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