Breakbulk europe 2017 event recap

breakbulk europe 2017

EVENT RECAP April 24-26, 2017 • Antwerp Expo • Antwerp, Belgium www.breakbulk.com BREAKBULK MAGAZINE 63

64 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2017

conference recap

‘ROUGH RIDE’ TO RETURN TO MULTILATERALISM

BY CARLY FIELDS

Industry needs to find a way back to workable multilateralism to overcome the threat of rising populism and the impact that might have on the breakbulk sector, a prominent lawyer has advised.

Speaking at Breakbulk Europe, Ana Stanič, founder and director of UK-based E&A Law, warned of a “rough ride” ahead as industry adapts to a new way of multilateralism that addresses the loss in confidence in international institutions.

“We’re in a state of paradox of progress where we could go either way,” Stanič said. “We could go into a much

more dangerous world, or we could try to find what the opportunities are.”

She favors a move to a new rulebased system at a multilateral level to replace the system in place today, which is viewed as ineffective.

“Unless we figure out a way, particularly in the EU, to address the institutional efficiencies, there is a strong likelihood that the institution won’t survive.”

Institutions under threat in a world of rising populism and nationalism include the World Bank, the International Monetary Fund, the United Nations and the European Union.

Project cargo companies that survive will be those that “grasp the mettle,”

acknowledge that industry is moving to something new, and position themselves accordingly. “We are living in unprecedented times, and being ahead of the curve is what will make the difference,” Stanič said.

While she sees a rough ride ahead as industry and civil society come up with new solutions, companies in the breakbulk business should play an active role in redrafting and revising to contribute to what “that new thing” is going to look like.

“What is clear is that it’s not going to be what we have today,” she said. “The key is how quickly we are able to put that into place, and how much of a rough, uncertain and chaotic period we have in between.”

From Conference Session “Brexit, Trump and Trade: Fasten Your Seat Belts – Bumpy Ride Ahead”

CARRIERS TOLD TO KICK-START LOW SULFUR TALKS

BY CARLY FIELDS

Project cargo carriers need to urgently ramp up their conversations with shippers about the 2020 deadline for the switch to low-sulfur marine fuels worldwide, an audience at Breakbulk Europe heard.

From Jan. 1, 2020, International Maritime Organization regulations require that the sulfur limit in the heavy fuel oils used as bunker fuel worldwide be reduced from 3.5 percent to no more than 0.5 percent.

Wallenius Wilhelmsen Logistics’ Roger Strevens described the incoming legislation as a “brutal shock” to the industry.

“We’ve had changes before, but this is something completely different,” he said.

Shippers complain that they have been largely left in the dark on what impact this will have on project cargo moves.

Patrick Legault, president of Falcon

International, said there was “very little awareness” of a regulation that is going to have a huge impact. “Ultimately the buyer is going to have to pay for this.”

Robin Meech, Marine and Energy Consulting managing director, added that many shippers he had encountered did not believe the legislation would affect them. “But, if you are a shipper and you put your cargo on a ship that stops because of issues with burning 0.5 percent sulfur fuel that is a problem for you.”

Alex Strogen, senior global category leader at GE Energy, complained that so far only one carrier had proactively approached GE to talk about the issues.

“But it’s huge and we need to talk more,” he said. “Carriers might not have the answers right now, but that’s not an excuse to not start discussing and brainstorming.”

With shippers preparing freight quotes up to four years in advance,

Strogen added that any price spikes as a result of the legislation need to be factored in now. “We can’t have our margins being eroded like that, that is unacceptable.”

Information from carriers on the potential impacts of the regulation will make it easier for shippers to plan and prepare for any price shocks. Without that information, shippers warned that there could be a significant impact on international project cargo trade.

Strogen said: “Carriers have a perception that they will just pass costs along to shippers. But we will just start near shoring, which will cut into project volumes.”

Legault agreed, adding the costlier imports become for shippers, the less interest there will be in trade overseas.

“We need more information so we can inform shippers that they will need to pay more freight,” he said.

From Conference Session “Sulphur Shock: Countdown to 2020” www.breakbulk.com BREAKBULK MAGAZINE 65

66 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2017

conference recap

STANDARDIZATION KEY FOR PROJECT INDUSTRY

BY GARY BURROWS

While the project industry is facing a severe downturn in available work, cargo owners and engineering, procurement and construction companies further impact their bottom line by failing to standardize their operations, according to a keynote presentation at Breakbulk Europe.

The project business has “fallen off the cliff,” not only in projects in the works, but in willingness to invest and industry demographics, said Allison J Aschman, corporate director, IPA Capital Solutions.

Beyond the continual fallout from the financial crisis, a range of political and trade issues have buffeted the project owners and EPC companies.

“Companies have cut back drastically on capital spend from 2013 onwards,” Aschman said.

Only 195 projects of more than US$10 million were completed in 2016, the lowest volume since the 1990s, according to IPA, a research and benchmarking

consultant focusing on capital project systems, with 16,000 projects in its database. This is compared to 250 in 2015.

Normally there are about 200 to 300 large projects completed in any year.

One reason for the slippage is that many large-scale projects have been delayed, and so they are excluded from IPA’s completed project database, she said.

The investment landscape has changed among petroleum projects, Aschman added. The number of multibillion-dollar megaprojects sanctioned since 2008 is a fraction of numbers from prior years. Investors are not in a risk-taking mood, so there are fewer speculative investments, and they focus on U.S. and parts of Europe and Middle East, and avoid emerging economies.

Of large-scale onshore projects authorized in 2016, the U.S. led with 44 percent of projects, worth US$18.5 billion. Europe and CIS countries housed 17 percent of projects, but only US$2.4 billion in value.

The Middle East accounted for 12 percent of projects, worth US$15.2 billion. Asia was next at 10 percent (US$6.7 billion), as

its transition from exports and through lower GDP growth. Next is Canada at 7 percent (US$14.4 billion), followed by South America at 6 percent (US$4 billion), Africa at 3 percent (US$1.2 billion), and Australia, 1 percent (US$3.9 billion).

Businesses are not gaining the value they expect from projects, due to schedule slippage, asset problems, cost overruns and because sales of product degrade from the time the projects are sanctioned through the first few years after startup, Aschman said.

With the downturn, companies have been forced to cut back. Already faced with a demographic shift, as older stalwarts are retiring, leaving a “dearth of mid-career professionals,” further staff cuts, reorganizations, less training spend and forced supply chain cost reductions have become the problem rather than a lean-and-mean solution. Worse, engineers and contractors are taking on work “below their fully burdened cost; this is obviously not sustainable,” she said.

Owners and EPCs may know the right processes and practices, but the skill and experience to make them effective is gone or marginalized, Aschman explained. To compensate, they’ve turned more to the contractors, but the long-term solution is to maintain that expertise in-house, she said.

The industry pins its hopes on firming of oil prices over the next 18 months, but it will be merely a shadow of its glory days. Still, at US$55 per gallon, oil prices will move some companies to begin investment anew.

Aschman said exploration and production has become a low-margin industry, and it’s time to start acting like it. This includes longer, steadier production with lower capital cost of production; focusing on cost of goods sold in design of facilities; and scaling projects so they are simple and effective rather than building the biggest and best possible, only to have less-than-optimal production averages due to lower demand.

“Think truly about standardization,” Aschman said. “Really think about how to plan, execute and fund projects differently than in the past. Look at those that are effective and learn from them.”

From Conference Session “Capital Projects Outlook: Project Pipeline and Trends” www.breakbulk.com BREAKBULK MAGAZINE 67

conference recap

CUSTOMERS EXPECT SMART DATA USE

BY CARLY FIELDS

Companies in the project cargo industry might admit to being scared about what digitalization means, but that doesn’t stop customers expecting them to do something useful with data, Tim Paridaens, director, Internet of Things at Deloitte Consulting in Belgium, said at Breakbulk Europe.

Indeed, data-driven intelligence “is expected” today, he said, as customer expectations change.

However, the industry faces problems on the data side, particularly with data gaps, quality and latency. “Most of the data we use today is for diagnostics, so it is focused on the past,” Dieter Degryse, general manager of Transportation Operations EAME at Caterpillar, added.

Caterpillar is exploring sensorenabled technologies for end-to-end tracking of cargo, however Degryse acknowledged that this was not a solution for all. “Sensor strategy at the current price point ($100-$200 per unit) is currently cost prohibitive to put on every machine. But we need to leverage every machine that talks – it’s about trying to strike the right balance.”

Degryse remained convinced that the breakbulk industry will see “significant and rapid change” in this space in the short term, but added that data sharing and collaboration is key.

“Talking about sharing makes people uneasy, but we need a culture shift, as there’s tremendous opportunities for all of us if we try to be open-minded on what is in the realms of possibility,” he said.

From Conference Session “The Internet of Breakbulk Things: When Cargo Talks” 68 BREAKBULK MAGAZINE www.breakbulk.com

BREAKBULK CARGO WILL SURVIVE BREXIT

BY CARLY FIELDS

UK-based forwarder Tuscor Lloyds does not believe that Brexit – Great Britain’s exit from the European Union – will have a marked impact on the breakbulk sector.

Whether the UK opts for a so-called soft or hard Brexit, the project-driven oil and gas, mining and agricultural sectors are largely immune to changing customs regimes and regulatory frameworks as their business models focus on global commodity prices.

“These industries are the largest contributors to the project cargo market, so we don’t expect to see Brexit making a huge impact on the breakbulk sector,” Neel Ratti, Tuscor Lloyds general manager, said at Breakbulk Europe.

“Actually, we think the project cargo sector is much more resilient than the general cargo sector to a market shock such as Brexit.”

That said, Ratti confirmed that the forwarder is still “hoping for the best but preparing for the worst.”

Those preparations include bringing in more skills to its business, drawing up

faster and more precise customs entries and transit documentation, and hiring more clerical staff to process entries quickly. It is also considering creating small brokerage offices at the major cargo exit points.

“Even if it’s too early to know the outcome, we can still make ourselves ready to service projects for our clients,” Ratti said. “It is better to be ready and know what to do instead of reacting to the situation when it’s finally decided. Actually, we can mobilize right now without impacting our operations or investing much money.”

He did raise the concern that without a clear strategy at government level, project cargo and related goods could be held up at crossing points, causing delays, stoppages and congestion. But, taking a macro view, Brexit should not deter project cargo movers from doing business in the region, Ratti added.

“Despite Brexit, the EU and UK will remain easy places to do business,” he said, pointing out that many energy and mining firms already operate in much more hostile and bureaucratic regions than the free markets of Europe.

From Conference Session “Practical Matters: Brexit at the Borders” ISSUE 3 / 2017

booth winners

BEST

BREAKBULK EUROPE

OF

2017

CLOCKWISE FROM TOP LEFT: “Best Design” winner NileDutch; “Most Interactive” winner Liebherr;

“Most Educational” winner Geodis; “Most Welcoming Staff” winner Nirint Shipping BV

www.breakbulk.com BREAKBULK MAGAZINE 69