and therefore aid the recovery of the market?

FRAGMENTED SECTOR

Drewry’s estimate of the current MPV fleet comprises some 3,188 vessels with an average age of almost 17 years.

The sector is highly fragmented; our list of some 20 major ship owner/operators accounts for just 30 percent of the total deadweight available to charterers, although they do represent the younger end of the fleet.

Interestingly, where the vessels are smaller, with less lift capability, the

BY SUSAN OATWAY

older they are. The fleets that have those characteristics are operated in short-sea trades. This sector has finally started to see an improvement in charter rates after a market trough that has lasted more than five years. However, vessels in this sector are in urgent need of renewal, and it is to be hoped that when owners do start to see a positive bottom line, the old tonnage will be scrapped to make way for the new.

For long-haul trades, mergers and joint ventures have not meant fleet consolidation, but they have brought about cost savings for the companies involved and the opportunity to schedule fleets to an advantage. In this there has been a positive market outcome for the operators.

Some industry stakeholders have commented that without consolidation this sector will cease to exist in less than 10 years. Drewry’s view is that this is a little pessimistic. But it is true that only by working together will the smaller fleets be able to compete on the same playing field as the new wave of mega owners.

DEVELOPMENT OF DRY CARGO DEMAND 8000

Total dry cargo

Total bulk cargo

Total container cargo

1400

MPV Market share (right axis)

7000

1300

6000

1200

5000

1100

4000

1000

3000

900

2000

800

1000 0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

700

Values in million tons / Source: Drewry

44 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2018

In the latest edition of Drewry’s Multipurpose Shipping Forecaster report we declare that we remain cautiously optimistic on the outlook for the sector. There are some caveats to this optimism as global general cargo demand is forecast to grow at a rate of just 2 percent per year to 2022, while the multipurpose and heavy-lift fleet is expected to contract at less than 1 percent per year over the same period.

Meanwhile, the threat of a trade war continues to loom over the horizon and the competing sectors are not yet secure enough to move from this sector.

Multipurpose vessels benefit from the growth in demand for breakbulk and project cargo and, while it is clear that both are affected by modal competition and trade tariffs, the latter has seen some renewal in certain sectors.

In BP’s latest energy outlook, global consumption of fuel in 2017 is compared with 2016. Although renewable energy consumption is still a minor part of the global mix, it is growing at a faster rate (almost 17 percent year-on-year) than any of the other fuel types.

Wind energy provided more than half of that renewables growth, which is positive news for the MPV sector.

The equipment needed for a wind farm, including the blades and towers, is ideally suited to the MPV fleet. The equipment is large, unwieldy (project) cargo, which needs a vessel that can both lift and stow it correctly. Also the top two manufacturers are based in Europe, while the top regions for growing installed capacity are in Asia – a perfect trade route and a growing market for project carrier tonnage.

China reported a 25 percent increase in power generation from renewables in 2017, compared with 2016, to 106.7 million tonnes oil equivalent, which is 22 percent of the global renewable power. Within that global increase, some regions have a much bigger share than others. Asia-Pacific represents some 36 percent of renewable energy consumption (including China alone amounting to 22 percent). The European Union is worth 33 percent and North America 23 percent. Asia-

MAJOR OPERATORS FLEET SIZE AND AVERAGE AGE COMPARISON

1,600 1,500 Jumbo

1,400

Bubble size: number of vessels

1,300 1,200

SAL Heavy Lift

1,100

Hansa Heavy Lift

1,000 900 800 700 600 500

BigLift

AVERAGE OF MAX GEAR

CAUTIOUSLY OPTIMISTIC

Combi Lift

AAL

Chipolbrok Zeaborn

400

BBC Chartering

300

Cosco

Albros Shipping

China Navigation

100

Carisbrooke

Wilson Eurocarriers

NYK Bulk & Projects

0

Wagenborg

-100 -200

Spliethoff

Thorco

200

Volga Shipping

4

5

6

7

8

Source: Drewry

9 10 11 12

North Western Shipping

13

Pacific is also the fastest-growing region with 2017 consumption up almost 25 percent on 2016.

CONSTRUCTION LIFTING DEMAND

14 15

AVERAGE AGE

The other significant factor in our uplift for demand is a region-wide construction boom for Southeast Asia that is expected to last the next 10 years.

It is largely fueled by China’s Belt and Road initiative, which will link China to Europe through Central and Southeast Asia. India’s annual construction investment is also expected to increase by about one-third over the next five years to an average US$170 billion per year.

The outlook for the competing sectors, although mixed going into the final quarter of the year, remains positive for the medium term. It is true

16 17 18

Alstership

19

20

21 22

23

that the impact of U.S. tariffs is more keenly felt by the container-shipping lines, but here, too, there is still growth forecast, albeit at a slightly weaker rate than previously expected.

There may be trouble ahead, but the green shoots of recovery appear weather-proofed to withstand the volatility expected to the end of 2018.

Longer term, owners are more positive post-2020 when the true picture of the various environmental regulations will have become clearer. Maybe we should upgrade our forecast to reasonably optimistic? BB Susan Oatway is a consultant, who for more than 13 years has been the principle author of Drewry’s multipurpose and heavy-lift publications and is co-editor of the reefer shipping report.

www.breakbulk.com BREAKBULK MAGAZINE 45

MARKET SPOTLIGHT

DRIVING MEDITERRANEAN PROGRESS Recovering Sales Bode Well for Car Carriers

CREDIT: PORT OF KOPER

46 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 6 / 2018

BY HELEN CAMPBELL

T

he 2009 financial crisis was brutal, regardless of business type, and the automobile industry certainly did not escape the sharp downturn in financial confidence and investment.

With countries such as Spain, Italy and Portugal particularly affected, manufacture and movement of new automobiles in the Mediterranean suffered from a bit of a flat battery for much of the period from the crash until around 2012-2013.

Now, import recovery in Spain and the expansion of existing production there as well as in countries such as Turkey and Morocco are feeding the shoots of recovery in roll-on/roll-off business for new automobiles in the Mediterranean.

In addition, a number of greenfield investments in Central Europe are expected to result in increased movement of new vehicles through Mediterranean ports as the southern terminals attract business that traditionally goes to the north.

ONE TO WATCH

“What you see in the automobile market is that it has become much more global, flexible and opportunistic in the choice of location for manufacturing,” said Erik Jensen, vice president for sales for Europe and Africa at Wallenius Wilhelmsen Ocean. “Manufacturers are looking at the currency situation, the trade agreements, price of labor, outbound logistics and, of course, political aspects. With that combination, we have seen Turkey and Spain becoming very competitive for export.”

Demand in Spain increased by about 10 percent in the first half of 2018, and by 4.7 percent in France in the same period, according to the European Automobile Manufacturers’ Association. Sales in Italy were down slightly, by 1.4 percent.

Meanwhile, manufacturers in Turkey produced more than 1.7 million cars in 2017, a 14 percent increase since 2016 and a huge recovery from 374,000 back in 2002, according to Invest in Turkey’s Automotive Industry Report.

Growth in car imports is projected to come from Spain – with movements into Barcelona, Valencia and Tarragona – as the country moves further out of recession, while Italian imports are seen as more stagnant in comparison. Morocco’s port of Tangier is expected to feature heavily in exports, while Greece’s Piraeus becomes less important.

Meanwhile, ports in Turkey’s Izmir Bay are projected to see an increase in movement, well supported by Turkey’s longstanding strong relations with the “Stan” countries to its east, including Kazakhstan, Uzbekistan and Turkmenistan, which are all import destinations for Turkish production.

“Car movements in Mediterranean ports have been quite volatile in recent years, but hold potential high demand for new cars,” one port operator said.

“As a terminal operator, we see a lot of business opportunities within the Mediterranean, especially if the general situation in southern countries becomes more stable.”

Largely, the region seems to be one the ro-ro carriers are watching, but with muted confidence.

“We are very clear that the Mediterranean is important for us in the future, and that goes for the whole market, whether it is North Africa or Spain or Turkey,” Jensen said. “On the other hand, our development in the new cars business is coming from our customers and where they build their new production, so we have a very flexible view on this as we look to fill up our network. We need to have sound robust growth.”

ISSUES AT STAKE

If the Mediterranean’s ports network is to take advantage of projected growth in ro-ro pure car and truck trade, it will need to meet a number of challenges.

Industry sources have said that the fluctuations in vehicle production and flows that come with tentative recovery, coupled with political upheaval, continue to make it hard to determine the exact degree of growth and to therefore plan and invest accordingly.

One of the biggest problems facing Mediterranean ports is that the “stopstart” of fluctuating throughputs has meant many ports in the region have become storage yards, creating congestion and capacity problems. The

TOP 10 EU PASSENGER CAR PRODUCTION GERMANY SPAIN FRANCE UK CZECH REPUBLIC SLOVAKIA ITALY

EU TOTAL 2017 8,742,056

2018 8,882,743 +1.6%

HUNGARY ROMANIA

H1 2017 H1 2018 (provisional figures)

POLAND

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Source: ACEA/IHS Markit/Economic and Market Report - EU Automotive Industry, Quarter 2, 2018

www.breakbulk.com BREAKBULK MAGAZINE 47

CREDIT: WALLENIUS WILHELMSEN

shifting of car storage facilities away from the ports themselves during leaner times post-crash has meant that the faster-to-recover container business has taken a large proportion of space that would otherwise be available to cars in some ports. This earlier consolidation of storage presents difficulties with rail connections or other means of transportation of new cars from storage to the quayside.

“We have a challenge with the infrastructure at the terminals in the ports because they are rather congested,” said Bjorn Svenningsen, director of sales and marketing for United European Car Carriers, or UECC. “Consequently, from time to time, we have to wait with our vessels before there is sufficient space in the terminal to accept the cargo that we have on board. It seems port facilities are being used for storage, so what we would really like to see is the different port authorities being a little stricter in the way their terminals are being used, in order to have sufficient space for our ships coming in.”

Certainly, any improvements could make a big difference, Svenningsen said, with a typical 35-day automobile ro-ro route for UECC looking like this: load at Bremerhaven; proceed to Zeebrugge, Bristol and Vigo; proceed 48 BREAKBULK MAGAZINE www.breakbulk.com

Some UK ports have installed a system of cameras where the car is driven through and pictures taken from all angles that can be used later in case of damages.

The Med is lagging a bit in this type of technology.”

– Bjorn Svenningsen,UECC

to Sagunto to offload and Tarragona to load; move on to Livorno and unload and load; move to Piraeus to unload and load; and finish with unloading and loading at three ports in Turkey before looping back to Bremerhaven again.

Uncertainty means the desire to build further new infrastructure remains on hold for most, so investments in yard-management systems and space optimization is preferable while the market finds its feet again. Even if

ports and terminals do feel confident about increasing infrastructure, spatial limitations are still an obstacle. Many ports in the Mediterranean are hemmed in by cities, with little or no room for lateral expansion.

UPGRADE GAME

Gregor Belič, car terminal director at Slovenia’s Port of Koper, said the port has enough space for a long-term expansion utilizing flatlands to the east of the port, but that ability is rare. One of the top three automobilehandling ports in the Mediterranean, the port’s 800 meters of quay and four ro-ro ramps handled 741,253 cars in 2017 and 408,855 in the first half of 2018. It already has a multistory storage garage for 8,000 cars, in addition to 40,000 open-air parking spaces.

“A totally new car carrier berth is planned in the Basin 3 area, which will be served by new rail access from the adjacent storage areas,” Belič said.

“The beginning of construction of both these projects is expected in 2019.

Recently, we also decided to start the construction of a multistory garage for 6,000 cars to join the existing one. Another project, the new truck gate, which will improve the internal ISSUE 6 / 2018

logistics of the whole port, should be completed by March 2019.”

A recent upgrade of the Port of Koper’s car terminal operating system has helped to standardize data exchange, enhanced the port’s overview of field operations and speeded up communication between the customer and the terminal, Belič said, adding that steady growth of volumes had encouraged the port to expedite some of its infrastructure projects to increase productivity and capacity of the car terminal.

All carriers really want is a smooth fast in, fast out service at ports.

Continued improvements to new carprocessing technology and increased digitalization could help improve visibility. Transparency is an assurance for car transporters from the first to the last point of risk.

“Some of the ports in the UK, for example, have installed a system of cameras where the car is driven through and pictures taken from all angles that can be used later in case

of damages,” Svenningsen said. “The Med is lagging a bit in this type of technology.”

ELECTRIC OVERDRIVE

The drive for an increase in electric vehicles, or EV, presents a valuable opportunity in the push for a lower carbon future. Demand in the EU for electric cars increased by a robust 40 percent in the first half of 2018, according to the European Automobile Manufacturers’ Association. However, the logistics of electric vehicles bring a further challenge for automobilehandling ports and operators, especially from the infrastructure aspect.

“We expect that the majority of EVs, while waiting in the port, will require power supply, which is logical if you want to optimize the whole supply chain,” Koper’s Belič said. “We are already using plug-in stations in our existing garage and have recently built a new electrical substation to meet the increased consumption. The new garage will be built considering

the requirements of EV logistics.”

These logistical and technical challenges are all against the backdrop of the incoming International Maritime Organization Sulfur 2020 regulations, which will increase carriers’ cost bases and exacerbate the existing ship-rotation issues caused by congestion, and could lead to shifts in favored routes and ports. While some operators have taken delivery of new dual-fuel pure car and truck carriers in recent years, market players have warned that low margins are already dampening willingness to invest further in more specialized vessels.

So while the Mediterranean is one to watch, car and truck ro-ro movers will need to monitor political and economic developments carefully as a number of variables play out over the next few years. BB Helen Campbell is a freelance journalist based in London who has specialized in energy, environment, sustainability and technology for more than 20 years.

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It’s these strengths that make us the Energy Port of the Americas.

View all our capabilities at portofcc.com

www.breakbulk.com BREAKBULK MAGAZINE 49

REGIONAL REVIEW

INDIAN OPPORTUNITIES Oil Offers Better Prospects Than Mining

R

eversing a February 2018 Indian Supreme Court order that halted mining activity in the state of Goa would understandably trigger talk of new opportunities for all stakeholders not only in that state, but perhaps more broadly across the country.

Under normal circumstances, jumping to such a conclusion would be expected. However the mining climate in India is somewhat complicated.

Instead, other energy-related projects, such as the construction of underground rock caverns for crude oil storage, could offer more tangible opportunities for the project cargo sector.

Prior to the Supreme Court’s decision in February, other legislative measures going back to 2012 had already hampered mining activity in Goa. Some impediments hark further back to a concession system with Portuguese roots, still found in the Mines and Minerals Development Act of 1954. Later, in 1961, the mining concessions for exploration and exploitation previously having permanent status were converted into fixed-tenure leases that ended in 2007.

Can it get more complicated?

Of course. In May the government approved the restructuring of the Indian Bureau of Mines to reform regulation of the mineral sector. What impact this move will have on mining activity remains to be seen.

Turning back to the developments of August this year, it has been said that if adopted, the legislative amendments will result in significant changes to legislation and the structure of India’s coal and ore mining industry, giving the sector and all related industries, 50 BREAKBULK MAGAZINE www.breakbulk.com

BY THOMAS TIMLEN

including project cargo transport and mining equipment manufacturing, a powerful boost. However, questions remain on whether this will actually happen, and if so, when. And these are not the only questions.

RISK OF UNDERUTILIZATION

From April to June 2018, India saw a 19 percent increase of thermal and steam coal imports. Should domestic production increase significantly as a result of the passage of amended legislation, the resulting decline of demand for imports could leave ports operating below capacity, with similar underutilization of surrounding infrastructure. That would not bode well for development projects.

More recently, the Indian Ports Association issued statistics in October showing positive throughput at the

PRODUCTION HEAVY

Domestic coal production and coal imports 1000 900 800 700 600 500 400 300 200 100 0

2016-17

2018-19

Domestic coal production (Million Tonnes) Coal import (Million Tonnes)

Source: Care Ratings Ltd., Coal: Sector Update and Outlook, May 2018

country’s major ports from April to September 2018, increasing by 5.12 percent as compared with the same period in 2017. Shipments of thermal and steam coal contributed to the growth with increases of 11.34 percent on the same basis.

The prospect of increases to domestic coal production might have been seen as a means by which port throughput could be maintained as exports. However, with India ranked 23rd globally among coal exporting countries in 2017 with only 1 percent of the world’s total departing from its ports (as compared with the top ranking exporter Australia shipping 36 percent of the world’s coal) this outcome is far from likely. Should India boost coal production to reduce reliance on imports to meet the country’s energy needs, domestic production would only be distributed internally, leaving ports to manage only domestic coastal movements at best.

Expanding India’s mining activity naturally leads to an assumption that there will be an increased demand for mining and construction equipment, the latter to be utilized at the mines and for improvements to the country’s infrastructure. However such assumptions overlook the reality of some mines. For example, although some reporting indicates that iron ore and coal mining in Goa has been banned since February 2018, others say that the problem stretches back to 2012.

One recent legislation would reportedly lift that ban. The result would not necessarily lead to a flood of machinery headed for Goa, as the initial phase would simply involve reactivating the existing equipment put in limbo at Goa’s ISSUE 6 / 2018

ABOVE: Miners rest inside an underground

coal mine at Dhanbad district in the eastern Indian state of Jharkhand in this 2012 file photo.

CREDIT: AHMAD MASOOD/REUTERS/NEWSCOM

INSET: India’s Strategic Petroleum Reserve.

CREDIT: INDIAN STRATEGIC PETROLEUM RESERVES, INC.

mines. For other Indian states, there might be little, if any, impact.

Ironically, despite holding the world’s fifth-largest coal reserves, India remains dependent on imports due to the demand for high quality coal used at its steel plants, while exports of domestically mined, poor-quality coal have declined.

Meanwhile another political initiative in Goa involves a resolution passed to put pressure on the State’s Chief Minister to negate India’s Supreme Court February 2018 ruling

that put a halt to mining in Goa. The court’s decision followed allegations of illegal mining in the state, and in addition to leaving mines at a standstill, about 50,000 workers employed in the sector were left without jobs.

OPPORTUNITIES BEYOND MINING

While the prospects surrounding Goa’s mining activity, or the country’s, are difficult to predict, for the project cargo sector as well as heavy machinery and construction equipment players there are reasons for optimism, as the ore and coal mining sectors are not the only ones where the acquisition and delivery of heavy machinery may be needed.

Initiatives are underway to boost

the domestic petroleum and natural gas sectors, including the construction of massive underground rock storage caverns and associated facilities by Indian Strategic Petroleum Reserves Ltd. that could generate demand for several industrial stakeholders.

On Oct. 17, a road show promoting India’s Strategic Petroleum Reserves Program was launched by Shri Dharmendra Pradhan, India’s minister of petroleum and natural gas and skill development and entrepreneurship.

The Strategic Petroleum Reserves www.breakbulk.com BREAKBULK MAGAZINE 51

which seeks public/private partnerships in India’s emerging hydrocarbon sector.

ISPRL has successfully completed and commissioned the first phase SPRs program.

SECURITY OF OIL SUPPLY

CREDIT: INDIAN STRATEGIC PETROLEUM RESERVES, INC.

Program is one of India’s key initiatives towards energy security, envisioning the creation of additional crude oil reserves facilities in a private/public partnership.

At the event Pradhan said that on the world’s energy landscape, India is the third-largest consumer of energy and the third-largest importer of crude oil. With the Indian economy growing rapidly, energy demand is forecasted to grow more than any other country in the next two decades. India has a very large requirement of petroleum fuels, and demand for petroleum products has increased at a compound annual growth rate of 5.5 percent from 2013 to 2017.

As such, India’s domestic production will not be able to meet the increasing domestic demand of petroleum fuels and petrochemicals, leaving India dependent on imports for the foreseeable future.

CREATION OF RESERVES

One of the mitigation measures is to create enough strategic reserves within the country to store an adequate amount of crude oil. This will not only help to avoid disruption on the supply side, it will also help to reduce price volatility.

“Having the objective to meet the energy security, the government of India formed Indian Strategic Petroleum Reserves Ltd., or ISPRL, a special purpose vehicle under the Ministry of Petroleum and Natural Gas,” Pradhan explained. “To further improve strategic reserves, the union cabinet granted approval for establishing additional 6.5 million tonnes of strategic petroleum reserve, 52 BREAKBULK MAGAZINE www.breakbulk.com

which will be able to provide 12 extra days of supply. After a detailed study considering technical and commercial factors, two locations, Chandikhol in Odisha and Padur in Karnataka, have been selected as the optimum locations for these SPRs. These two SPRs will add strategic petroleum reserves of 12 days in addition to 10 days of reserves achieved in Phase I. Indian refiners maintain 65 days of crude storage, and when added to the storage planned and achieved by ISPRL, this takes the Indian crude storage tally to 87 days.

This is very close to the storage of 90 days mandated by the International Energy Agency for member countries.”

On the issue of the second phase, Pradhan said that these are large investments requiring more than US$1.5 billion of capital, and the government plans to develop this under a PPP framework.

India has decided to keep the nation ahead in the quest for securing its vital crude oil buffer inventory by seeking to almost double the capacity of its underground storage caverns through the ambitious second phase of the program

With the Indian economy growing rapidly, energy demand is forecasted to grow more than any other country in the next two decades.”

The government has found that underground storage of crude oil is more secure, safe, economical and environmentally friendly than conventional above-ground storage tanks.

Many other developed countries have created crude oil reserves in different types of underground storage facilities.

ISPRL has built and will operate three crude oil storage facilities, constructed in underground rock caverns located on the East and West coasts of India. Crude oil from these caverns can be supplied to Indian refineries, either through pipelines, or through a combination of pipelines and ships. While part of the stored oil can be used for commercial purposes by oil companies, the major part will be reserved for strategic purposes.

In May the first cargo of crude oil arrived at ISPRL’s Mangalore oil storage facility. The cargo was loaded in Abu Dhabi and arrived following a six-day voyage.

Indian energy demand is forecast by the International Energy Agency to grow by more than any other country in the period to 2040, propelled by an economy that will grow to more than five-times its current size and by population growth that will make it the world’s most populous country. Indian energy consumption is expected to more than double by 2040, accounting for 25 percent of the rise in global energy, and the largest absolute growth in oil consumption.

With the potential opportunities associated with the expansion of India’s mining activity somewhat in doubt, the government’s backing of the strategic petroleum reserves program involving the creation of massive storage caverns and associated facilities looks like a safer bet for suppliers of project cargo transport and heavy construction equipment. BB Thomas Timlen is a Singapore-based freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

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ENERGY UPDATE: NATIONALS LOOK BEYOND OIL

CREATING NEW FIT-FOR-PURPOSE TRAINING MECHANISMS

ENERGY UPDATE

NUCLEAR REALITIES West Africa is Realizing its Nuclear Ambitions

T

here is a lot of talk in Africa about nuclear energy, and why not? It is a reliable source of virtually zero carbon emissions and nuclear plants run on uranium, a resource that the continent has a great deal of, particularly Niger, which is regularly in the top five ranking of the world’s largest uranium producers.

Africa is plagued with power issues — due largely to accelerated population and urbanization growth as well as industrialization. With demand far outstripping supply, the strain on national power grids has created an acute form of energy poverty — one that stifles the economic development that the continent so desires and needs. It’s a particularly acute problem in West Africa.

REGION IN FOCUS

Nigeria has a complex energy supply crisis, Niger is only satisfying some 47 percent of its energy needs with the balance imported, and Ghana is increasingly experiencing intermittent supply problems, along with industry concerns about the high cost. Tellingly, these are the only three nations in the region that have undertaken, or are updating, energy planning studies to determine their needs for additional electricity generation capacity, according to the International Atomic Energy Agency, or IAEA. “To date, these countries have not identified major obstacles that would preclude nuclear power from their energy mix,” the IAEA confirmed to Breakbulk. “But equally, these countries have not yet completed all the studies or preparatory work necessary to reach the stage where they would be ready to sign contracts for the construction of their first nuclear power plant.”

Even if they were at that point, it would take at least 10 to 15 years to complete the infrastructure and 54 BREAKBULK MAGAZINE www.breakbulk.com

the support required for a nuclear power plant. South Africa provides the evidence, given that it is the only country in Africa to have a nuclear power station.

Koeberg Nuclear Power Station is under the control of Eskom, the country’s generator, transmitter, trader and distributor of electricity. It has been in operation for more than 33 years and took from May 1971 until April 1984 to complete and be able to contribute the first nuclear-generated electricity to the national grid.

Velaphi Ntuli, Koeberg Nuclear Power Station general manager, said, however, that planning started even earlier, with the site, 30 kilometers north of Cape Town and purchased in 1967.

It was chosen because “it measured up to the U.S. Atomic Energy Commission guidelines for siting requirements,” Ntuli said. It is also close to other power generators, predominately coalfired stations, so plays a pivotal role in ensuring the security of the Cape region’s power network.

“Two pressurized water reactor units of about 1,000 megawatts each contribute nearly 6 percent of South Africa’s energy needs from the 1,860 megawatts generated, 50 percent of which takes care of all the Western Cape’s needs,” Ntuli said.

Koeberg’s reliability is undisputed.

Its performance is regularly benchmarked against the world’s best-performing and reliable stations.

“Koeberg Unit 2, for example, set a record of 492 days of [uninterrupted] reliable power generation in 2016/2017, and Unit 1 topped at 474 during 2016,” Ntuli said.

The station’s Finance Manager Renee Ovis added that the Rand/ MWhour of Koeberg’s operational expenditure, especially primary energy, has proven to be the most costeffective within Eskom.

BY KERRY DIMMER

FACING REALITY

This reliability and cost effectiveness of energy supply is just what West Africa needs, but does any country have the staying power, let alone the finances, to endure the long processes to reach turnkey?

“There are some high-level requirements to be considered before embarking on a new nuclear power plant program, not least of which are safety, economic and technical capability, nuclear skills development and training capacity, site suitability, nuclear power legislation and regulation, and the level of maturity of other supporting industries, such as manufacturing, engineering, etc.,” Ntuli advised. And, of course, there is the expertise in necessary large-scale logistics and project cargo to consider.

This is where the IAEA’s guidelines, in terms of the considerations before deciding on implementing a nuclear power plant program, are powerful tools.

Called the Milestones Approach, the guidelines emphasize three progressive phases of development, each dependent on the degree of commitment and resources applied by a country. Each phase is underpinned by specific milestones, at which progress can be assessed and a decision can be made about the readiness to move on to the next phase.

But the choices made will already be dependent on the location and energy needs. “It is not possible to state that one region or country is ideally suited, or not, to produce nuclear power without undertaking appropriate energy planning studies, projecting energy demand and capability to supply, and [taking into account] the mix of different energy sources and technologies that best meets the country or region’s needs,” the IAEA said. “While it is ISSUE 6 / 2018

each country’s sovereign decision whether to add nuclear power to its energy mix, each country or region has specific characteristics and needs that should be taken into account when considering introducing nuclear power.”

SAFETY RISKS DEBUNKED

While nuclear disasters such as Three Mile Island in 1979, Chernobyl in 1986 and Fukushima in 2011 cannot be ignored, the World Nuclear Association pointedly noted that apart from Chernobyl, where there was a death toll of 56, no nuclear workers nor members of the public have ever died as a result of exposure to radiation due to a commercial nuclear reactor incident.

Therefore the real concern for Africa is cost. The IAEA’s Milko Kovachev said that while a government’s investment to develop the necessary infrastructure is modest – relative to the cost of the first nuclear power plant – “is still in the order of hundreds of millions of dollars.

“Most countries in Africa will find it difficult to invest this amount of money in a nuclear power project, but there are financing mechanisms, like, for instance, from export agencies of vendor countries,” he said. “Tapping into a reliable, carbon-free supply of energy when vendors are offering to fund it can make sense for several countries in Africa.”

There is another option in small modular reactors, or SMRs. SMRs produce up to 300 megawatts of power per unit and can be easily transported to sites making them ideally suited to African conditions.

ROSIER PICTURE

One of the major players circling the African nuclear energy scene is Rosatom, the Russian state energy corporation, which is considered No. 1 in the world in terms of the number of simultaneously implemented nuclear reactor construction projects. Last year, Rosatom signed an agreement with Nigeria on the construction and operation of a nuclear power plant and research center, which will house a multipurpose nuclear research

EMPTY EXPERTISE CLAIMS

reactor. It also agreed to a roadmap for cooperation in the field of “peaceful usage of nuclear technologies.”

Using the IAEA’s Milestones Approach, Nigeria commenced with its nuclear energy program 10 years ago, with Rosatom becoming involved five years into that process. Dmitry Shornikov, Rosatom’s CEO for Central and Southern Africa, said that a great deal has been done in terms of the legal framework and educating specialists.

Shornikov also said that Rosatom is committed to assisting Nigeria to achieve its nuclear ambition, noting that the IAEA has undertaken two missions to Nigeria, proving its support of the nuclear program and advancement of relative infrastructure development.

Ghana is also moving ahead, with an announcement in July by Robert Sogbadzi, deputy director in charge of nuclear and alternative energy at the Ministry of Energy, that nuclear will be included in the nation’s energy mix by 2029.

“This year, we are to finalize our progression report and then issue a white paper on our nuclear program,” Sogbadzi said.

The government said it has signed a memorandum of agreement with Rosatom for the construction of a nuclear power plant. Ghana does actually have a nuclear station, situated in the city capital Accra, but it is only used for research and training.

ELECTRICITY GENERATION OF COUNTRIES CONSIDERING INTRODUCING NUCLEAR ENERGY

While there are a number of logistics organizations that claim to provide nuclear transport expertise to Africa, there has been relatively limited opportunity to date to supply that expertise. That there will be opportunities is obvious. However, these West African nations, particularly landlocked Niger, are going to require strategic solutions for the complex transport delivery of components for nuclear power stations.

Africa is a continent known for its underdeveloped infrastructure and complicated, longwinded protocols – ports included – and with nuclear plants likely to be situated far from developed environments, engineering, procurement and construction companies are going to have to be prepared to maneuver around the challenges. Competition is also likely to be fierce considering the number of nuclear vendors from Russia, China and South Korea that are keen to be involved in the development of Africa’s nuclear technologies and construction of plants.

It will therefore only be after the first delivery is made that any service provider can lay claim to having the expertise to help realize Africa’s nuclear ambitions. BB Kerry Dimmer is an award-winning freelance journalist, focused on African business affairs.

Morocco

Egypt Niger

47.9

182

5.3 8.2

31.2

280 Ghana 17.6

13 20

11.5

Sudan

In 2015 In 2030

Nigeria

In terawatt hours Source: International Energy Agency

31.4 48.3

9.7

14.8

Kenya

www.breakbulk.com BREAKBULK MAGAZINE 55

NEWS FROM BREAKBULK AMERICAS

EXHIBITION SNAPSHOTS

Carriers, EPCs See Smoother Sailing Ahead

BY GARY BURROWS

There’s growing, though guarded, confidence among engineering, procurement and construction companies and the heavy-lift, multipurpose ocean carriers that serve them that the market is returning to stable, sustainable rates after three years of disaster.

Carrier and EPC representatives at a Breakbulk Americas panel spoke about navigating through this return to stability and the obstacles they face, including the International Maritime Organization’s 2020 sulfur regulations.

“We believe it’s the start of something that should lead us to better times,” said David Lloreda Calero, chartering manager/special projects, BBC Chartering. Evidence can be seen in stabilization in shipping demand, absence of fleet renewal programs, healthy main shipping markets, which also mean less competition from container and bulk carriers, potential fleet impacts from IMO 2020, and consolidation.

“A few years back, the 10 biggest heavy-lift companies in the world had 770 ships,” Calero said. “Now these same 10 companies we’re talking about 530 ships. So there has already been a reduction in tonnage and we believe with the 2020 regulations, that reduction will be even more dramatic.”

Of course, the return of oil prices north of US$80 a barrel is sweetening the pot.

“The project cycle is kicking back in again,” said Justin Archard, corporate director – commercial, of SAL Heavy Lift. “There’s confidence in the world, a little more optimism. Oil, I checked this morning, is about US$85. Investment decisions were taken at a much lower level; now they’re at much more healthy levels.”

Turning that confidence into 56 BREAKBULK MAGAZINE www.breakbulk.com

sustainable rates remains a necessary goal for carriers.

Calero said that, while rates have improved, carriers need rates to increase “20 percent to 30 percent to be a healthy shipping market.” BBC anticipates that an important tool to reaching sustainable rates will be bunker surcharges.

“Bunker is probably the biggest cost for carriers right now. We believe as a company that bunker surcharges will be a key instrument to try to drive rates where we should have them.”

ACHIEVING EQUILIBRIUM

Given the precarious nature of supply and demand, what can carriers and EPCs do to maintain harmony?

“The supply side, the demand side, we’re talking all the time, trying to navigate our way together,” Archard said. “But we can’t manage the macro environment. That’s the biggest influencer. In 2015 the world went off a cliff.

“What we can do is anticipate the cycle. There has always been a cycle,” he reminded, referencing the huge downturn in 1997 and 1998.

Andrew Young, logistics manager, Bechtel Oil Gas & Chemicals, referenced a Drewry presentation (see related story, page 44) and a graph that reflected supply and demand. “It shows from 2015 to 2016 the cargo fell off a cliff, but tonnage went up,” he said. With the decline in tonnage and cargo rebounding, Drewry forecasts achieving an equilibrium by late 2019.

“We see in FEED (front-end engineering design) and pre-FEED there’s a lot of work that we’re getting involved in,” he said, noting mining, energy and civil infrastructure projects in addition to oil and gas. He said some projects will go live in the first half of 2019. “There’s going to be a lot of business going into 2020,” he added.

ISSUE 6 / 2018

“I think we’re a little bit slower to react on the oil and gas side,” said Phillip Brown, global chartering manager, Fluor. “We are doing a lot of proposals, but what we’ve seen most recently is a pickup in infrastructure, mining and metals work in South America and some in Australia and Asia.”

Brown said he doesn’t anticipate the flow of shipments until late 2019 and into the early 2020s.

“When we ask for firm rates for 2020-2022, we understand that there’s going to be market fluctuations, there are going to be changes in market, changes in law,” he said.

Both EPCs said the rising market will impact their procurement strategies.

“Incoterms will remain the same for the most part; I don’t think pushing the transportation risk back onto our material provider is the right answer,” Brown said. “As far as strategies for marine transportation specifically, I think we’ll be looking at more and more consolidation, so we can do bigger lots of cargo at a time to get economies of scale.” He said this may include full charters for larger shipments of steel or bulk pipe.

CONSOLIDATION OVER?

According to moderator Dominik Stehle, formerly executive vice president, deugro Group and recently named chief commercial officer of Zeamarine, “90 percent of the heavylift fleet is controlled by three or four companies.” Does that mean the cycle of consolidation has played out?

“There are more consolidations to come,” Archard said. “It’s driven by necessity.”

He said it’s more a case of reducing the pool of available owners than limiting tonnage. “There’s the opportunity to take tonnage into a fleet and not necessarily make a difference to the owner side. Or there’s the opportunity to actually take the fleet ownership into an active market. That from an owner’s side is where we see the most opportunity now.”

Eliminating tonnage is a concern

for Young. “Rates are one thing, but from the EPC it’s service … It’s making sure we’ve got carriers that can offer us service. We work in a dynamic industry. If we don’t deliver critical heavy-lift projects, we don’t do projects.”

That requires a “strong, flexible carrier base,” he added. “Give us that flexibility and it will give us some

healthy competition to try to keep rates where they should be and not letting them run away.”

For Brown, it’s not just a matter of service and availability, but “quality of the actual work. This even flows down to liner terms: the quality of stevedores, the quality of the terminals the carriers work, all of these things have a knock-on effect for us.” BB

Clock’s Ticking on IMO 2020 Carrier and EPC panelists at a Breakbulk Americas session referred to the haunting creep towards the International Maritime Organization 2020 sulfur regulations as though time was being kept on a doomsday clock.

“We’re at 15 months. I think there is time to figure this out,” said Brent Berg, vice president of business development, Thorco Projects.

It’s a vessel-by-vessel decision of whether to install scrubbers, burn low-sulfur fuel, or park the vessel.

From each direction the issues play out.

If you install scrubbers – and many vessels are not designed to handle scrubbers – “you have a vessel in drydock, you have off-hire, you have issues of whether it will break down or is it a reliable piece of equipment,” Berg said. All of these costs are also hitting carriers as they try to crawl out of a historic downturn.

Burning low-sulfur raises issues of quantity and quality of supply, carriers and EPCs agreed.

“We saw this summer where we had bad bunkers in Houston, Panama and over in Asia. That’s a huge cost to carriers,” Berg said.

David Lloreda Calero, chartering manager/special projects, BBC Chartering, said five of the carrier’s ships were affected by bad bunkers, costing more than US$1 million on cleaning, drydocking, spare parts and damaged machinery. “And we still don’t know who produced it or where it came from.”

With the shift to low-sulfur bunkers ships around the world, which are set up primarily to handle high-sulfur fuels, will have to carry both, meaning lower inventories.

Justin Archard, corporate director – commercial, SAL Heavy Lift, questioned whether refineries will provide the low-sulfur fuels in quantities carriers need throughout the world.

“Of global fuel consumption, transportation was 53 percent. Of that, only 6 percent is for shipping, and heavy fuel oil is only 3.5 percent of that. Revenue is about 4 percent.

So the actual amount of fuel for shipping is really low on the radar of major refineries,” Archard said. “So convincing them and incentivizing them to create supply for us in this changing environment is going to be as challenging as figuring where to place our ships to actually get the fuel to keep them moving.”

While some panelists questioned whether the IMO might delay the regulations to give the industry time to adjust, Archard believes there’s no changing the course.

“The big liner carriers … are adopting the rules and figuring out their strategies and making capital investments, in the millions,” he said. “Considering our day rates are considerably less than a container vessel, if you’ve made the investment already and somebody says, ‘we’re going to kick this can down the road five years,’ there are people on the other side that are terribly upset.”

www.breakbulk.com BREAKBULK MAGAZINE 57

US Trade Actions ‘Policy, Not Politics’

BY GARY BURROWS

The raft of tariffs, economic sanctions, changes in export/import controls and scuttled and reworked trade agreements under the Trump administration – characterized as protectionism by some trading nations as well as opponents – are “not politics but policy,” a national security policy expert said.

“The changes we’re already seeing and will likely continue to see are secular trends; it’s not some episodic aberration that a new administration would change,” said Mario Mancuso, partner with Kirkland & Ellis LLP. “The drivers of the policy choices that the administration are making are structural, not political. Frankly they’ve been at work for about a decade.”

Speaking at Breakbulk Americas, Mancuso invited attendees to read the administration’s National Security Strategy, issued December 2017.

“These strategies focus on how the U.S. envisions itself in international security order … for the past decade these strategies have been based on terrorism for obvious reasons. This one is different.”

CHINA, RUSSIA POLICIES

For the first time in history, according to Mancuso, the U.S. actually labels China, the second-largest world economy, as a strategic competitor. The document also effectively lists Russia as an adversary. Though neither should be seen as a big surprise, formal U.S. policy frames the argument that China and Russia “are trying to change the global order in ways that would be detrimental to U.S. security interests.”

The other key point the policy makes, Mancuso added, is that it makes history by linking trade issues with national security issues. “And while the strategy doesn’t present a unified theory of how to approach the world, it says we really cannot think of these issues in isolation.

“It’s a fundamental assessment of what U.S. security interests are and how they’re being impacted by what the U.S. administration believes are unfair trade practices by some of our largest trading partners,” he added. “The reason that’s 58 BREAKBULK MAGAZINE www.breakbulk.com

Mario Mancuso, partner with Kirkland & Ellis LLP, presents at Breakbulk Americas.

also important is because it feeds directly into the economic sanctions and export and import issues.”

While U.S. businesses clearly understand that economic sanctions prohibit doing business directly with North Korea, that country has trade relationships with Russia and China and is engaged in illicit shipping practices to fund its weapons program, Mancuso said. The Office of Foreign Assets Control in an advisory this year detailed how the North Korean regime actually altered shipping documents.

“You can’t get much more serious about nuclear weapons than the Korean peninsula,” added Mancuso, who has served as undersecretary of Commerce for industry and security and deputy assistant secretary of Defense for special operations and combating terrorism.

With the policy change towards Russia comes a longer game. “You have a country led by President Putin which would like to re-establish in some way Russia’s place in the world. It’s not a near-term issue,” Mancuso said. “It is complicated in the Russia case because of the obvious political overlay that exists.”

He noted new Russia sanctions under discussion, “will have very dramatic consequences – not for just U.S. persons – but for non-U.S. companies that have a role in such U.S. control. You know that it’s serious when the U.S. places sanctions on a president’s wife.”

On tariffs, Mancuso said the U.S. is strategically approaching them with regards to Europe and its recently renegotiated trade deal with Mexico and Canada. The latter he called a deal that creates “a runway effective to deal with China.”

EXPORT-IMPORT I.T. CONTROLS

As part of U.S. policy, the government is undergoing a dramatic review of “emerging and foundational technologies,” he said.

“Some of these technologies include things like AI (artificial intelligence), blockchain, quantum computing. These are larger, winnertake-all technologies that have or could have important impact on U.S. military capabilities,” he said.

However, most of these technologies are exported under U.S. Export Administration Regulations classification EAR99, which doesn’t require a license in most cases.

“It’s a default classification; it’s like for pencils. You can send these anywhere in the world without a license with the exception of sanctioned geographies and sanctioned persons.” BB The U.S. National Security Strategy of the United States of America can be read for free here: https://www.whitehouse. gov/wp-content/uploads/2017/12/NSSFinal-12-18-2017-0905.pdf

ISSUE 6 / 2018

US Tariffs, Sanctions Impede Project Trade

BY LORI MUSSER

“There are tariff and sanction issues that are not going away anytime soon,” said Kathy Canaan, global compliance director for global EPC Fluor, during a session on trade policy at Breakbulk Americas.

“What we are going through is unprecedented. The strategies we put in place to do things better, faster and cheaper are being undermined,” Canaan said, speaking of inbound shipments for U.S. petrochemical industry development projects, among others.

In an era when international projects are being increasingly modularized overseas for shipment back to the U.S., complications such as economic sanctions, import tariffs and retaliatory tariffs can wreak havoc with project supply chains.

Canaan referenced Section 232 of the Trade Expansion Act, whereby the president has broad power to adjust imports – including through the use of tariffs – if excessive foreign imports are found to be a threat to U.S. national security. Similarly, Section 301 authorizes the president to take all appropriate action, including retaliation, for “burdens or restrictions” imposed on U.S. commerce.

“It is important to understand the chilling effect of all these activities,” Canaan said, and she challenged Breakbulk Americas’ delegates to discuss the issues, collaborate on solutions, and put together a common platform and voice to take up the argument with Washington.

“It’s complicated. It’s a tough environment. There is no value in not sharing … We can weather it a little better if we talk,” she suggested.

“There are 10 times as many jobs related to steel in maritime in the U.S. than there are in the entire U.S. steel industry,” he said.

Foster said the Trump administration’s scorched-earth approach to the steel industry has had “predictable and completely negative consequences.” He said the policies have led to “8 million fewer tons [of steel] crossing our docks.”

He added: “Trade restrictions have a very broad effect on breakbulk, as well as container and roll-on, roll-off.

The whole national security premise for these tariffs does not hold water.”

CAPITAL PROJECTS NOT IN A VACUUM

Focusing on the export side of capital projects, Capt. Bill Schubert, president of International Trade and Transportation Inc., said that another critical federal issue is the incapacitation, since 2015, of the Export-Import Bank of the U.S., which lacks a board quorum. There are four board members nominated by President Trump – two Democrats and two Republicans, but their appointment is being held up in the Senate by Sen. Pat Toomey, R-Pa., who seeks bank reform. The Ex-Im Bank is unable to vote on capital projects with a value of more than US$10 million. That makes it a nonstarter in the project industry.

Schubert, a former U.S. Maritime Administrator, said the Ex-Im Bank is needed because without export capital, there won’t be a capital project. He said 60 percent export credit agency project financing is a common requirement for big projects. “We are the only western country without a functioning export credit agency.” Ex-Im financing for U.S. projects peaked in 2014, at close to US$17 billion.

Schubert conducted a survey of five U.S.-based global engineering, procurement and construction companies and determined that together they had US$68 billion in lost opportunities over a 12-month period due to the lack of U.S. export credit agency financing. There are current projects in the works that also need financing, and there have been lost opportunities related to expansion and follow-on (operating and maintenance) business as well.

He said that the Ex-Im Bank shutdown impacts U.S. presence overseas, encourages the migration of the supply chain outside of the U.S., harms the U.S. strategic industrial manufacturing base and can impact projects of strategic national interest such as those in the nuclear and satellite industries.

“We need to get back up and running as soon as possible, or everybody is going to lose,” Schubert said. BB

ECONOMIC HARM FOR MARITIME INDUSTRY

John Foster, president of Kurt Orban Partners and chairman of the American Institute for International Steel, said that steel dominates the breakbulk business in the U.S. He said that when “over-thetop aggressive moves” in Washington restrict steel movements, the maritime industry suffers.

Trade session panelists (from left), Capt. Bill Schubert, International Trade and Transportation Inc.; Mario Mancuso, Kirkland & Ellis; Kathy Canaan, Fluor; and John Foster, Kurt Orban Partners.

www.breakbulk.com BREAKBULK MAGAZINE 59

Joshua Cotton, Bechtel equipment operations manager, speaks while daughter Evelyn programs a self-made robotic vehicle.

Lessons from a Nine-Year-Old

BY LORI MUSSER

Row upon row of veteran breakbulk industry players were under the spell of nine-year-old Evelyn Cotton at a Breakbulk Americas session on innovation.

Under the watchful eye of her father, Bechtel equipment operations manager Joshua Cotton, Evelyn took a couple of minutes and programmed on-thespot a small self-made robotic vehicle to respond to movements in front of it, essentially acting as a guard dog.

The point made so cleverly by a child is that there is a new generation among us, one that makes child’s play out of incorporating technology into everyday activity, one that will expect technological advantages from industry in the future, and one that is inspiring innovation in our breakbulk and project cargo industries today.

Stephen “Spo” Spoljaric, Bechtel Oil, Gas & Chemical’s deputy field procurement manager, said companies must stay relevant, and using the same technology that we see every day – such as when 60 BREAKBULK MAGAZINE www.breakbulk.com

booking a rideshare or OpenTable restaurant reservation, or when using an electronic boarding pass – is an important way to maintain relevance.

Spoljaric said innovation and technology should be easy, but the key is integrating digitally across relationships in a transformative way.

“Our industry at its core is very, very traditional,” said Carsten Wendt, who heads up sales for high and heavy cargo and breakbulk for Wallenius Wilhelmsen Ocean.

“I personally believe we are just at the beginning,” Wendt said, citing the potential to invent digital solutions to make things “better, smarter and more cost effective.”

Wendt outlined a pilot project in Singapore to deliver spare parts to vessels via drone. He said cost savings could be upwards of US$4,000 per delivery. He said that across 200 ports, if there were only perhaps two drone lifts per day, savings could exceed US$675 million per year.

Cotton said Bechtel is working hard to leverage everyday technology at work. He said even very simple technology, like using Amazon to

order gloves and welding rods, will eliminate a whole bunch of paperwork and lend a competitive edge.

Drones are another tool used at Bechtel to enhance efficiency and lower costs. “We have about 45 different use cases for drones,” Cotton said. “We use them for real estate management; we’ll fly over a 400-acre laydown yard, calculate the unused space and find a way to reorganize it to make more space available. We use them for surveys.

It saves on boots-on-the-ground surveyors.”

Cotton said that a vertically integrated impetus for technology has begun. For example, customers are beginning to call for innovations related to safety. He said engineering, procurement and construction companies that can provide innovation and technology may derive an advantage – a differentiating factor from the competition. BB Go to youtu.be/2ZmiLcIIBl4 to watch Evelyn Cotton’s session at Breakbulk Americas.

ISSUE 6 / 2018

Finding Cures for Project Cargo Risk

BY LORI MUSSER

In a world of razor-thin margins and vast uncertainties, each partner in a highly complex project wants to minimize risk. Industry experts at a Breakbulk Americas session shared their thoughts on how much risk they can bear, and how to manage it.

Forwarders said they are taking responsibility for their share, but are working hard with all supply chain parties to minimize end-to-end risk.

Jake Swanson, global sector head for engineering, procurement and construction for DHL Industrial Projects, said that project forwarder contract negotiations may be complicated by the fact that terms of draft EPC contracts are often more suited to materials purchases than complex transportation services.

Joye Runfola, senior project logistics specialist with Americas’ procurement for multinational Air Liquide USA, said it is important to identify risks in advance. “If we don’t understand ahead of time, and it isn’t clearly defined, then who is going to take that risk?”

Corey Henry, regional senior logistics manager America (NCSA) for EPC McDermott, said: “If I submit a scope, I expect to collectively figure out how to mitigate a risk on both sides … It’s an education process. Educating people upstream, downstream.”

Because a massive project shipment from China to the Americas requires far more complex logistical solutions than simply ordering on Amazon to ship a stapler, Henry said the details and definitions of scope have to be well understood by all from the outset.

Corey cautioned that the task of defining risk in itself can be onerous.

For example, “there is definitely a difference between a reimbursable environment versus a lump-sum environment.”

“We really try to have an open relationship,” said Leandro Brusque, supply chain manager for Ocyan, a service provider to the oil and gas industry. The company also sees value in working with its partners to decrease risk, and that means developing risk profiles on those

Leandro Brusque, supply chain manager for Ocyan, speaks at Breakbulk Americas.

partners and engaging its customers in new and meaningful ways. “We definitely need to change the game.

The market is not good for anyone.

We need to sit together at a table and have a clear discussion, a transparent discussion … otherwise we all will sink,” Brusque said.

Dennis Devlin, director of industrial projects USA and the Houston branch of transport and logistics giant Geodis, said the current trend of pushing as much risk on forwarders as possible is not sustainable. And, when the market becomes more robust, project forwarders will be able to pick and choose business and will pick work with a more reasonable risk profile and better margins. That will leave some businesses hanging.

However, in the down market today, most forwarders don’t have that luxury.

Pat Roche, vice president of projects and energy services for Expeditors, listed a number of factors impacting risk levels, including mitigation strategy and quality of work. He agreed that, as the market improves, there will be motivation to take on the “more profitable work

where the risk is more mutual.”

Roche also said that, in a market where payment terms seem to be getting longer, “a robust program of vetting the financial health of your customers,” may be critical.

The market unknowns are plentiful, and also include such factors as interest rate volatility, rate validity, tariff and trade sanction changes, and regional anomalies.

Solutions, according to the panelists, may include incorporating risk discussions early on in a project, mutual indemnification considerations, removal of irrelevant terms and conditions from contracts, and adept handling of performance bonds and cargo lien waivers and indemnification clauses. Retention clauses, the definition of force majeure, breaches of law that are uncapped, warranty provisions, an offsetting capability that allows short payment on an invoice, and even rust clauses – all of these are common but problematic issues in logistics.

Many of these solutions can be provided for contractually. As Roche said: “A well-negotiated contract is a healthy contract.” BB www.breakbulk.com BREAKBULK MAGAZINE 61

ADVERTORIAL

SERVYGRU, your ally in Mexico As part of Breakbulk on the Rise, we got a little taste of everything.

We shared a booth, marketed our company, and used other tools to help us promote Servygru in this international forum.

This past October SERVYGRU participated for the first time in Breakbulk Americas as an exhibitor. As part of Breakbulk on the Rise, we got a little taste of everything. We shared a booth, marketed our company, and used other tools to help us promote Servygru in this international forum. It was a great experience!

Our primary objectives for Breakbulk Americas were networking, reaching a new market and putting SERVYGRU in people’s minds. As a young company of merely three years, it was an excellent opportunity to introduce SERVYGRU and showcase what we can do for the industry.

We are a young company with the talent and experience of more than 40 years in the transport sector. This has given us two significant advantages: First, the knowledge and expertise of different areas, thanks to the people who started the company. From entrepreneurs of a third-generation trucking family business – SERVYGRU being their second adventure in creating and growing a successful transport company – to IT transport software experts, we are proud to have a team with a great attitude ready to give 200%.

Second, as a new company, we have worked hard from the beginning to have systems and procedures in place. With quick access to information via the ERP system and tracking systems in our units, we have been

62 BREAKBULK MAGAZINE www.breakbulk.com

able to work efficiently and made it easier to obtain necessary certifications such as CTPAT. So what can SERVYRGU do for the breakbulk industry? As experts in Mexican infrastructure with over 40 years of experience in heavy haul, SERVYRGU offers the best fit for different cargos such as heaters, transformers, generators, and wind towers.

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We have two main focuses: Following our passion, and creating a healthy company for clients, employees, and providers to thrive.

As a team player, you’ll find in SERVYGRU an excellent ally to succeed with the challenges the Breakbulk industry might bring.

Don’t miss out on doing business in Mexico!

ISSUE 6 / 2018

ADVERTORIAL

Buildings that put clients in control…

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Rubb Thermohall insulated warehouse solutions provide flexible, cost efficient, cool space for perishable cargoes, including flowers, speciality foods and pharmaceuticals in an energy efficient and low maintenance environment.

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Rubb provided a 30m x 108m x 5m (98.4 x 354.3 x 16.4 ft.) fabric structure, featuring Serge Ferrari fabric insulated with 150mm (6”) Thermohall® cladding. The hall is divided by a partition inside to accommodate two temperature zones, and is used for storage and maturing of herring in barrels before exporting.

Grøntvedt has now expanded with an additional insulated Thermohall®. This has been linked to the first fabric building and measures 30m x 152m x 5m (98.4 x 498.7 x 16.4 ft.). The structure features the same Thermohall® specifications as the original building. The buildings are energy efficient, with a quick construction time and are perfect for this kind of storage.

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“The halls are excellent for our needs and are of a quality we know we will benefit from for a long time. They keep the required temperature consistently, even on hot summer days.”

– Alexander Grøntvedt Production Manager Grøntvedt Pelagic AS

www.breakbulk.com BREAKBULK MAGAZINE 63

ADVERTORIAL

Global reach and a local touch ITM delivers tailored, flexible and productive transport solutions specialized for your industry.

In this fast-paced and highly competitive world, you need a partner you can trust with your supply chain. Someone who offers the tools and experience to ensure that your products, equipment or machinery arrive on time, wherever you need them. ITM Group is an international heavy-haul carrier, rigging and project cargo freight forwarder. Focused on time sensitive industries, the company is highly specialized in complete plant relocations, overdimensional and heavy weight shipping for machinery and equipment. Based in Houston, Texas, ITM is the shipping agent you need, with a global reach and local touch. Through a dynamic interaction between customers, employees and highly specialized systems, ITM delivers tailored, flexible and productive transport solutions specialized for your industry.

Steel, Mining and Heavy Industries ITM provides tailored over-dimensional and heavy weight transportation solutions delivered to remote job site locations across Canada, the United States and Mexico for steel products such as pipes, plate, and coils. Other services include: storage and distribution services to job site, ocean freight for abnormal loads, blocking and bracing services and doorto-door transportation for heavy equipment.

Chemical Industry Safety, trust, and global services from one source – these are the core characteristics of chemical logistics solutions from ITM Group.

64 BREAKBULK MAGAZINE www.breakbulk.com

With many years’ experience in the handling of hazardous goods, ITM not only supports well-known global chemical corporations but also the numerous small and mediumsized enterprises which are the backbone of the chemical industry with efficient and economical rail transport for bulk solid or liquid chemicals. ITM also offers transloading, ISO tank transportation and leasing and direct tank trucking services with a seamless crossborder service between the US, Canada and Mexico.

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ISSUE 6 / 2018

BACK PAGE LEADING NORTH AMERICAN INFRASTRUCTURE PROJECTS 2018

CG-LA Infrastructure’s projects list, which covers the top 100 projects, represents US$512.6 billion in total project value across 12 sectors, compared with US$312 billion in 2017. CG-LA says the spike reflects “pent-up demand and robust new project originations.”

PROJECT SPONSOR STATE STATUS

VALUE SECTOR

(US$B)

1

SeaOne Caribbean Fuels Supply

SeaOne Holdings LLC

Mississippi

Planning

Energy – Oil & Gas

20.0

2

The Texas Central HSR

Texas Central Partners LLC

Texas

Procurement

Rail – HSR

15.0

3

The Gateway Program (Hudson Tunnel Project)

Port Authority of New York and New Jersey New York/New Jersey Design

Rail

12.7

4

Reseau Electrique Metropolitain (REM)

CDPQ Infra

Quebec

Construction

Urban Mass Transit

4.9

5

Appalachia Storage and Trading Hub

Appalachia Development Group

West Virginia

Announced

Energy – Oil & Gas

10.0

6

Hell’s Kitchen Lithium and Geothermal Plant

Controlled Thermal Resources

California

Planning

Energy – Renewable

1.8

7

VIA Rail High-Frequency Plan

VIA Rail

Quebec

Feasibility

Rail

4.6

8

Gordie Howe International Bridge

Windsor-Detroit Bridge Authority

Michigan/ Ontario

Awarded

Highways, Bridges & Tunnels

2.6

9

Durham-Orange LRT

GoTriangle

North Carolina

Design

Urban Mass Transit

2.5

10

Millennium Line Broadway Extension

Translink (Vancounver Metro)

British Columbia

Design

Urban Mass Transit

2.2

11

Louis-Hippolyte- LaFontaine Tunnel Rehab.

Québec Ministry of Transports

Quebec

Procurement

Highways, Bridges & Tunnels

1.0

12

VTA BART Silicon Valley Extension Phase II

Valley Transportation Authority

California

Design

Urban Mass Transit

4.7

13

Calgary Green Line LRT

City of Calgary

Alberta

Design

Urban Mass Transit

4.7

14

LA Metro – West Santa Ana Branch

LA Metro

California

Feasibility

Urban Mass Transit

4.5

15

Federal Way Link Extension

Sound Transit

Washington

Design

Urban Mass Transit

2.5

Metro Gold Line Foothill Extension Construction Authority

California

Procurement

Urban Mass Transit

1.5

16

Foothill Gold Line Extension

17

Cotton Belt Regional Rail

Dallas Area Rapid Transit (DART)

Texas

Planning

Urban Mass Transit

1.1

18

Port of Long Beach – Pier B On-Dock Rail Support Facility

Port of Long Beach

California

Feasibility

Ports & Waterways

0.8

Montreal Pink Line (Ligne Rose) 19

City of Montreal - l’Autorité régionale de transport métropolitain (ARTM)

Quebec

Feasibility

Urban Mass Transit

4.5

20

City of Ottawa

Ottawa Light Rail Transit (LRT) Stage 2

21

SOO Green Renewable Rail Project SOO Green Renewable Rail LLC

Ontario

Design

Urban Mass Transit

2.8

Iowa, Minnesota, Dakotas

Planning

Energy – Transmission

2.5

22

2nd Avenue Subway Phase 2

MTA

New York

Design

Urban Mass Transit

2.3

23

D2 Subway

Dallas Area Rapid Transit (DART)

Texas

Procurement

Urban Mass Transit

1.3

24

Toronto SmartTrack

Metrolinx and TTC

Ontario

Planning

Urban Mass Transit

1.1

25

Pattullo Bridge Replacement (P3)

Translink (Vancounver Metro)

British Columbia

Procurement

Highways, Bridges & Tunnels

1.1

26

Capital Line – South

City of Edmonton

Alberta

Design

Urban Mass Transit

0.5

27

Metrolinx Regional Express Rail - GO Regional Express

Metrolinx (GO Transit)

Ontario

Procurement

Rail

28

Maryland I-495 Capital Beltway & I-270 P3 Program

Maryland DOT

Maryland

Planning

Highways, Bridges & Tunnels

9.1

29

Honolulu Rail Transit

Procurement

10.4

HART

Hawaii

Urban Mass Transit

8.3

TransWest Express Transmission Line

TransWest Express LLC (The Anschutz Corp.)

Wyoming, Colorado, Planning Nevada, Utah

Energy – Transmission

3.0

USACE

3.0

30 31

Olmsted Lock and Dam

Illinois

Construction

Ports & Waterways

32

Brightline Phase 2 (Miami-Orlando Expansion) All Aboard Florida

Florida

Planning

Rail

3.0

33

Southwest Light Rail Extension

Metropolitan Council

Minnesota

Planning

Urban Mass Transit

2.4

34

CTA Red and Purple Modernization

Chicago Transit Aurhority

Illinois

Design

Urban Mass Transit

2.1

35

The Gateway Program (Portal Bridge Replacement Project)

New Jersey Transit

New Jersey

Procurement

Highways, Bridges & Tunnels

1.6

36

Line 4 Subway Extension, Martín Carrera-Tepexpan

Secretaría de Comunicaciones y Transportes

Mexico

Feasibility

Urban Mass Transit

1.5

37

North End Sewage Treatment Plant (NEWPCC)

City of Winnipeg

Manitoba

Planning

Water & Wastewater

1.1

38

Howard Street Tunnel Modernization

Maryland DOT & CSX

Maryland

Planning

Highways, Bridges & Tunnels

0.5

39

California WaterFix

DCA & DWR

California

Design

Water & Wastewater

17.0

40

Toronto-Windsor HSR (Ontario)

Ontario Ministry of Transportation (MTO)

Ontario

Design

Rail - HSR

15.4

41

Pure Water San Diego

City of San Diego

California

Planning

Water & Wastewater

42

Red River Water Supply Project

Garrison Diversion Conservancy District

North Dakota

Design

Water & Wastewater

1.1

43

Hamilton LRT

Infrastructure Ontario/Metrolinx

Ontario

Procurement

Urban Mass Transit

0.8

44

Kicking Horse Canyon Project – Phase 4

BC Ministry of Trans and Infrastructure

British Columbia

Planning

Highways, Bridges & Tunnels

45

Utah Lake Restoration Project

Lake Restoration Solutions inc.

Utah

Planning

Water & Wastewater

46

Chicago O’Hare Airport Expansion

Chicago Department of Aviation

Illinois

Design

Airport

8.7

47

Nashville nMotion Long-Range Transit Plan

Nashville MTA

Tennessee

Announced

Urban Mass Transit

6.0

Ports & Logistics

Water & Wastewater

Urban Mass Transit

Highways & Bridges

Rail

Energy

Airport

1.2

0.3 125.0

Telecommunications

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PROJECT SPONSOR STATE STATUS

VALUE SECTOR

48

Relief Line North

Metrolinx and City of Toronto

Ontario

Planning

Urban Mass Transit

4.8

49

Champlain-Hudson Power Express

Transmission Developers, Inc.

New York

Planning

Energy – Transmission

2.2

50

Roberts Bank Terminal 2 Expansion

Port of Vancouver

British Columbia

Planning

Ports & Waterways

2.0

51

O’Hare Express System Project

Chicago Infrastructure Trust

Illinois

Procurement

Urban Mass Transit

1.0

52

Howard Frankland Bridge

Florida Department of Transportation

Florida

Design

Highways, Bridges & Tunnels

0.8

53

Gov. Harry W. Nice Memorial Bridge Replacement

Maryland Transportation Authority

Maryland

Procurement

Highways, Bridges & Tunnels

0.8

54

I-70 Floyd Hill to Veterans Memorial Tunnels Improvements

Colorado DOT

Colorado

Feasibility

Highways, Bridges & Tunnels

0.7

55

Port of Montreal Contrecœur Container Terminal Montreal Port Authority

Quebec

Design

Ports & Waterways

0.6

56

South Dade BRT

Florida

Feasibility

Urban Mass Transit

0.3

57

LBJ East I-635

Texas DOT

Texas

Procurement

Highways, Bridges & Tunnels

1.6

58

I-69 BridgeLink (Ohio River Crossing)

Indiana DOT and Kentucky Trans Cabinet

Kentucky/ Indiana

Planning

Highways, Bridges & Tunnels

1.5

59

Pittsburgh International Airport Modernization

Alleghany Airport Authority

Pennsylvania

Design

Airport

1.1

60

I-95 Express Lanes Fredericksburg Extension Virginia DOT P3

Virginia

Procurement

Highways, Bridges & Tunnels

0.6

Miami-Dade Transit

(US$B)

61

Gross Reservoir Expansion Project

Denver Water

Colorado

Feasibility

Water & Wastewater

0.5

62

Telecomm Trunk Network

Ministry of Coms and Transportation

Mexico

Planning

Telecommunications

0.4

63

Los Berros Water Treatment Plant of the Cutzamala System

CONAGUA

Mexico

Planning

Water & Wastewater

0.1

64

Vancouver-Seattle HSR (Pacific Northwest WSDOT/BC Ministry of Transportation HSR Corridor)

British Columbia/ Washington

Feasibility

Rail – HSR

65

Interconnection SIN-BCS Transmission Line

Secretariat of Energy (SENER)

Mexico

Planning

Energy – Transmission

1.6

66

LaGuardia Airtrain Project

MTA

New York

Planning

Airport

1.5

67

Cascade Power Project

Cascade Power

Alberta

Planning

Energy – Oil & Gas

1.2

68

The Northwest Water Treatment Facility

City of Wichita

Kansas

Procurement

Water & Wastewater

0.5

69

Lake Manitoba and Lake St. Martin Outlet Channels Project

Manitoba Infrastructure

Manitoba

Planning

Ports & Waterways

0.4

70

London BRT

City of London

Ontario

Planning

Urban Mass Transit

0.4

Ministry of Coms and Transportation – General Directorate of Road

Mexico

Feasibility

Highways, Bridges & Tunnels

0.2

Navajo Telecom Project Navajo Telecom LLC 72

Arizona, Colorado, New Mexico, Utah

Planning

Telecommunications

0.1

73

Mexico

Planning

Water & Wastewater

0.1

Bay du Nord Oil Project Newfoundland & Labrador, Equinor Canada 74

Newfoundland & Labrador

Announced

Energy – Oil & Gas

8.3

Cancún-Tulum Train 75

Agency of Strategic Projects of the State of Quintana Roo (AGEPRO)

Mexico

Procurement

Rail

2.2 1.2

71

Las Brisas-Los Mochis Highway

Desalinization Plant of Los Cabos, Baja California Sur

CONAGUA

40.0

76

Wataynikaneyap Transmission Project/ Northern Ontario Grid Connection Project

Wataynikaneyap Power

Ontario

Design

Energy – Transmission

77

I-95 ETL Northbound Extension

Maryland Transportation Authority

Maryland

Design

Highways, Bridges & Tunnels

1.1

78

Trinity Lakes TOD Station

Gateway Planning

Texas

Planning

Urban Mass Transit

1.0

79

New England Clean Energy Connect

Central Maine Power (CMP)

Maine

Planning

Energy – Transmission

1.0

80

Kaw Lake Alternative Water Supply

City of Enid

Oklahoma

Design

Water & Wastewater

0.5

81

Natural Gas Strategic Storage Facility

CENAGAS

Mexico

Procurement

Energy – Oil & Gas

0.3

82

Jaltipan – Salina Cruz Pipeline

CENAGAS

Mexico

Feasibility

Energy – Oil & Gas

0.2

83

St. Louis-Lambert Int’l. Airport Privatization

St. Louis Airport Authority/City of St. Louis Missouri

Planning

Airport

1.0

84

Gemini Solar Project

Quinbrook Infrastructure Partners

Nevada

Planning

Energy – Renewable

1.0

85

Saddle Creek Combined Sewer Overflow Retention Treatment Basin

City of Omaha

Nebraska

Design

Water & Wastewater

0.1

86

LNG Canada Export Terminal

LNG Canada

British Columbia

Design

Energy – Oil & Gas

87

I-84 Viaduct Redesign

Connecticut DOT

Connecticut

Planning

Highways, Bridges & Tunnels

88

The Ixtepec – Yautepec Transmission Line

Secretariat of Energy (SENER)

Mexico

Planning

Energy – Transmission

89

Goldboro LNG

Pieridae Energy

Nova Scotia

Planning

Energy – Oil & Gas

90

Blue Hill Wind Project

SaskPower

Saskatchewan

Planning

Energy – Renewable

0.4

91

Ocean Outfall Discharge Reduction and Resiliency Enhancement

Miami-Dade County

Florida

Procurement

Water & Wastewater

0.2

92

Port Fourchon LNG

Fourchon LNG LLC

Louisianna

Planning

Energy – Oil & Gas

1.0

93

Don River and Central Waterfront Wet Weather Flow System – Phase 1

City of Toronto

Ontario

Procurement

Water & Wastewater

0.3

94

Alaska LNG

Alaska Gasline Development Corp.

Alaska

Planning

Energy - Oil & Gas

95

Newark Airport Terminal One Redevelopment PANYNJ

New Jersey

Awarded

Airport

96

Diamond Head Concourse Honolulu Airport

Hawaii DOT Airport Division

Hawaii

Announced

Airport

1.1

97

Fourth Parallel Runway at Charlotte Douglas International Airport

City of Charlotte

North Carolina

Planning

Airport

0.4

98

Skipjack Wind Farm

Deepwater Wind

Maryland

Design

Energy - Transmission

0.7

99

DC Street Light Modernization

DC OP3

District of Columbia

Procurement

Urban Renewal

0.2

100

Asheville I-26 Connector

North Carolina DOT

North Carolina

Design

Highways, Bridges & Tunnels

0.8

30.8 4.3 1.2 10.0

43.0 1.4

Source: 2018 Strategic 100 North American Infrastructure Report, 10th edition, www.cg-la.com.

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