Breakbulk Magazine May/June 2015

EU Energy Blueprint n Axe U.S. Oil Export Ban? n India’s Nuclear Path n Breakbulk China Coverage

MAY/JUNE 2015

CLIMATE CHANGE Wind Energy Cools in Eastern Europe

SPECIAL FEATURE: TENTH ANNIVERSARY SUPPLEMENT

contents

24 ENERGY UPDATE

EU ENERGY BLUEPRINT

Navigating Europe’s Changing Energy Landscape

30 OIL + GAS

AXE U.S. CRUDE OIL EXPORT BAN? Surprising Impacts on Supplies, Shipping and Prices

36 NUCLEAR ENERGY

INDIA’S NUCLEAR PATH

Controversy Ensues Amid U.S.-India Nuclear Deal

10 CLIMATE CHANGE Wind Energy Cools in Eastern Europe

cover story

44 BREAKBULK CHINA 2015

HANDOUT WIPEOUT

Beating Back Bribery in Project Cargo

47 BREAKBULK CHINA 2015

CHINA DOWNSHIFTS Finding Traction in China’s Economic Slowdown

70 AIR CARGO

AIR APPARENT Air Freight Plays Role in Expanding Project, Breakbulk Markets

8 Editorial n 52 Breakbulk China – A Look Back n 106 Breakbulk Index n 114 Navigating Post-sanction Eurasia 4 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

contents

78 OCEAN SERVICES

GREEN LIGHT FOR STEEL

Ports Breathe Easier as China Lifts Valemax Ban

84 TECHNOLOGY

INFORMATION INNOVATION

Logistics Melds Technology with Expertise

94 LOGISTICS PERSPECTIVE

FROM MYTH TO MEDIATOR

James Chan’s Bicultural Roots Help Businesses Connect with China

90 COPING WITH DEMAND Projects Point Up Russia’s Heavy-lift Needs

country report

98 PORT NEWS

MOBILE COILED FOR GROWTH Steel Finds Sweet Home in Alabama

101 PORT FOCUS

ALIVE AND WELL Despite Competition, Hong Kong’s Port Prevails

54

ADVERTORIAL SPECIAL

PROJECT SOLUTIONS

6 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

editorial

OUT ON A LIMB

T

Gary Burrows

here was a photo that spread like a digital virus through social media a few years back. U.S. gas prices had encroached upon $4 a gallon. The photo depicted a gas station sign displaying fuel prices, in which the cost of regular gas is listed as “ARM” and the premium price as “LEG.” Appendages have survived, however, as gas prices plummeted due to the revolutionary development of U.S. shale oil extraction – along with a commensurate drop in U.S. dependence on imported oil, something that 40 years ago would have been considered an impossibility.

Yet despite the enormous potential from this profound development, many appear to panic at the prospect of ending a decades-old ban on U.S. exports of crude oil.

Legislation borne during the 1970s “energy crisis” continues to apply rules to a playing field universally changed by the shale revolution. Borne out of attempts to protect against dependence on foreign oil, the rule hoards U.S. production. Now, it runs the risk of choking on a glut of product.

From the 1970s to 2008, U.S. crude oil production fell by half.

Output has rebounded 64 percent, or 3.2 billion barrels per day, from 2008 to March 2014, according to analyst IHS Global Inc. In the process, oil production has spearheaded the U.S. economic recovery, boosting the country’s gross domestic product by 1 percent in each of the past two years, IHS says.

Ed Osterwald, a partner with CEG Europe, provides some deeper insights on the positive developments that would ensue by ending the U.S. export ban on crude oil. His detailed analysis is

8 BREAKBULK MAGAZINE www.breakbulk.com

available on page 30.

He points out that the U.S. has managed to circumvent the export ban by converting surplus shale oil into fuels, which can be exported. Small solace, as refineries pay low prices for U.S. oil that has no alternative buyers.

And with improvements in shale production and more economical extraction methods, the U.S. oil industry is running out of options and is now at risk of becoming a victim of its own success.

Now that would be a crisis, failing to capitalize on a potential success story that creators of the U.S. oil export ban would have viewed as a miracle.

According to IHS, lifting the export ban and allowing U.S. crude to trade freely would increase production from the current 8.2 million barrels per day to 11.2 million by 2020, and adding investment of nearly US$750 billion. Add to that an additional US$86 billion annually in additional GDP. It’s no secret that, as the oil industry succeeds, support industries including breakbulk and project shipping directly benefit.

There are broader political and economic aspects involved, which Osterwald expertly details. Obviously, being able to provide an alternative product to Russia, Iran or other less desirable nations benefits the U.S. and its trade partners.

But first, cooler heads have to prevail and an antiquated rule cut loose to allow the U.S. oil industry to reach its export potential.

EDITORIAL DIRECTOR Gary G. Burrows / +1 904 535 5460 gburrows@breakbulk.com DESIGNER Catherine Dorrough REPORTERS Alan M. Field V.L. Srinivasan Eugene Gerden Herman K. Trabish Eric Johnson Mark Willis Mary Shacklett

BREAKBULK EDITORIAL BOARD John Amos Amos Logistics

Ed Bastian

BBC Chartering

Murray Cooper

McDemott International Inc.

Etienne de Vel Fednav Belgium

Dennis Devlin Panalpina

John Hark

Bertling Project Logistics

Dennis Mottola Bechtel Corp.

William Moyersoen

ArcelorMittal Antwerp Logistics

Albert Pegg

Antwerp Port Authority

Dirk Visser

Dynamar D.V.

Grant Wattman

Agility Project Logistics

MANAGING DIRECTOR Alli McEntyre / +353.87.381.4021 amcentyre@breakbulk.com ACCOUNT MANAGERS Kathleen Pinson / +1.678.954.0552 kpinson@breakbulk.com Manager for West, East & North Africa Kingsley Ekweariri / +1.353.89.952.4754 kekweariri@breakbulk.com

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By Herman K. Trabish

CLIMATE CHANGE Wind Energy Cools in Eastern Europe

10 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

AS

Credit: GE Energy

recently as 2013, emerging Eastern Europe nations were considered among the wind industry’s brightest prospects.

All the ingredients were there: EU renewables policies, excellent wind resources, financial backing, strong local banking and legal institutions, and developed infrastructure ranging from good ports to good roads.

But while the emerging markets of Central and Eastern Europe built 16 percent of the European Union’s 2013 total new wind, they installed only 7.1 percent, or 838 megawatts, in 2014. Once promising Baltic state markets (Latvia, Estonia, and Lithuania) contributed less than 25 MW.

www.breakbulk.com BREAKBULK MAGAZINE 11

Poland built 894 megawatts of wind power in 2013, bringing its total installed capacity to 3,390 MW. That generated 3.6 percent of Poland’s electricity, according to the Global Wind Energy Council (GWEC). Romania had grown its 2009 capacity of 14 MW to 2,599.6 MW by the end of 2013 and it was on track to meet the EU Directive’s target of 24 percent renewables-generated electricity by 2020. Croatia (301.8 MW), Cyprus (146.7 MW), Ukraine (371.3 MW), and the Baltic states of Estonia (279.9 MW) and Lithuania (278.4 MW) were also opening up for wind.

Then Europe’s economic turmoil started raising questions in political leaders’ minds about the feed-in tariffs (FITs) and other renewables policy supports.

Bulgaria was a perfect example. By the end of 2013, it had built 681.1 MW and was on track to reach the EU Directive’s 16 percent renewables target, according to 2014 wind power statistics from the European Wind Energy Association (EWEA).

But a 2012 amendment to Bulgaria’s 2011 Law for Energy from Renewable Sources cut the FIT term to 12 years and fixed the tariff only when the project’s construction was completed.

Later the same year, all tariffs were reduced a further 10 percent. In 2013, political leaders began considering a (since-defeated) 20 percent fee for wind project income. As a result, Bulgaria added only 9.4 MW in 2014.

“Bulgaria has huge wind potential but the government pulled the rug out from under investors,” said Ivan Pineda, EWEA director of public affairs. “That uncertainty essentially rendered projects unfinanceable.“ Ivan Pineda Similarly threatened policy and tariff changes in Romania reduced its installations by almost half from 694.6 MW in 2013 to 354 MW in 2014.

Allegations in the press that Romanian developers were earning excessive profits because of incentives started a debate among policymakers, Pineda explained. EWEA’s study showed the allegations were untrue, but the Ministry 12 BREAKBULK MAGAZINE www.breakbulk.com

Credit: GE Energy

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WIND POWER INSTALLED IN EUROPE THROUGH 2014 Germany accounted for nearly 45 percent of the European Union’s installed wind energy in 2014.

EU CAPACITY (MW) Austria Belgium Bulgaria Croatia Cyprus Czech Republic Denmark* Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Netherlands Poland Portugal* Romania Slovakia Slovenia Spain Sweden UK TOTAL EU-28

INSTALLED 2013 308.4 275.6 7.1 81.2 – 8.0 694.5 10.5 163.3 630.0 3238.4 116.2 – 343.6 437.7 2.2 16.2 – 295.0 893.5 200.0 694.6 – 2.3 175.1 689.0 2075.0 11357.3

END 2013 1683.8 1665.5 681.1 260.8 146.7 268.1 4807.0 279.9 449.0 8243.0 34250.2 1865.9 329.2 2049.3 8557.9 61.8 278.8 58.3 2671.0 3389.5 4730.4 2599.6 3.1 2.3 22959.1 4381.6 10710.9 117383.6

INSTALLED 2014

END 2014

411.2 293.5 9.4 85.7 – 14.0 67.0 22.8 184.0 1042.0 5279.2 113.9 – 222.4 107.5 – 0.5 – 141.0 444.3 184.0 354.0 – 0.9 27.5 1050.2 1736.4 11791.4

2095.0 1959.0 690.5 346.5 146.7 281.5 4845.0 302.7 627.0 9285.0 39165.0 1979.8 329.2 2271.7 8662.9 61.8 279.3 58.3 2805.0 3833.8 4914.4 2953.6 3.1 3.2 22986.5 5424.8 12440.3 128751.4

* Provisional data Source: European Wind Energy Association.

MAY-JUNE 2015

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of Economics reacted to budget deficits by making retroactive policy changes.

Developers active during Romania’s growth spurt were pushed out of the country or went bankrupt, he added. “There is almost no development by EU companies in Romania now.”

In Poland, Pineda said, “there is a very strong anti-renewables discourse, but the wind industry has found a productive niche because there is a mismatch between the political discourse

and the business atmosphere.”

Poland’s tradable green certificates policy mandated electricity sellers to obtain a portion of their power from renewables, but in 2012 certificate prices collapsed, prompting political leaders to develop the Renewable Energy Sources Act. It is based on a reverse auction in which electricity sellers bid for contracts. Early drafts suggested it would not provide strong support. As a result, the forecast that Poland’s average annual

growth would rise to 500 MW was not realized. The lack of policy certainty caused Poland’s 2013 growth of 893.5 MW to fall to only 444.3 MW in 2014.

Poland is still an important market for wind in Eastern Europe, Pineda said.

Despite the policy changes, it should remain a strong market because of a very good wind resource.

“The countries in Eastern Europe need to come forward with stable regulatory frameworks, not only for wind but

SHIPPING WIND IN EUROPE BBC Chartering and Briese Group are two carriers that partner in carrying European wind power shipments.

BBC Chartering is the global carrier for the Briese Group. Briese Chartering handles regional and coastal project and bulk carrier services in Europe.

Each may operate under the other’s brand if a customer requires a combined service.

BBC Chartering markets about 150 multipurpose and heavy-lift vessels ranging up to 20,000 dwt and with lifting capacities up to 900 tonnes. Briese Chartering runs more than 40 smaller geared and ungeared MPP vessels up to 7,500 dwt and with lifting capacities up to 170 tonnes.

“Briese Chartering is the carrier of choice for many wind power shipments which are mostly covering regional trades in the North Atlantic, the North Sea and the Baltic,” said Raymond Fisch, BBC Chartering’s senior vice president. “BBC Chartering, as the global carrier, is involved in transAtlantic shipments from Houston to Gdynia and on occasion also handles regional shipment involving more significant heavy-lift equipment.”

Congestion is “hardly an issue” at the port of Gdynia, Fisch said.

Qualified, professional stevedores are regularly available. “Most Baltic and Eastern European ports are adequately experienced in receiving vessels and handling port calls smoothly.”

Blades, which mostly move as deck cargo, are always handled in a tandem lift by vessel cranes. The handling 14 BREAKBULK MAGAZINE www.breakbulk.com

A blade is delivered to a site in Romania. / Credit: GE Energy

is supervised by port captains with experience managing wind turbine technology, Fisch explained. “Blades are mostly carried on deck, and handled in compliance with customer cargo requirements and HSEQ plans.”

All wind cargo operations are prepared with a deck and lifting arrangement, the modeling of vessel crane outreach, lifting operation, quay setting, and a cargo securing and lashing plan, he added.

Project cargoes are insured. That requires skilled port captains, stevedores, lashing crews, and the industry standards for cargo handling and equipment, as agreed between the

shipper and the carrier.

Pricing rates for the bulky but not equally heavy blades depends on a variety of considerations not limited to wind technology shipping. They include: • Overall voyage calculation of destination and cargo combination.

• Follow-on charter of the vessel.

• Time sensitivity and availability of tonnage.

• Overall terms of carriage per vessel type, etc., including whether it is geared or ungeared.

• Weight/measure and volumetric rate considerations.

MAY-JUNE 2015

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for their economies,” Pineda said. “Pension funds and private investors that finance wind also finance infrastructure construction. Changes to support schemes that limit forward visibility will make investors lose confidence and cause capital flight.”

Financing – Money is There

European banks offer a variety of financings, in euros, for Eastern European developers. The most common are non-recourse and limited recourse senior loans, according to EWEA’s 2013 Eastern Winds. The European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), and the International Finance Corporation (IFC) are also active, through mid- to long-term financing or syndicated loans with local commercial banks.

“Because the wind resources are there, the money is there,” Pineda said.

“What is needed is stable regulatory frameworks to attract the investors and give them confidence the government will provide support that will be there not for two or five years but for the lifetime of the wind project.”

Hope has been rekindled by the recent announcement of the European Commission’s EU Structural and Investment Fund. It funds higher risk undertakings by providing first loss loans, Pineda explained. “If the project goes wrong, that is the first investCliff Harris ment tranche lost. It is a way to encourage investors to move away from mature, secure markets toward emerging markets like the Eastern Europe wind market.”

GE Wind Energy

In 2011, GE Energy was looking toward the emerging markets in Eastern Europe. It won its first contract in Romania. “In 2011, we installed 300 megawatts of equipment in Eastern Europe, mainly in Romania,” recalled Cliff Harris, GE European Renewables General Manager. “In 2012, it was another 300 megawatts, again predominantly in Romania. But in 2013, we were 16 BREAKBULK MAGAZINE www.breakbulk.com

GE’s logistical approach to Europe centers on its Salzbergen assembly facility in Northern Germany. / Credit: GE Energy MAY-JUNE 2015

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Threatened policy and tariff changes in Romania reduced its installations by almost half from 694.6 MW in 2013 to 354 MW in 2014. / Credit: GE Energy

at 120 megawatts and in 2014 it went down to 80 megawatts.”

In response, GE shifted its attention to small projects in Poland, a strategy that’s creating opportunities. “In 2015, we expect to install about 260 megawatts. The biggest country will be Poland, followed by Lithuania and Montenegro,” Harris said. “Poland will be about 55 units, Lithuania about 24 units, and Montenegro about 26 units.”

GE Energy nearly doubled its global installations in 2014 and moved ahead of Enercon to become the world’s fourthlargest wind turbine original equipment manufacturer (OEM), behind Vestas, Siemens and Goldwind, according to FTI Consulting’s 2014 Global Wind Market Update.

GE’s logistical approach to Eastern Europe centers on its Salzbergen assembly facility in Northern Germany. “We buy component parts like gearboxes and blades from our global supply chain,” Har18 BREAKBULK MAGAZINE www.breakbulk.com

ris said. “We assemble all the components for European nacelles in Salzbergen.”

The nacelle is the 50-plus-ton tractor-trailer sized housing at the top of the 70-plus-ton, 80- to 100-meter tall steel tower. It contains the turbine gearing and power electronics and supports the 20-plus-ton hub to which three 40- to 55-meter long, 10-ton fiberglass blades attach.

Shipments to and from Salzbergen traverse Germany’s Brake port. They are then transported to and from the assembly facility by truck.

GE uses “most of the big international shipping carriers and most of the large commercial ports on the Baltic,” Harris said. For the short sea shipments of nacelles and hubs to Eastern Europe from Salzbergen, GE often uses EMS Chartering or Coli Shipping.

Coli also delivered, through Paldiski, the turbine parts for GE’s work in Estonia and, through the port of Klaipeda, the tur-

bine parts for its Lithuanian development.

Much of GE European projects’ engineering design and planning is also done at the Salzbergen facility. The objective, Harris said, is “the lowest landed cost.”

There are two “tricks” to wind business logistics, Harris said. “One is to have a good product to win the contract.

The other is to be good at project logistics management and make it all come together at exactly the right time.”

That means coordinating tower and blade transport so they arrive at the project site from different places in the world at the same time as the assembled nacelle shipped from Salzbergen. That is “absolutely critical,” Harris said, but not easy when a large number of massive turbines are involved.

“When we worked in Romania, we regularly had to cross the Danube,” Harris recalled. “The Danube is tidal. You bring in things on ships at high water to get into the ports. But to cross the bridges, the MAY-JUNE 2015

cover story

Credit: Shutterstock

THE FEED-IN TARIFF

Danube needs to be at low water so there is as much time as possible to get across as before the moveable bridge rises up.”

Oldendorff delivered towers and BBC Chartering delivered blades through Midia to Romania for GE, Harris said.

Harris applies three rules to project logistics: • Understand local compliance.

• Employ local teams.

• Work directly with local suppliers.

There are two forms of local compliance, Harris explained. In Salzbergen, the turbines must be built to the codes and standards of the country where they will be installed.

Before anything leaves the Salzbergen factory, it undergoes a rigorous 20 BREAKBULK MAGAZINE www.breakbulk.com

The idea of a special tariff paid to power producers who send (or feed) electricity into the grid originated in 1984, in California, according to feedin tariff (FIT) authority Paul Gipe. It was provided to fulfill the Public Utility Regulatory Policies Act (PURPA) portion of the 1978 National Energy Act. The FIT price was set at the cost a utility would avoid by not buying another source of electricity. This first successful FIT drove early growth of wind energy in California during the 1980s.

Germany started the trend to FITs in Europe in 1991 with its Stromeinspeisungsgesetz (StrEG). The “law on feeding in electricity to the grid” gave the policy its name. The most important early innovation was to use the retail rate instead of the utility’s avoided cost to set the tariff, or price per kilowatthour, paid to the electricity producer.

The objective of Germany’s FIT was to create price stability so renewables developers could finance projects.

The use of a higher than avoided-cost remuneration rate came with German lawmakers’ recognition that renewables-generated electricity provides environmental and health benefits worth a premium.

The passage, in 2000, of the Erneuerbare Energien Gesetz (EEG), or the Renewable Energy Sources Act, reflected this thinking. In recognition of renewables’ larger environmental, social and economic value, it remunerated power providers a guaranteed 20-year tariff that included the cost of their generation and a “reasonable” profit. It also set technology-specific tariffs and gave renewables priority access to the grid.

Germany’s FIT drove unprecedented renewables growth in the first decade of this century. France, Spain, Switzerland, the UK and other Western European countries implemented similar programs. Eastern European countries followed, including Romania, Bulgaria, Lithuania and Ukraine.

Well-administered tariff systems reproduced Germany’s success. Some variations, most notably in Spain, created problems. Europe’s slow recovery from the recession increased resistance to the FIT concept. Political opponents, demanding a more market-oriented policy, have so far resisted a FIT program in Poland and have driven significant disruption in countries like Romania, Bulgaria and the Czech Republic.

codes and standards compliance check and is issued a certificate of conformity.

In Poland, for instance, the lights atop the turbine have to flash at a particular frequency, so electrical connections and switches must have a particular rating, Harris explained. Lifting gears built and tested to German standards have to be re-tested to Polish standards.

Once in country, the development team must know local compliance logistics.

“Poland has an eight-ton axle load limit so you have to find transport vehicles that have more axles so you don’t overload them,” Harris explained. “Also, the transport permit is paid by the truck in Poland rather than by the convoy, as it would be in Romania. To keep costs down, you have to

use as few trucks as possible rather than thinking about the number of convoys.”

Salzbergen managers team with local companies through GE offices in Croatia, Estonia, Poland, Romania, Hungary and the Czech Republic, Harris said. “Local teams combine sourcing, sales and project management. They add local language skills and understand the local community and its culture. They know things like police escort requirements and restrictions on when things can be moved.”

GE avoids using intermediaries. “We prefer to work directly with local suppliers for things like cranes and transport,” Harris said. He singled out three Eastern European logistics companies: Transannaberg in Strzelce-Opolskie, Poland; MAY-JUNE 2015

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CF&S in Tallinn, Estonia; and Universal Transporte Bolk in Sibio, Romania.

GE planners coordinate routes of least resistance with local transporters. Moving the giant turbine parts anywhere in the world is rarely easy. Negotiations with local authorities often include getting rights to tear down and reconstruct traffic islands or barriers. “But the Eastern European countries we work in are no worse and no better than the rest of Europe,” Harris said. “There is nothing that stands out and nothing that pulls you down.”

That is in sharp contrast with logistics challenges Harris recently encountered in planning GE’s first wind project in Kazahkstan.

“We have been planning how to transport across Kazakhstan for a year and we are not finished yet,” Harris said.

The first obstacle is Kazakhstan’s sheer size. “We will have to transport things 3,000 kilometers where there is no real infrastructure,” Harris said.

“When you get into the colder parts, you can only transport in the winter because you need the road to be frozen. But you can only build in the summer because you can’t dig in the frozen ground.”

Those limited time windows mean the project will take longer to build.

Those road conditions and Kazahkstan’s limited rail network mean GE will have to use “a combination of ships, rail, and ruggedized transport,” Harris said.

Negotiations with the limited number of local transporters for reasonable rates are ongoing. “When you deal with the unknown, the risk requires extra contingencies. We are trying to make our bid as accurate as possible,” Harris said. “There is a lot of upfront effort to make things come off well.”

Kazakhstan has huge wind potential, but has not yet perfected regulations to cover renewable energy development, according to the GWEC. Kyrgyzstan and Tajikistan, which are less rich in fossil fuels, might have more potential in the short and medium term, but have not yet seen any installation.

WIND POWER INSTALLED IN THROUGH 2014, EU CANDIDATES, OTHERS

22 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

While other countries saw installed capacity drop, Turkey registered a 24 percent increase in 2014.

COUNTRY

INSTALLED 2013

END 2013

INSTALLED 2014

END 2014

Former Yugoslav Republic of Macedonia Serbia Turkey Total

– – 37.0 37.0 – – – – 646.3 2,958.5 804.0 3,762.5 646.3 2,958.5 841.0 3,799.5 EUROPEAN FREE TRADE ASSOCIATION Iceland 1.8 1.8 1.2 3.0 Liechtenstein – – – – Norway 110.0 771.3 48.0 819.3 Switzerland 13.3 60.3 - 60.3 Total 125.1 833.4 49.2 882.6 OTHER Belarus – 3.4 – 3.4 Faroe Islands 4.5 6.6 11.7 18.3 Russia – 15.4 – 15.4 Ukraine 95.3 371.2 126.3 497.5 Total 99.8 396.7 138.0 534.7 TOTAL EUROPE 12,228.5 121,572.2 12,819.6 133,968.2 Note: due to previous year adjustments, 423.5 MW of project decommissioning, repowering and rounding of figures, the total 2014 end-of-year cumulative capacity is not exactly equivalent to the sum of the 2013 end-of-year total plus the 2014 additions.

Source: European Wind Energy Association

Turkey

Much of the wind development previously focused on Eastern Europe has moved to Turkey, where the government has established a FIT and other policy supports. It seems “set for growth with the potential to regionally supply from a Turkish base to neighboring countries in Eastern Europe and Western Asia,” according to information from the Turkish Wind Energy Association (TUREB) in a justreleased Totaro and Associates report.

Turkey is within – Cliff Harris Europe’s economic sphere, as a candidate for the European Union, and is considered by EWEA one of the biggest emerging wind markets, Pineda confirmed. “All the major OEMs are working there, and they have very good second and third tiers of developers, contractors, and suppliers.”

Turkey installed 28 percent of its 3.76

“When you deal with the unknown, the risk requires extra contingencies.... There is a lot of upfront effort to make things come off well.”

gigawatts of operating wind capacity in 2014 and more than 55 percent in the last three years. That growth keeps it on track toward its 20 gigawatts by 2023 target. Its 10-year, 7.3 cents per kilowatthour FIT is below the retail price of electricity, but by using locally sourced components developers can boost remuneration. And, though manufacturers are pushing for a higher FIT, it does provide a stable base on which banks can offer financing.

Breakeven for domestic turbine manufacturing is said to be approximately 55 units to 65 units per year. Only Turkey’s major OEMs can do that. Enercon was the first OEM into the market and, until recently, has remained dominant. But Vestas and Nordex have bigger shares of the 514 turbines committed for erection by 2017, with Siemens and GE trailing.

Turkey has about 6.6 gigawatts of wind capacity under development.

The government plans another 9.5 gigawatts but there is a nine-year time horizon for project development, according to TUREB. The government is working to improve licensing and permitting processes. BB

energy update

EU ENERGY BLUEPRINT Navigating Europe’s Changing Energy Landscape he last 12 months have witnessed a new direction in European energy policy, with new European Union legislation framework, alongside the escalation in geopolitical tensions with neighboring Russia, laying the groundwork for a potentially fundamental shift in 24 BREAKBULK MAGAZINE www.breakbulk.com

regional energy consumption and production over the next decade.

Among the most interesting recent developments has been the European Commission announcement in February 2015 of a new legislative blueprint to create a true energy union between the region’s 28-member national states.

By Mike Willis

This ambitious package of reforms unveiled by the EU’s Brussels-based executive body is aimed at driving down consumer costs through enhanced intra-European competition and efficiency savings, and augmenting cross-national border interconnection of electricity, gas, and other energy flows.

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PORTOFLONGVIEW.COM

T. 360-425-3305 F. 360-425-8650

WASHINGTON’S WORKING PORT

energy update

EUROPEAN UNION GROSS INLAND CONSUMPTION Renewable energy has nearly doubled its share of total consumption since 2000.

40%

30%

20%

10%

0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Crude oil and petroleum products

Natural gas

Solid fuels

Nuclear energy

Renewable energy

Non-renewable waste and electricity

% of total consumption, EU-28, 1990-2012 / Source: Eurostat

With energy policy in Europe predominantly still falling within the domain of national governments, Georg Zachmann, a research fellow on climate change and energy at Brussels-based think thank Bruegel, outlined how the commission blueprint also reflects longstanding efforts to “Europeanize” energy policy.

“The energy union proposals represent a political effort (by the European Commission) to create a Georg Zachmann joint European energy strategy and reverse the trend of renationalization of policy that has taken place during the last 10 years,” Zachmann said.

The European Commission has estimated that its energy union plans, which include increasing carbon efficiency, constructing cross-border electricity connectors, and increasing the current contribution of sources of renewable energy, will necessitate an additional €1 trillion (US$1.08 trillion) of investment by 2020 alone.

If successfully implemented, these proposals could replicate the widespread gains for EU member states that have taken place from the deregulation and the creation of a single European market for trade in goods, services and capital since a wholesale political drive for greater regional economic integration gathered pace more than 30 years ago.

26 BREAKBULK MAGAZINE www.breakbulk.com

By vastly reducing national sovereignty over energy policy, “overhauling state interventions in the internal market, and phasing out environmentally harmful subsidies,” the commission’s proposals could therefore have wideranging ramifications for regional energy sector investment during the next decade and beyond.

However, the likelihood of success in developing a new energy union, and the extent to which it would mark a fundamental change in European policy direction over the next decade remains in doubt, according to Bruegel’s Zachmann, who outlined a likely unwillingness of

national governments to cede further significant sovereignty to Brussels.

“There are intrinsic differences between how the EU member states deal with energy. Due to this divergence in national interests and approach to energy policy, I am doubtful of the prospects of success, and it will be very difficult for a single Europeanized approach to prevail,” he said.

With France and the United Kingdom continuing to provide state support for nuclear power development, the German government phasing out nuclear energy in favor of its indigenous renewables sector, and Poland retaining strong

Surface coal mining in Belchatow, Poland. / Credit: Shutterstock MAY-JUNE 2015

energy update

EU GAS IMPORT SOURCES The European Union relies on foreign supply for nearly half of its energy consumption, with Russia accounting for more than 30 percent of its imported natural gas.

40%

30%

20%

10%

0%

2004 Russia

2005

2006

Norway

2007

2008

Algeria

2009 Qatar

2010

2011 Nigeria

2012

2013

rest of world

% of Total Imports / Source: Eurostat

links to coal-powered electricity, it is likely that the wide variety of existing energy policies within Europe will persist during the next decade.

Most analysts also agree that retention of the status quo will correspondingly result in continued divergence in national investment priorities during the next decade. This was also confirmed by a UK government advisor, who spoke on condition of anonymity.

Alongside the energy union proposals, the other most potentially far-reaching development for EU energy policy during the last year has been the escalation in geopolitical tensions between the West and Russia, following the latter’s illegal annexation of the Ukrainian peninsula of Crimea in March 2014.

In what has developed into the region’s most serious geopolitical standoff since the end of the Cold War in 1989, concerns have grown that Moscow might be prepared to restrict energy exports to neighboring Europe, in response to the imposition of Western trade sanctions. With the EU reliant on foreign supply for more than half its total energy consumption, Russia accounted for more than 30 percent of the region’s imported natural gas in 2012.

As European policymakers have finally woken up to the threat posed by President Vladimir Putin’s increasingly revanchist Russian government, efforts to develop new strategic partnerships with alternative, more reliable exporting countries have gathered pace in recent months.

28 BREAKBULK MAGAZINE www.breakbulk.com

The European Commission has taken steps to facilitate increased natural gas imports from Turkmenistan and Azerbaijan, including proposals to link the central Asian states and Caspian Sea region to the EU by constructing a US$45 billion southern corridor pipeline, as reported by the Financial Times on Feb. 25.

As with proposals to create a new energy union, however, there is widespread skepticism over the extent to which the EU can successfully wean itself off reliance on Russian imports over the next decade, not least given that alternative sources of gas are located in Central Asia, the Middle East and North Africa, where repressive regimes may spell future political and social instability.

A longstanding structural dependency on imported gas will remain particularly prevalent in parts of Eastern Europe, where an unwillingness or inability to develop indigenous energy production will see the region continue to remain heavily dependent on Russia imports over the next decade.

Despite abundant shale reserves in Poland and France, the prospects that Europe will be able to replicate of the rapid expansion in U.S. unconventional oil and gas extraction, which has dramatically reduced North American energy costs in recent years, also remains extremely unlikely for the time being.

One area in which the European Commission’s energy union and future investment proposals does seem likely to bear fruit during the next decade are

efforts to further develop the proportion of regional energy produced by renewable energy sources, lower carbon emissions, and increase energy efficiency throughout the EU. This was confirmed by Joseph Curtin, senior analyst at the Institute for International and European Affairs, a Dublin-based research organization.

Following a binding agreement between member states to meet the target of producing 20 percent of final energy consumption from renewable sources by 2020, aggregate EU renewable energy industry investment has already superseded spending on developing other energy production during the last decade, he said.

While outlining significant future infrastructure development challenges, alongside concerns over the non-binding nature of an additional target agreed by European countries in October 2014 to increase the renewable energy consumption to at least 27 percent of aggregate EU final energy consumption by 2030, further robust investment growth is likely to take place during the coming years, outlined Curtin.

“Renewables will remain one of the main focuses of investment in the EU energy sector (during the next decade), but this will also require huge investment in energy grids,” Curtin said.

With a protracted period of fiscal rectitude facing many national governments following the region’s recent financial and public debt crises, an important source of energy sector funding may also be provided by recent proposals for a new intra-EU economic stimulus package, the so-called “Juncker Plan.”

With proposals to spend more than €315 billion (US$340 billion), through public and private investment partnerships, an initial blueprint of the invest- Jean-Claude Juncker ment program named after European Commission President Jean-Claude Juncker, has earmarked a sizeable, though as yet unspecified, proportion of its funding to the further development of renewable energy production and enhancing intra-EU energy efficiency over the next three years. BB MAY-JUNE 2015

oil + gas

AXE

U.S. CRUDE OIL EXPORT BAN? Surprising Impacts on Supplies, Shipping and Prices

By Ed Osterwald

30 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

Credit: Shutterstock

O

il and gas companies in North America have proven that unconventional hydrocarbons can be produced on a vast scale. This extraordinary development wasn’t anticipated even a few years ago.

But despite moving rapidly toward the long-held dream of “energy independence” the U.S. retains a 1970s-era ban on the export of crude oil. This has created some unexpected consequences.

Its removal would trigger some other surprising changes too. Among other things, domestic crude oil prices and refining margins would reconnect with the rest of the world.

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since shale oil production is essentially entrepreneurial and operating costs keep getting lower).

• Taking advantage of weaknesses in existing regulations.

Many companies in the U.S. have chosen the latter alternative. Although crude oil exports are not allowed, no such restriction exists on either fuel products or condensates that have been “stabilized” (when lighter fractions are removed through distillation).

FIGURE 1: U.S. AND CANADIAN OIL PRODUCTION 16 14

Canadian output is rising faster than export capacity...

MILLION BARRELS/DAY

12 10 8

... and surplus U.S. production cannot be exported...

6 4 2

2010

2011

2012

2013

shale oil U.S.

2014

2015

2016

2017

Figure 2 shows U.S. imports and exports of crude oil and products since 2000. It also presents domestic refinery throughput, together with production of crude oil and natural gas liquids. The dramatic shifts in supply balance began around 2012, when output of shale oil became significant.

Several interesting trends are apparent.

Refinery throughput in the U.S. declined at the beginning of the 2008–2010 recession, but steadily increased thereafter; average utilization rose from 81 percent in 2009 to more than 88 percent in 2014.

More interestingly, however, is that the surge in U.S. crude oil production has been matched quite closely by increased exports of finished products. Thus it would seem that the U.S. oil industry has retained supply balance by converting

... which creates unforeseen problems.

0

Canada

U.S. Major Force in Global Oil

2018

onshore U.S.

offshore U.S.

Source: Competition Economists Group LLP 2015

The emergence of shale oil production in the United States has already reshaped the global oil industry.

U.S. regulations that ban the export of crude oil were put in place in the 1970s to encourage supply security during the “energy crisis.” But the sudden emergence of shale oil production in the U.S. has made this federal policy seem archaic at best. In most markets, surplus oil and gas can be delivered to consumers elsewhere in the world, provided it can be done in an economically viable basis. But such is not the case for the U.S., creating an assortment of unintended consequences.

The surge in U.S. Ed Osterwald shale oil output, together with oil sands from Canada, will cause production in these two countries to double between 2012 and 2016.

Canada is still considering how to monetize its vast reserves; some estimates suggest 750 billion barrels of extractable heavy oil exist within the Province of Alberta, which could equate to up exports of up to 3 million barrels per day of diluted bitumen. Meanwhile, oil from shale in the U.S. will contribute at least 32 BREAKBULK MAGAZINE www.breakbulk.com

another 3 million barrels every day.

Such rapid shifts in domestic energy supplies of major economies are almost unprecedented in recent history. (See Figure 1) In general, when supply imbalances cannot be removed through physical exports or imports, other market clearing mechanisms need to be found.

Options might include: • Cessation of production (unlikely,

FIGURE 2: CHANGES IN U.S. OIL INDUSTRY IMPORTS, EXPORTS AND REFINERY RUNS 16

12 MILLION BARRELS/DAY

Shale Breaks Loose

8

4

0

-4

2000

2001

2002

2003

2004

2005

crude imports

product imports

crude production

refinery runs

2006

2007

2008

crude exports

2009

2010

2011

2012

2013

product exports

Source: Competition Economists Group LLP 2015 MAY-JUNE 2015

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oil + gas

surplus shale oil into fuels, which have then been exported to other countries.

(See Figure 3) By comparing the increase in U.S. crude output – more than 2.5 million barrels a day – with the net shift in product exports (i.e. increase in product exports less decline in imports), it becomes quite apparent that despite the ban on crude oil exports, all of the added U.S. production has simply been converted to products and then shipped to other countries (i.e. more than 2.4 million barrels/day).

Trade statistics show that most product exports from the U.S. are delivered to South America and Europe.

It is worth noting that refining in the U.S. is highly profitable at the moment.

Again this is one of the effects of the export ban. Because surplus U.S. production is stranded, its market value is decreased, thereby lowering the feedstock cost to U.S. refiners.

Impact of Removing Export Ban

Should the ban eventually be lifted, it is fair to assume that the surplus would still be exported, but as crude instead of products. Since U.S. crude prices would no longer be disconnected from global markets, alternate values would rise, reducing refining margins, refinery runs and the quantity of products available for export.

Perhaps more importantly, however,

FIGURE 3: NET SHIFT IN U.S. SUPPLY BALANCE In million barrels per day

Crude Production Crude Imports Product Imports Product Exports Net change in U.S. product supply balance

2.5 -2.0 -1.0 1.4 2.4

Increase in exports/decrease in imports Source: Competition Economists Group LLP 2015

would be the effect on the way in which price discovery takes place in global crude oil markets. According to Platts (a subsidiary of McGraw-Hill), the North Sea’s Dated Brent: “… is increasingly being used to determine the value of sweet crude in the North Sea, West Africa, the Mediterranean, South and Latin America, Canada and North America, Central Asia and in Russia.

More than 60 percent of the world’s internationally traded crude oil is priced against Dated Brent.”

Despite this, the volume of crude oil that could be shipped from the U.S. (2 million barrels per day and rising) would simply overwhelm the steadily declin-

ing 1 million barrels per day of North Sea output (i.e. Brent Ninian Blend, Forties, Oseberg and Ekofisk) that is used to assess the value of Brent.

Another factor that would favor a U.S.-based price marker arises from recurring rumors of manipulation of Dated Brent. It is illustrated by a pending class action suit in New York that alleges certain oil companies and traders “monopolized the Brent crude oil market,” conspiring to influence oil prices and the prices of futures contracts.

U.S. regulators tend to be more aggressive in pursuing market manipulation cases than their European counterparts, applying more stringent financial and criminal penalties. With U.S. regulators naturally discouraging the types of behavior that have been rumored in the Brent market for many years, a U.S. Gulf Coast-based sweet crude marker would be well monitored, fully transparent and quickly accepted by the industry.

Removing the export ban would also reduce the number of vessel movements, given that crude oil tankers (typically 600,000 deadweight tons or more) are much larger than product vessels (more than 60,000 dwt). Should the full 2.4 million barrels/day of exports switch from fuel products to crude, it would result in about 600 fewer loadings per year (roughly two per day).

Conclusions

The North American unconventional oil and gas story continues to revolutionize the energy industry in the U.S. and Canada, with side effects impacting many other parts of the world. As an example, the U.S. export ban on crude oil creates strong economic incentives for domestic refiners to ship surplus fuel products to markets in other countries.

Should the U.S. law be changed, the number of vessel movements might decline, but U.S. oil markets would once again become linked to the rest of the world. This would be a very good development indeed. BB

A petroleum shipping pier on Puget Sound, Washington. / Credit: Shutterstock 34 BREAKBULK MAGAZINE www.breakbulk.com

Ed Osterwald is a partner with CEG Europe, which provides economic and financial advice on competition, regulatory and commercial issues in the energy sector. Osterwald is based in London.

MAY-JUNE 2015

nuclear energy

Credit: Shutterstock

INDIA’S NUCLEAR PATH Controversy Ensues Amid U.S.-India Nuclear Deal

By V.L. Srinivasan

E

nding a decade-old nuclear dispute, India settled issues relating to civil nuclear liability with the U.S. during President Barack Obama’s visit to Delhi in January, which cleared major hurdles to procure reactors from Nuclear Suppliers Group (NSG) for stepping up nuclear power generation.

The deal assumes significance in the backdrop of China, an NSG member, agreeing late last year to supply Pakistan with two nuclear reactors. China had already provided two nuclear reactors to Pakistan in the past.

Even the U.S. administration was keen to conclude the deal, as India signed an agreement in December 2014 in which Russia committed to build 12 new nuclear plants in India at a cost of US$3 billion apiece. This means Russia would be the only seller in India’s nuclear market if the U.S. and its allies don’t negotiate with India.

Given India’s growing econ-

omy and strategic importance to the U.S. for many reasons, the Obama administration could ill afford to lose the South Asian ally.

India’s nuclear power plants are producing 5,780 megawatts, which is 3.5 percent of the total power generated in the country, but with the demand for electricity growing every year, the Indian government has taken up six more projects to generate an additional 4,300 MW by 2019 and plans are underway to build another 44 nuclear plants to produce nearly 51,000 MW. While the Indian government says that nuclear power would be low carbon, meet the domestic energy needs to some extent and reduce emission of greenhouse gases emission by nearly 40 percent, opponents to the deal cite three major nuclear accidents in the U.S. (Three Mile Island), the former USSR (Chernobyl) and Japan (Fukushima), and express fears that the radiation leak would not only claim human lives and destruct environment, but would

36 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

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nuclear energy

U.S. President Barack Obama and Indian Prime Minister Narendra Modi meet at Hyderabad House in New Delhi on January 25. During the trip the two leaders made progress on civilian nuclear trade. / Credit: Hindustan Times/Newscom

also pose health hazards to the survivors.

Others believe India will be at the mercy of the U.S. and other NSG members, as it doesn’t have the needed uranium deposits to produce nuclear power. They also refute claims that nuclear power will cost less than the fossil fuel used for electricity generation.

They argue that disposing of the nuclear waste – about 4 tonnes of nuclear waste is produced per one gigawatt (1,000 MW) of nuclear power generated – is a costly and complex process.

However, the government asserted that no provision relating to waiving compensation under the Civil Liability for Nuclear Damage Act (CLND), which is to provide a civil liability for nuclear damage and prompt compensation to the victims of a nuclear incident through a no-fault liability to the operator.

India’s External Affairs Minister Sushma Swaraj said the government was not limiting the compensation and can notify a higher amount, if required.

“The Nuclear Liability Law has not been diluted and the amount of Rs1500 crore (US$250 million) is upfront compensation only,” she said.

The Department of Atomic Energy has also launched public outreach programs throughout the country, including 38 BREAKBULK MAGAZINE www.breakbulk.com

where plants were being set up, to create awareness among people about the benefits of nuclear power plants and also to allay apprehensions about potential dangers they pose.

What has enraged the activists is the decision to set up a nuclear insurance pool, a risk transfer mechanism formed

by GIC Re and four other governmentowned companies, to pay compensation to the victims in case of accidents in these plants and a provision of around US$250 million has been made under the mechanism.

In a statement, Sushma Swaraj prominent citizens including retired bureaucrats, senior journalists and civil rights leaders, said they were “deeply disturbed” by reports that the Indian government has capitulated to U.S. demands and agreed to a deal that indemnifies American nuclear vendors from the consequences of accidents caused by design defects in their reactors.

The proposed nuclear insurance pool, activists argue in the statement, would redirect any potential liability of the U.S. firms back to Indian taxpayers.

This creates a “moral hazard,” where the Indian people could end up being responsible for mistakes made by a multinational corporation.

“The Indian government has agreed to purchase the AP1000 reactors from Westinghouse, and the Economic Simplified Boiling Water Reactor (ESBWR) from General Electric. Both these designs are untested. The ESBWR technology is so immature that the design received certification from the U.S. nuclear regulatory commission only in September 2014, and recent reports suggest that construction of AP1000 units has run into trouble in China,” the statement pointed out.

“India has agreed to pay billions of dollars for immature American technology, and then ensured that American companies will not be held to account for any design defects,” they added.

But the nuclear power plants have certain advantages as well as disadvantages. Fossil fuels are finite, and instead of depending on conventional energy resources like coal or LNG, the time has come to look at alternatives and one such option is nuclear power for sustained development. Compared with coal-fired projects, nuclear plants require much less land, supporters say.

Disadvantages include the risk of nuclear accidents as India’s safety record and its emergency disaster management is yet to be tested.

Though the agreement has been reached only this year, it becomes operational next decade and India will be able to import reactors after eight years.

Human Rights Forum General Secretary V.S. Krishna, V.S. Krishna who is among those leading the movement against the project, said European countries such as Germany, Italy and France have decided to cut down nuclear power generation in the wake of Fukushima Daiichi disaster in Japan.

One of the nuclear plants, with a capacity of 9,000 MW, is coming up near Kovvada village in the South Indian state of Andhra Pradesh, where the locals have been protesting for more than five years. With a coastline of nearly 1,000 kilometers, Andhra Pradesh experiences MAY-JUNE 2015

nuclear energy

In this 2012 photo, survivors of the 1984 Union Carbide gas leak hold a candlelight vigil to protest the Kudankulam nuclear plant at Chennai in Bhopal, India. About 10,000 villagers spent the night in the open near Kudankulam. / Credit: SANJEEV GUPTA/EPA/Newscom

many cyclones every year.

“The Nuclear Power Corp. of India Ltd., which is monitoring the nuclear plants in the country, has ignored the fact Kovvada is close to the East coast and prone to high risk in case of a typhoon or a cyclone makes a land fall,” Krishna said.

Another activist, S.P. Udayakumar, who is leading the People’s Movement against Nuclear Energy and a member of National Alliance of Antinuclear Movements, alleged that the treaty reflected U.S. double standards.

S.P. Udayakumar “If the U.S. is affected in an oil spill, they would charge US$20 billion for clean-up and compensation, but when India buys a nuclear power plant, we should not ask for any liability at all. Their own Price Anderson Act would demand liability in similar situations. Indian rulers, on the other hand, bend backwards to please the U.S. government and corporations.

This is why we oppose this unprincipled, opportunistic, anti-people and immoral business deal,” he said.

Udayakumar also dismissed the Indian government’s contention that nuclear power is the only option to 40 BREAKBULK MAGAZINE www.breakbulk.com

meet the growing demand for power.

“No country in the world gets 100 percent power from nuclear sources. Only a handful of countries get substantial power from nuclear sources. Japan now gets hardly 2 percent nuclear power. We need to re-think and go beyond thermal and nuclear,” he added.

Nityanand Jayaraman, a volunteer with the Chennai Solidarity Group against Kudankulam power plant, pointed out that when the world’s worst industrial disaster, Union Carbide gas leak in Bhopal, took place in 1984, the US$450 million compensation agreed upon worked out to a mere Rs25,000 per victim. “The survivors are fighting for justice for the last 30 years while successive governments have been working overtime to indemnify U.S. nuclear equipment suppliers from any liability arising from a nuclear accident or a disaster,” he said.

Jayaraman too agrees with Udayakumar’s views on the need for nuclear plants. “Nuclear power is not a solution.

It is a problem for which a solution has not been found. Equitable distribution of electricity, reduction of wasteful consumption, efficiency enhancement, and decentralized use of renewables should be able to meet India’s current and future needs,” he added.

However, India’s Department of Atomic Energy (DAE) said concerns

expressed over the nuclear plants’ safety were not based on scientific facts.

S.K. Malhotra, head of the public awareness division in DAE, said some people oppose not only nuclear power, but also all other power projects including those based on fossil fuels and hydro.

They are against most of the developmental projects and talk about global warming, pollution and depletion of natural resources in case of fossil fuel-based energy system.

“They feel that renewable resources S.K. Malhotra are the right and the only choice for replacing the fossil energy, little realizing the fact that these resources may hardly be able to meet only about 20 percent of the large electricity needs of a country like India,” Malhotra said.

Another group is not against nuclear power, but oppose collaboration with other countries and feels India, having indigenously developed nuclear technology, should go only for homegrown nuclear reactors.

Given India’s limited resources of uranium availability, they want India to establish Thorium-based reactors, which MAY-JUNE 2015

nuclear energy

INDIA’S NUCLEAR POWER FACILITIES In Operation: 21 Units, 5,780 MW Under Commissioning and Construction: 6 Units, 4,300 MW Proposed Projects

RAWAT B H ATA ( Raj as t h a n )

GORAKHPUR (Ha r ya na )

1x1 0 0 1x2 0 0 4x2 2 0 2x7 0 0

M W ** MW MW MW

NARORA (Ut t a r Pr a desh)

M A H I B A N S WA R A ( Raj as t h a n )

4x 700 MW

2x 220 MW

BHIMPUR (Ma dhya Pr a desh)

4x70 0 M W

4x 700 MW

KA KRA PA R ( G uj ara t )

2x22 0 M W 2x70 0 M W

HARIPUR (West Benga l)

CHHAYA MITHI VIRDI ( G uj ara t )

6x1100 MW*

CHUT KA (Ma dhya Pr a desh)

TA RA P U R ( M ahar a s h t r a )

2x16 0 M W 2x54 0 M W

6x1650 MW**

4x22 0 M W 2x70 0 M W

*Indicative capacity **Owned by DAE, operated by NPCIL. Presently under extended shutdown. ***Being implemented by BHAVINI Source: Nuclear Power Corp. of India Ltd.

is available abundantly in the country. However, thorium cannot be used directly as a fuel; it first must be modified into the fissile material by neutron irradiation in operating nuclear power reactors.

Fast Breeder Reactors (FBRs), because of high neutron availability, 42 BREAKBULK MAGAZINE www.breakbulk.com

6x 1500 MW *

KAL PAKKAM (Ta mil Na du)

KA I G A ( Karnat a k a )

2x 700 MW

KOVVADA (Andhr a Pr a desh)

JA I TA P U R ( M ahar a s h t r a )

6x 1000 MW *

2x 220 MW 1x 500 MW ***

KUDANKUL AM (Ta mil Na du)

1x 1000 MW 1x 1000 MW 4x 1000 MW

are the ideal choice for conversion of thorium. Now these FBRs are fueled by plutonium, which is obtained by reprocessing spent fuel from uranium-based reactors. India’s three-stage nuclear power program is based on this strategy.

Its first stage comprises of the indige-

nous Pressurized Heavy Water Reactors (PHWRs), the technology for which has already been mastered. The only problem is that the total installed capacity through them is limited by the availability of uranium in the country.

“The nuclear deal will bring additional installed capacity through the imported reactors and the imported uranium. In addition to increasing the installed nuclear capacity, it will also provide additional plutonium for the second stage which in turn will help in converting more thorium into fissile material,” Malhotra said.

On safety, Malhotra said that after the Fukushima accident, the Atomic Energy Regulatory Board of India had a safety review of all nuclear reactors. The Nuclear Power Corp. of India Ltd., which is the sole operator of these reactors, separately carried out another review. Both reviews found that India’s nuclear power reactors are generally safe even in case of a natural calamity, and are also well equipped to mitigate the adverse effects of beyond design basis accidents.

He said that DAE and other agencies regularly conduct public outreach programs to promote awareness about peaceful uses of atomic energy in right perspective with prime focus on benefits to the society. It is done through large number of seminars, lectures for students, academicians and general public.

A large number of exhibitions on benefits of nuclear energy, safety of nuclear power and non-power application in the fields of agriculture, health care, food preservation, industry, water resources management etc. are also organized.

Large number of visits to nuclear power stations and other facilities are arranged to boost the public confidence.

TV campaigns, street plays, advertisements, radio jingles are also employed.

Publications including information sheets, fact sheets, FAQs, coffee table books etc. in various Indian languages are also brought out regularly for mass distribution.

Recently, NPCIL has also entered into partnership with several specialized agencies for creating mass awareness about the necessity of nuclear power and its inherent safety. Special awareness initiatives are taken for the people living in the neighborhood of nuclear facilities, he added. BB MAY-JUNE 2015

breakbulk china 2015

Credit: Shutterstock

EVENT COVERAGE

By Eric Johnson

HANDOUT

WIPEOUT

Beating Back Bribery in Project Cargo

A

n anticorruption campaign sweeping China since 2013 has taken down scores of executives at state-run companies and government agencies across the country.

Outside China, the Beijing government’s ongoing campaign has helped 44 BREAKBULK MAGAZINE www.breakbulk.com

focus international attention on the pervasiveness of illegal gift-giving and bribery in the business world, including the project cargo industry, and demonstrates how governments are fighting back.

So it was appropriate that China’s biggest city, Shanghai, was the backdrop in March for a straightforward look

at anticorruption compliance among project cargo professionals. Manilabased consultant Michelle Juan, of the non-profit, anti-bribery group TRACE International, led the discussion at the annual Breakbulk China conference.

Because governments everywhere are now involved in the war on graft, Juan said every company with a stake in cross-border cargo hauling should make compliance a top priority. Her sentiments were echoed by professionals in the room from Iran, Turkey and South Korea.

TRACE, which offers legal and certification services through an association of memMichelle Juan ber-companies, is one of many industry and government-affiliated groups helping businesses comply with the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and a vast array of country-specific laws. Each group publicizes and promotes anti-bribery standards, encouraging companies to comply through everyday business practices. Some groups provide training, transparency guidelines and compliance certification.

In Nigeria, for example, the Maritime Anti-Corruption Network (MACN) has been working with the government and the United Nations Development Programme to clean up cargo-handling procedures at the ports of Apapa and Tin Can in Lagos, Port Harcourt, Onne and others. MACN’s more than 40 companymembers include global vessel owners and cargo shippers.

In a 2014 assessment of Nigerian ports, MACN cited “weak internal ethics infrastructure in port agencies (such as a lack of codes of conduct), weak enforcement practices, and underdeveloped systems for investigating complaints of demands for bribes or facilitation payments” as key challenges demanding action.

A parallel report on the port situation by the Nigerian government’s Technical Unit on Governance and Anticorruption Reforms recently noted, “Corruption is widely rationalized as part of the system.

MAY-JUNE 2015

‘Gifts’ are considered acceptable, and for some agencies they are expected as part of the process.” The report also cited low salaries, pressure for “job protection money” from higher-ups and inadequate job training as reasons why port workers take bribes.

What’s happening in Nigeria is hardly unique. Greasing palms has been known to speed up customs paperwork in many countries. In some parts of the Philippines, Juan said, cargo-loading dockworkers commonly expect small payoffs in the form of cigarettes for simply doing their jobs. And bribery on a much larger scale has been known to ensnare front-office executives and professionals who exchange under-the-table cash for project contracts.

In many countries, according to the World Bank, corruption increases business costs by at least 10 percent. And a report by the World Economic Forum found that corruption is considered the leading impediment to conducting business in 22 out of 144 economies surveyed worldwide.

No matter where they’re in force, laws designed to prevent bribery share several common elements, Juan said.

For example, every law identifies a bribe as an offer or promise to give, or an authorization to give, anything of value to a government official or private sector individual, directly or indirectly.

Moreover, a bribe is designated for an improper or corrupt purpose, to obtain or retain business, or to obtain another improper advantage.

It’s also important to note that according to most of the world’s antibribery laws, companies can be held liable for improper payments made by their third-party associates. These third parties can include subcontractors, vendors, brokers, joint-venture partners and consultants. And willful ignorance of a third party’s bribing activities is no excuse, Juan said, because any principal company with knowledge of graft involving a business associate can be liable.

What’s at risk? Money, for starters.

A company targeted by a government’s anti-graft investigators may be subjected to a costly internal investigation, auditing and legal fees. Bribery also puts a

A crane is loaded on a ship in the port of Port Harcourt, Nigeria. / Credit: Agentur/Newscom

NIGERIAN CORRUPTION RISKS AS RELATED TO ASSETS Table establishes link between specific assets of port sector organizations, associated corruption threats and the potential corruption problem areas.

ASSETS

THREAT

PROBLEM AREA

Reputation Vehicles/tugboat, pilot cutter Fuel Cash Staff Containers/cargoes Morale Economy Government policies Equipment - crane, tractors, forklift, scanners, tugboats, pilot cutters Ships, jetty, terminals Stakeholders Trust

Government agencies Revenue Reputation

Staff Stakeholders

Facilitation money for documentation Ship berthing and sailing

Ship Government Contractors Bribe Poverty Economic meltdown Legislations Cargo clearance

Delay in processing necessary documents Duties, charges, taxes Nigerian Port Authority procurement Cargo documentation and release Poor remuneration and work environment Cargo diversion to other ports Obsolete laws Quick processing of cargo in port

Political pressure Demurrage policy Culture/tradition of facilitation Lack of code of ethics Greed Partners

Shipping activities Cargo storage and handling Ship boarding, cargo clearance, exit gate All processing in the ports Customs duties, taxes, charges and levy Ship boarding, cargo clearance and delivery

Source: Nigerian Government Report of Corruption Risk Assessment in the Ports Sector in Nigeria, 2014 www.breakbulk.com BREAKBULK MAGAZINE 45

breakbulk china 2015

company’s reputation on the line, as a corruption accusation that goes public can tarnish a good name, scare off clients and hurt sales. Graft undermines staff confidence in a company’s management team and may foster a permissive attitude toward other crimes. And a conviction can mean a huge fine – sometimes millions of dollars.

The U.S. Foreign Corrupt Practices Act is an especially daunting threat to multinationals that wink at corrupt practices by third parties. After being accused of complicity in a government bribery scandal linked to a US$6 billion liquefied natural gas project in Nigeria, Japan’s Marubeni Corp. in 2012 was forced to reach a US$54 million settlement with the U.S. And Switzerland-based logistics giant Panalpina World Transport settled with the U.S. for US$70 million in 2010 after being accused of bribing customs officials in Angola, Brazil, Kazakhstan and other countries.

As of March, Juan said, U.S. investigators were pursuing cases involving more than 100 companies. And 90 percent of those cases involved problems with third-party partners.

It’s been argued, however, that these risks may not outweigh the cost of legal compliance. Monitoring third parties requires expensive due diligence, for example, and compliant companies stand the chance of losing contracts to unscrupulous competitors. Gift-giving is routine in some countries. Besides, when a cargo project is pinched for time, it can be so easy to speed things up by slipping a few cartons of cigarettes to the right people.

Juan said TRACE wants to help global shippers beat bribery and is stepping up its involvement in the shipping industry. The association provides compliance advice, training and cleanbusiness certificates that are like a Good Housekeeping Seal for companies.

Certification offers cargo and shipowners a simple way to vet the shipping and port agents they rely upon. Shipping principals can thus lower their liability by working with certified agents. And agents tend to pick certified entities over other suppliers, thus rewarding companies that are committed to transparency.

46 BREAKBULK MAGAZINE www.breakbulk.com

ANTI-BRIBERY COMPLIANCE CHALLENGES Companies surveyed found third party due diligence overwhelmingly the most significant anti-bribery compliance challenge.

Third party due dilligence

58.1%

Supply and marketing chain compliance

18.9%

Dealing with state-owned enterprises

9.5%

Gift, hospitality and entertainment

8.1%

Understanding government expectations when evaluating adequacy of compliance programs 5.4%

Source: Raising the Standard of Anti-Bribery Compliance Worldwide, 2015, TRACE International Inc.

Graft undermines staff confidence in a company’s management team and may foster a permissive attitude toward other crimes.

Certified companies can avoid many of the pitfalls of non-compliance. Even if a rogue employee gets deeply involved in bribery and prompts a government corruption probe, Juan said, the company might avoid liability completely if it previously proved it compliant with anticorruption standards.

Particularly important for a company that wants to stay on the high ground is to make sure top-level executives follow every rule and clients clearly understand their leadership philosophy. “If you say that, as a company, from the top-down you’re not going to” engage in corruption

“then your customers will understand,” Juan said.

TRACE encourages every company to write out and post for all to see a nononsense policy expressly prohibiting bribery. It should describe “prohibited behavior simply, concisely and unambiguously,” according to the group’s guidelines. The policy should also clearly state that employees who bring violations to management’s attention would be protected from retaliation. It should also state the company prohibits all facilitation payments.

In addition to keeping government investigators at bay, compliant companies can win customers who appreciate a clearly stated position. Juan told the story of a Middle East company that went shopping for a shipping agent and, after finding each candidate offering the same price and quality, selected an agent with an official no-bribery policy.

TRACE has designed anti-bribery services in the shipping sector for shipping agents, and works with MACN and shipping companies to rate ports in terms of transparency. In May, TRACE planned to start a shipowner compliance service.

It’s also working on a global due diligence initiative for freight forwarders and logistics companies.

To mark International Anticorruption Day on Dec. 9, 2014, MACN Chairman Cecilia Müller Torbrand, who also works Cecilia Müller as the legal counsel Torbrand for anticorruption and foreign trade controls at Maersk Group, spoke of the determination with which industry leaders are pursuing compliance.

These days, it’s a commitment that’s protecting companies from the long arm of the law in China and worldwide.

“MACN members recognize that they need to take a firm stance against corruption and actively fight it,” Torbrand said in a press statement. They’re also “working with peers and stakeholders to achieve the systemic changes in the external operating environment required to eliminate corruption in the maritime industry.” BB MAY-JUNE 2015

breakbulk china 2015

EVENT COVERAGE

A stock investor checks prices in a brokerage house in Shenyang in China’s Liaoning province. / Credit: Tian Weitao/FeatureChina/Newscom

CHINA DOWNSHIFTS Finding Traction in China’s Economic Slowdown

By Eric Johnson

I

n a major break with tradition, the formal unveiling of the Chinese government’s next five-year plan for the nation’s economy later this year is likely to be a thoroughly anticlimactic event.

That’s because an economic slowdown that government leaders in Beijing are calling “the new normal” for the country is already more than three years old. No one expects China’s gross domestic product growth to ever return to the double-digit boom days of the 1990s and early 2000s. And that fact is sure to be confirmed when the government’s new

five-year plan period begins in 2016.

The slowdown is already old news for almost every business sector in China, the world’s second-largest economy, including the heavy cargo shipping and logistics trades. Demand for imported project cargo has fallen in recent years because factories, mines and cities are no longer expanding at breakneck speed. And heavy cargo exports simply aren’t what they used to be.

Multinational companies in China and Chinese companies with branches abroad thus have been forced to adjust to a new business climate. Adapting to this “new normal” means multinationals in the cargo sector must “get used to a China that is no longer an unambiguous growth story,” said John Jullens,

a Shanghai-based partner with the consultancy Strategy&, a division of PriceWaterhouseCoopers.

Of course, there’s nothing static about a decelerating bullet train. So for now, the once-racing Chinese economy is still moving forward with no sign of stalling.

The nation’s total GDP has been expanding by about US$1 trillion annually ever since the slowdown started. It’s expected to top US$11 trillion by the end of 2015, according to the International Monetary Fund. In comparison, total GDP for the U.S. is expected to rise to more than US$18 trillion this year.

Meanwhile, though, IMF has forecast another decline for China’s GDP growth rate this year to 6.8 percent, www.breakbulk.com BREAKBULK MAGAZINE 47

breakbulk china 2015

down from 7.4 percent in 2014.

To put the slowdown in perspective, consider what has happened to domestic, seaborne cargo shipping activity over the past year. Slumping demand for Chinese seaport-to-seaport services (that is, ships traveling between port cities such as Dalian in the north and Guangzhou in the south) has forced shipping companies to idle bulk freighters, liquefied natural gas carriers and container ships all along the coast.

As a result, according to the Ministry of Transportation, the Chinese domestic fleet’s carrying capacity fell 3.3 percent for bulk freighters, 1.7 percent for LNG carriers and 15 percent for container ships from 2013 to 2014. It was the first year-on-year decline ever for seaborne domestic capacity in these cargo areas.

At the nation’s major coastal ports, total cargo throughput rose about 5 percent to more than 6 billion tons last year compared to 2013, according to

48 BREAKBULK MAGAZINE www.breakbulk.com

CHINA EXPORT-IMPORT VALUES Exports and imports have fallen sharply since December. $500,000 export value

total export-import value

import value

$400,000 $300,000 $200,000 $100,000 0

May

2014

June

July

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.

2015

Feb.

Values in U.S.$millions / Source: China’s Ministry of Commerce

the China Federation of Logistics and Purchasing (CFLP). But that growth level was down from nearly 9 percent from 2013 to 2014. Coastal ports saw a 6 percent increase in shipping container traffic last year, compared to a 7.3 percent jump the year before.

The government says it’s doing what it can to manage the slowdown, which officials have partly blamed on falling overseas demand for Chinese exports and domestic demand for real estate, a main driver for the nation’s economy. The central bank, for example, has been cutting

MAY-JUNE 2015

interest rates since 2014. It’s also making modernizing by installing automation it easier for state banks to extend credit, equipment. including home mortgages. Meanwhile, The “new normal” is also about credit state-owned ports in Guangzhou, Tiantargeted to keep the economy growing jin and other cities are expanding their but at a slower clip. facilities, thanks to a government push for For example, the central governmore economy-boosting public spending ment is supporting cities and provinces nationwide that have been saddled with on infrastructure.

President Xi Jinping recently defined debt since the 2008 global financial “new normal” as a phase of national crisis. Beijing recently raised the total economic growth characterized not deficit ceiling allowed for all local govby rapid industrialization and urban ernments by 20 percent to about US$80 development, but by an “optimization billion, and has been encouraging the and upgrading of the economic strucuse of municipal bonds to fund new ture.” Xi said the process should include infrastructure projects. The Ministry more “innovation-driven” business and of Finance has also given local governservice-sector growth, and less low-cost ments the go-ahead to shift a combined export product manufacturing.

1 trillion yuan from outstanding bank For project cargo companies, it all loans to low-interest bonds. adds up to fewer jobs related to moving Nevertheless, no amount of financial new factory assembly line installations gymnastics will change the fact that and building projects, for example, but China’s “hypergrowth stage is coming to Sheet Harbour Ad 2:Layout 1 8/30/13 7:10 AM Page 1 more business serving factories that are an end,” Jullens said. And multinationals

can’t escape the fact that in his eyes “the easy phase is over.”

On top of that, Jullens said, nonChinese shippers and cargo companies in recent years have been losing inbound and outbound breakbulk business to their Chinese, state-owned competitors.

Nor are non-Chinese companies generally benefiting from a Beijing initiative to relocate manufacturing from coastal regions such as the Shanghai and Hong Kong areas to inland cities where labor is cheaper. Chinese companies that ship by air, rail, river and road are getting almost all of this relocation business.

What can European, American and Japanese project cargo movers do to stay relevant in this changing business environment? For one thing, Jullens said, non-Chinese companies that are used to focusing on “top line” business clients “will have to switch to a more bottomline focus.” They should also adjust their

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breakbulk china 2015

businesses to serve the kinds of companies that the Chinese government is encouraging to “upgrade” by, for example, replacing manual laborers with robots.

“Winning in China is often a function of making a series of difficult tradeoffs” in areas such as business models and services offered, Jullens said. For example, he recommends that foreign companies offer low-price products specifically designed for Chinese customers, as opposed to merely “low-cost versions of existing world-class products.”

Already well-positioned for Chinese clients are global shipping and logistics providers serving countries targeted by Chinese companies for business expansions. Companies in fields ranging from oil drilling to railway construction are being drawn like magnets to all corners of Africa, Southeast Asia and Central Asia. Plus, the Chinese government is providing financing and policy support to

OVERSEAS DIRECT INVESTMENT

BY CHINA COMPANIES While investment by Chinese companies (largely state-owned) nearly doubled from 2010 to 2013, it is expected to decline this year due to China’s economic slowdown. $120 $100 $80 $60 $40 $20 0

2010

2011

2012

2013

In U.S.$billions. 2014 figures will be released in September 2015.

Source: China’s Ministry of Commerce

companies participating in its Silk Road initiative, which is aimed at building trade and promoting Chinese companyled infrastructure construction in more than a dozen Asian countries south and west of China’s borders.

“Chinese expansion into developing markets is a certainty,” Jullens said.

“Opportunities will exist for many years to come for those who secure relationships” with Chinese companies – particularly the big, state-owned companies that are now leading the push into foreign markets.

International roll-on, roll-off logistics companies are also on the good side of China’s economic slowdown, as the country will continue to import and export huge numbers of cars, trucks and buses.

Ro-ro operators are also busy with twoway shipments of heavy equipment, from cranes to forklifts. Plus, China is a major exporter of wind power and solar power equipment, trains and railroad-building

MOVING THE INDUSTRY

SC & RA MOVING JOB

OF THE

YEAR 2015

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supplies, and even pre-fabricated manufacturing facilities, such as cement plants.

Meanwhile, Jullens recommends that Chinese companies seeking profit growth overseas – not at home, where business is cooling – should make the transition “from being merely ‘good enough’ to being truly world class.” Companies that meet world-class standards stand the best chance of profiting in the developed world, he said.

Chinese companies looking for business abroad naturally face the same challenges that confront companies in every emerging market economy, Jullens said. And the Chinese “are coming late to the party” in many lands, he said.

They may be strong at home, but in other countries “have to play catch-up with competitors with much more experience and more resources.”

But the Chinese are obviously not afraid to try. Underscoring that can-do attitude was a CFLP report in February that predicted Chinese shipping companies and port operators in 2015 expect to benefit from “warmer global trade conducive to improvements in the international shipping environment, stable trade and (the Chinese government’s) gradually strengthening of policies to support imports.”

Yet while “trade competitiveness is expected to improve” for China, the report added, “geopolitical and uncertain factors have increased. Trade friction is serious. Competition between ports for container volume is still fierce, forcing port enterprises to raise operating capacity and service level standards.”

Non-Chinese and Chinese companies that did well during the boom years were to a degree beneficiaries of what Jullens called “bad quality growth.” They also were able to take advantage of demographic conditions that, for example, allowed for large numbers of young, cheap workers to take assembly line jobs far from their hometowns in coastal cities.

Now, he said, the Chinese government no longer wants bad growth, and is doing all it can to adjust the business climate.

Moreover, those old demographic advantages are fading as the country ages and fewer young people accept assembly jobs.

The Communist Party is also backing the “new normal” by weeding out corruption in the government and state

companies, while working to inspire citizens with a “Chinese dream” campaign rooted in nationalism.

The unstoppable economic slowdown is now posing “unprecedented” challenges for China’s leaders as well as

companies, Jullens said. The next few years “will be a bit rough” as companies, the government and Chinese people adjust. But the ongoing “structural downshifting” is here to stay. “That will not change,” he said. BB

Friendly Neighbors & A SWEET ECONOMY THE PORT OF MOBILE

Alabama State Port Authority www.asdd.com

www.breakbulk.com BREAKBULK MAGAZINE 51

breakbulk china 2015

BREAKBULK CHINA 2015 – A LOOK BACK

CLOCKWISE FROM TOP LEFT: (1) Interactive presentations enhanced delegates’ experience. (2) The Breakbulk Business Run through the streets of Shanghai raised donations for HandsOn Shanghai. (3) A pause in conversation at the IMISK Group booth. (4) Wei Zhuang, general manager of BIMCO Shanghai Centre, speaks at an executive presentation. (5) Guests visit the booth of BBC Chartering, Hotel Key Sponsor for Breakbulk China. (6) Christina Louise Hansen and Lie Sofie Hoeg Christensen of Martin Bencher dressed in authentic attire at the company’s China-themed booth.

52 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

CLOCKWISE FROM TOP LEFT: (1) Delegates network at the booth of Rickmers Linie, Triple Crown Sponsor for Breakbulk’s events. (1) Breakbulk China is an opportunity for exhibitors and delegates to network and negotiate. (3) John Amos, program development for Breakbulk Events and Media, wraps up the executive presentations. (4) Cheng Li, Shanghai branch manager of Mund+Bruns, Asia, speaks with students at support services table during the Career Fair at Education Day. (5) Companies attending Breakbulk China represented 78 countries. (6) Tom Cullins, PLS associate, was the PLS course instructor. (7) Group tour of Luo Jing Terminal of Shanghai International Ports. www.breakbulk.com BREAKBULK MAGAZINE 53

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Credit: Port of Lake Charles

PROJECT SOLUTIONS

54 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

[ PROJECT SOLUTIONS ] ADVERTISEMENT

BOOMING PAST. SOLID PRESENT. BRIGHT FUTURE. A new sea lock. A new terminal.

The logistics sector keeps evolving in the port of Amsterdam. This metropolitan port is one of the world’s key international logistics hubs. For over 750 years, millions of tons of various cargo have been handled in the port area.

“A port with a booming past, a solid present and a bright future”, states Anthony van der Hoest, Cluster Manager Logistics at Port of Amsterdam.

FAST, EFFICIENT, FLEXIBLE AND RELIABLE

The port of Amsterdam is, among other things, a very important hub for breakbulk.

Van der Hoest: “With dedicated terminals, the port facilitates various customers with a wide range of cargo, resulting in an import and export throughput of 3.3 million tonnes each year.” Deepsea container vessels and feeders sail from Amsterdam to ports across the world. With its excellent facilities and space for growth, the port of Amsterdam is becoming an ever more important player in the container and breakbulk market in Northwest Europe. Van der Hoest: “We always strive for progression. One of the latest additions to our list of experienced ter-

minals is Holland Cargo Terminal. Also known as HCT.” HCT is a multipurpose terminal specialized in the transhipment and storage of containers, breakbulk and ro-ro and project cargo. Together with partners TMA Group and HPH, HCT offers a ‘one stop shipping’ concept with tailor made solutions. Van der Hoest: “With VCK Logistics, Waterland Terminal, CTVrede-Steinweg, SCS Multiport, Koopman Car Terminal, United Stevedores Amsterdam, Ter Haak Group and HCT, the port of Amsterdam offers shipping lines the opportunity to serve their customers in a fast, efficient, reliable and sustainable manner.

Experienced terminals offer tailor-made solutions in a congestion-free environment.”

FUTURE-PROOF ACCESSIBILITY

The largest and most important development in the port of Amsterdam at the moment is the construction of a new sea lock. This lock is of great importance to Port of Amsterdam and its customers. Van der Hoest: “We continuously work on improving our infrastructure. As vessels continue to grow in size, this investment is essential to future-proof the port’s accessibility.” The lock will guarantee the port’s ease of access for the new generation of medium-sized and large vessels. Amsterdam is future-proof and therefore able to maintain its position as one of the most important logistics hubs in Northwest Europe. Van der Hoest: “The preparations for the construction of the new, large sea lock are in full swing. The lock will be operational by 2019, ensuring a long, bright future.”

“Amongst other things, we are an allweather stevedoring specialist. Pioneers of covered terminals in Europe. A concept made possible through a partnership with Port of Amsterdam in 1998. It was the first of our three allweather terminals for inland and coastal shipping.”

– VCK LOGISTICS JEROEN BRAUNS, GENERAL MANAGER

www.breakbulk.com BREAKBULK MAGAZINE 55

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KOG TRANSPORT

BIG ENOUGH TO HANDLE. SMALL ENOUGH TO CARE. A true project logistics partner. Providing tailor-made solutions for specialized transport needs. Over 30 years of successfully providing feasible solutions to complex transport challenges.

We organize and supervise projects from feasibility studies to completion, including route surveys and special transport of heavy lift and oversized cargoes. Whether it be projects, cross trade shipments or one-off deliveries – over water, air, land or rail – KOG Transport is equipped to handle them. Regular air freight to onboard couriers, from simple LCL shipments to renting an entire bay on container ships or being

the first to manage a project involving barging a 2700MT unit on barges over high seas – twice – we have done them all.

We are members of C-TPAT program, FCPA compliant and certified with ISO-9001, ISO-14001 and OSHAS-18001.

Licensed FIATA and IATA agents, we are equipped to handle DGR and Radioactive goods.

We have our own offices in over 17 countries and are represented by an exclusive agency network worldwide. Since the beginning of 2015, KOG Transport is a part of the Rhenus Group and has access to a general logistic network of over 350 branches in over 40 countries.

Please contact your nearest project control center for a personalized service

Zug, Switzerland – for EMEA (Europe, Middle East and Africa) region.

New York, USA – for AMERICAS (North and South America) region.

Japan, Tokyo – for APAC (Asia Pacific) region.

PROJECT CONTROL CENTERS USA: KOG TRANSPORT, INC. 299 Broadway, Suite 1815 New York, NY 10007 Contact: Colin D’Abreo Telephone: + 1 212 346 9800 Telefax: + 1 212 748 6133 Email: cdabreo@kogusa.com

56 BREAKBULK MAGAZINE www.breakbulk.com

SWITZERLAND: KOG TRANSPORT, AG Zugerstrasse 1 CH-6330 Cham, Switzerland Contact: Roger Kündig Telephone: + 41 (0) 41 784 2356 Telefax: + 41 (0) 41 781 1530 Email: rkuendig@kogzug.ch

JAPAN: KOG JAPAN KK WBG Marive West 23rd Floor 2-6 Nakase, Mihama-ku, Chiba-shi Chiba 261-7123, Japan Contact: Masahiro Kosaka Telephone: + 81 43 297 3155 Telefax: + 81 43 297 3166 Email: mkosaka@kog-japan.co.jp

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Member of the Rhenus Group

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Truly a Project Forwarder, we work with our clients from feasibility to execution, no matter where the cargo originates or destined, specializing in North America, Europe, The Middle and Far East.

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USA: KOG TRANSPORT, INC. 299 Broadway, Suite 1815 New York, NY 10007 Contact: Colin D'Abreo Telephone: + 1 212 346 9800 Telefax: + 1 212 748 6133 cdabreo@ kogusa.com Email:

SWITZERLAND: KOG TRANSPORT, AG Zugerstrasse 1 CH-6330 Cham, Switzerland Contact: Roger Kündig Telephone: + 41 (0) 41 784 2356 Telefax: + 41 (0) 41 781 1530 Email: rkuendig@ kogzug.ch

JAPAN: KOG JAPAN KK WBG Marive West 23rd Floor 2-6 Nakase, Mihama-ku, Chiba-shi Chiba 261-7123, Japan Contact: Masahiro Kosaka Telephone: + 81 43 297 3155 Telefax: + 81 43 297 3166 Email: mkosaka@ kog-japan.co.jp

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THE PORT OF LAKE CHARLES:

YOUR SOLUTION FOR PROJECT CARGOES AND MORE Strategically positioned on the Gulf Coast in America’s energy corridor, the Port of Lake Charles in Southwest Louisiana is on the fast track to efficiently meet the growing demands of a booming global market.

Project-cargo handling is now more vital than ever on the Gulf Coast as more and more projects require qualified and trusted heavy-lift capable facilities. The Port’s extensive experience with industrial project cargo, along with its deep-draft berths, rail, interstate highway systems, airport and barge connections, position it well to handle any heavy-lift challenge.

The Port is a strategic deepwater seaport situated on the Calcasieu River Ship Channel—a 12-meter-deep channel connecting the U.S. to the world via the Gulf of Mexico.

Currently ranked as the 13-busiest Port district in the U.S., based on cargo tonnage volumes (54 million tons annually according to the U.S. Army Corps of Engineers, which includes over 7.5 percent of U.S. daily energy consumption), the Port continues to stay ahead of future trends and maritime needs in the global and regional arenas.

Southwest Louisiana’s economic boom, which now stands at over $80 billion in announced capital investments, is fueling a surge in maritime activity on the Channel, creating new opportunities for innovative project-cargo solutions. The Port’s 13 berths and large lay-down areas facilitate the loading, offloading, staging and storage of project cargo needed 58 BREAKBULK MAGAZINE www.breakbulk.com

by industrial facilities that require over-dimensional pieces as close to their project construction sites as possible.

Deep-draft ship traffic is projected to double on the Channel over the next 10 years, and the Port is ready to meet this increase by improving and building facilities to handle the needs of Port customers and Channel users.

The year 2015 will see more than $46 million in capital investments that will upgrade and reinforce Port docks and facilities. The Port’s historic Berth #1 and dock, which was built in 1926, has been demolished and a new, modern warehouse is being built to handle heavy cargoes. Improvements like these are significant game changers that will increase the Port’s project-cargo capacity, handling speed and overall efficiency.

Since the 1920s, the Port has played a strong role in handling all types of cargo needs of industries along the Calcasieu Ship Channel and sending heavy-lift cargoes from the U.S. to the rest of the world.

The Port of Lake Charles is governed by a seven-member board of commissioners and comprises two marine terminals, over 4,000 acres of property zoned for industrial use, and an industrial park.

For more information, call 337-439-3661 or visit www.portlc.com.

MAY-JUNE 2015

HEAVYLIFT PROJECT CARGO

If it’s big and heavy, the Port of Lake Charles makes easy work of it.

Huge industrial plant components and oversize equipment arrive regularly at the Port by ship for transport to sites throughout the United States. ove And overdimensional cargo manufactured in the U.S. is loaded aboard vessels at the Port of Lake Charles to ship out to world destinations.

The cargo-handling capabilities of the Port of Lake Charles and its strategic mid-Gulf location make it an easy choice for the region’s inbound and outbound project cargo.

Lake Charles, Louisiana, USA • +1 337 439-3661 • portlc.com

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ELEBIA EXPANDING ON SUCCESS ELEBIA AUTOHOOKS S.L.U., located in Barcelona and founded in 2009 with one goal: create the most innovative crane hook ever, able to hook on and release the loads remotely. Now will introduce it’s innovative automatic hook at this year’s BREAKBULK Europe (stand 626H2).

The patented elebia automatic crane hook is equipped with a magnet on its lower section. When the magnet is close to the load, it attracts and positions the sling. The user pushes the control button, the hook closes, catches the sling and lifts the load without any additional handling. The system works with cable slings, chains slings, master links, textile slings and even bigbags. Using the new and patented

elebia automatic hook, you will pick up and release loads remotely, avoiding any handling and travelling. The elebia hook system brings you the safest and most productive working method ever.

The ports in Spain, Portugal, UK, France, Sweden, USA and Israel have already equipped their cranes with the Elebia automatic hook system; more than 400 autohooks working in ports, for bigbags, palletized loads, paper pulp, paper rolls, steel rolls, etc. The key benefit has been safety and productivity. With a single tool, the elebia autohooks,

and simple set of standard spreaders, the movement of any kind of load becomes safer and faster. Safer, as there is no need of people in the dock, the ship bay or climbing onto the trucks. Faster, as remote release speeds up the whole process and remote engage can reduce human intervention to the minimum.

“Now we are ready to expand this success to all the ports in the world”, says Oscar Fillol, the inventor and CEO of Elebia Autohooks.

In this Breakbulk edition, elebia is presenting 4 new innovations: • load cells: all autohooks can be equipped with load cell, to measure the weight being lifted.

• eMax: new and most powerful remote control, able to control multiple autohooks with weighing scale, while displaying all the info. With a big high resolution screen, and a high profile keypad, it is still handy and lightweight. Some of the key features:

– Overload alarms (visual, buzzer and vibration.Overload value, user, date and time recorded into the log file)

– Unbalance alarm (when 2 or more hooks are used)

– Log events file with real time clock (open, close, load, overload alarm, maintenance, ...)

– Export log file via USB log file to spreadsheet.

• the new elebia bigbag: now it is possible to engage many bigbags with no handling at all.

• the e2: the smallest of the elebia family. A 2 ton autohook, light, small and rugged, specially designed for paper pulp, pipes, bigbgas, sling bags, etc.

See it in action: elebiaTV (youtube) and www.elebia.com

Oscar Fillol (CEO at elebia) holding the new e2

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A MARKET LEADER STUTE Logistics (AG & Co.) KG is a modern logistics provider founded 1853 in Bremen. Ever since STUTE has been renowned for designing tailor-made solutions and managing complex global assignments. We think and act flexibly and are considered a market leader in project logistics. Offering a full range of services from single or multiple origins - starting with planning, management and transport execution – to the final project site our customers rely on our long standing expertise. Today, just as over 160 years ago.

From start to finish, the handling of break bulk and heavy lift cargo requires continuous coordination, monitoring, control and follow-up. This will be guaranteed for each transport operation by specially trained staff with personal dedication and a comprehensive flow of information in order to safeguard timely and sophisticated project execution. At all times, in any terrain and at any location.

A task not all freight forwarders are up to. In such cases specialists are called upon who know exactly what they are doing. Specialists like STUTE.

For further information please contact: STUTE Logistics (AG & Co.) KG Am Sandtorkai 48, D-20457 Hamburg, Germany Contact: GERD ILLING, Branch Manager Phone: +49 40 731072-22 Fax: +49 421 386246-849 gerd.illing@stute.de www.stute.de

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ition Europe exhib At Breakbulk 18-21 May 2015 all 2 , Booth 205 H Antwerp Expo

BIG GUYS Taking on the heavyweights. Lifting, turning, transporting – our specialists make light work of these and other break bulk and heavy lift assignments. Because we offer all the experience and equipment, preliminary planning and approvals needed to execute your major projects – even if this means moving mountains.

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www.breakbulk.com BREAKBULK MAGAZINE 61

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TECNITRANSPORT USES NEW SPT TO MOVE POWER PLANT EQUIPMENT Tecnitransport recently arranged the transport of a coal-fired power plant equipment for AES’ Guacolda V in Huasco, Chile. The Santiago de Chilebased heavy hauler overcame challenges associated with the “last-mile” to the jobsite by using new SPT equipment, the only transport system of its kind in the region.

Initially the operation was planned and contracted to run by pulling trucks (three to four prime movers) with 12 axles lines and 12 tires per line of hydraulic Nicola-type trailers with drawbar. But the jobsite road was too narrow, too steep and required very tight turns — all discovered during Tecnitransport’s road survey, Cargo Equipment Experts said in a statement on behalf of its member. In fact, the gravel road measured less than 8 meters wide, had a maximum incline of 13 degrees and turns of nearly 90 degrees.

The original equipment plan wouldn’t work.

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62 BREAKBULK MAGAZINE www.breakbulk.com

transport to assemble and test the new system.

Manufactured by Mitsubishi Heavy Industries (MHI), the turbine and generator were carried from Japan. The turbine weighed 200 tons and measured 8.45 meters long, 6.74 meters wide and 5.77 meters high, while the generator weighed 270 tons and measured 11.9 meters long, 3.97 meters wide and 3.1 meters high.

After the BBC Chartering vessel arrived, the cargo was loaded separately onto SPT equipment and then moved through the site to its final position.

Tecnitransport used its 800-ton lift system 48A gantry crane to unload the heavy pieces.

As soon as the Guacolda V job finished, Tecnitransport had another job for its new SPT system. It was moved to southern Chile for a transformer transport for Colbun / Hyundai. The 295-ton transformer was collected at Puerto Coronel and delivered to the Santa Maria of Colbun coal-fired power plant in Coronel.

Using the same configuration of 12 axles lines with three files of hydraulic TDI Nicola type trailers with drawbar, moved the much heavier cargo from the port terminal, along a public road and on to the plant site.

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Loading proppants to rail cars at the Port of Vancouver USA, bound for North Dakota via The Advantaged Supply Chain.

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mineral ores, and agricultural commodities, among others.

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air cargo

AIR APPARENT

By Mary Shacklett

Air Freight Plays Role in Expanding Project, Breakbulk Markets

A

or a power plant that’s offline and requires parts to be placed back into operation quickly, the needs and timing are dire.

“From a pure cost basis, companies would like to consider ocean freight for these situations, but the timeframes they have to meet do not necessarily allow for that,” he said.

Van der Stichele estimates heavy-lift and breakbulk moves have accounted for 20 percent to 30 percent of charter air cargo shipments over the past few years.

Credit: Shutterstock

ir freight services for project cargo are flourishing, as time constraints and infrastructure limitations make air the best alternative to job sites for oil and gas, mining and utility projects underway in South America, the Middle East and Africa.

“In situations like these, time is a key factor,” said Pierre Van der Stichele, director of business cargo for air charter services provider Chapman Freeborn.

Whether it’s a large generator for a project, an aircraft engine,

70 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

air cargo

TOP 10 AIR FREIGHT MARKETS 2016

1

UNITED STATES GERMANY

3

CHINA HONG KONG

5

6

REPUBLIC OF KOREA UNITED KINGDOM

9

4

JAPAN UNITED ARAB EMIRATES

7

2

8

INDIA THE NETHERLANDS

10

Source: International Air Transport Association

HUMANITARIAN AID A major sector for large air cargo project shipments that is less often talked about is humanitarian aid.

“The urgency of the emergency situations encountered when humanitarian aid is needed in an area of the world is that equipment must be rushed to sites that often have limited infrastructure,” said Christoph Remund, CEO of DHL Global Freight Transport. “You need specialized recovery teams and logistics for this work, where tents and even entire kitchens might have to be transported on trucks into affected areas.”

Rapid response humanitarian efforts in many respects require the same levels of specialization that characterize most airborne project cargo shipments, and the unique conditions and circumstances they present.

72 BREAKBULK MAGAZINE www.breakbulk.com

“Much of this activity has been driven by the drilling and exploration activities of oil and gas companies in the Middle East and Africa,” he said. “The request starts with an e-mail from a shipper or a freight forwarder that has an urgent need to ship goods somewhere quickly.”

Like Chapman Freeborn, DHL Global Freight Transport also feels shippers’ sense of urgency in heavy cargo requests.

“There are projects underway around the world where on short notice, we receive a request to help the customer move oversized goods into a difficult-toaccess area – or to a location where the customer can’t afford the longer lead times of ocean cargo,” said Christoph Remund, Christoph Remund CEO of DHL Global Freight Transport.

Just as important as transporting these large loads is the ability to provide expertise at all points of the journey.

“Many times we will get an e-mail requesting cargo shipment, and the only information we will get is the weight of the cargo, its dimensions, and the type of machine it is,” said Van der Stichele.

“This isn’t much information to go on. It’s also why we immediately ask for blueprints that precisely show the pieces to be shipped in a tri-dimensional fashion.”

Van der Stichele cited the example of an underwater “Christmas tree,” which is an assembly of valves, spools and fittings used for an oil well, which Chapman Freeborn was asked to ship for an oil and gas company.

“We needed a crane on both sides of it to both load and unload,” he said, “We even had to construct special ramps for loading and unloading – but we are an engineering-oriented firm, and we have the expertise on staff to solve logistics issues like this.”

DHL’s Remund agrees that when heavy cargo customers come calling, they are looking for expertise and problem solving as well as transportation services.

“This is why we have dedicated ground teams that are strategically placed around the world,” he said. “One

team is in Singapore, there are some teams on location in Dubai, and we also have a local presence in the Americas.”

Managing Unique Logistics Needs

In some cases, the expertise that air cargo haulers provide goes beyond loading, shipping and unloading – especially in emerging markets like Africa, where skilled help can be in short supply.

“We now have experts who can help our customers in these remote areas set up their equipment, including the provision of engineering and planning support,” Remund said. “Then there are local infrastructure challenges that were not readily apparent when the project was planned, but that must be adjusted to. For example, especially for mining activities in remote areas, runways in strategic areas for landing aircraft may be inadequate or unavailable. We have to work out the logistics on how we are going to land the cargo and get it to the project site.”

Jannie Davel, senior vice president of air freight for DHL Global Forwarding, Americas, confirms the demand for heavy air cargo for projects dependent upon equipment arriving at the jobsite on time for the work that is scheduled.

“This enables enterprise supply chains to function the way they were designed,” Davel said. “For high-end products like those found in aviation, the ability to transport an entire aircraft engine in three days to meet a production plan is very critical.”

“There are many elements in shipping special cargo that customers may not consider,” said Chapman Freeman’s Van der Stichele, “such as where the best lashing and attachment points are in order to safely and securely prepare cargo for shipping. In other cases, special ramps need to be constructed in order to load and unload cargo. Then, airlines need to be worked with to determine whether the cargo can be loaded and unloaded from the aircraft that are available.

“In some cases, cranes that are twoand-a-half times the weight of the cargo they are lifting must be employed to get cargo onboard. Once the cargo is in the plane, it has to be secured in a way that the cargo will not shift during flight.

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big shackles, because if the shackles aren’t strong enough, the cargo and the plane won’t be able to withstand the turbulence. All of this requires a strong engineering background, together with expertise in the heavy equipment and the breakbulk cargo business,” he said.

The other service that customers receive from air charter suppliers is the assurance that every detail of air transport, include the plane itself, is thoroughly reviewed.

“In our environment, fleet modernization can be an issue,” acknowledged Van der Stichele. “We are not an airline, but we do focus on safety checks and we have access to research that vets the various airlines that we use for safety and on-time performance. We also check out all documentation and procedures to assure that there are no flight-related issues in any of these areas that can delay shipments or cause other complications.”

Managing equipment for a major project and ensuring that time and money aren’t lost can also operate on the reverse side of logistics.

Van der Stichele cites examples where ground crews in remote locations may not be able to fully repair a piece of equipment with the resources and skillsets that are locally available.

“In these cases, we might have to

As the air cargo industry looks at breakbulk and heavy equipment shipments for revemue, it has sought to reduce unit costs by replacing narrowbody aircraft with mid-sized or larger freighters. / Credit: Deutsche Post DHL Group

come in and air ship the equipment to repair depots in a major oil and gas center such as Aberdeen, Scotland, which supports North Sea oil drilling, or Houston, a major oil and gas center,” he said.

“It is in these areas that on-site expertise and parts are available to effect complicated repairs. Once the repairs are made, the equipment is then routed back to the project site,” he said.

Deutsche Post DHL Group, in cooperation with the United Nations Office for the Coordination of Humanitarian Affairs, deploys a disaster response team to support relief efforts in Vanuatu, which was devastated by Cyclone Pam in March. / Credit: Deutsche Post DHL Group 74 BREAKBULK MAGAZINE www.breakbulk.com

Adapting Air Cargo

For air cargo business, there are certain global “hot points” for projects where air shipments are in such high demand – equatorial Africa, Luanda, Mozambique and the Middle East – that it is turning a business that is essentially charter into where it is running regular routes or lanes.

Still, air cargo will remain a fundamentally on-demand or charter business because of cost. In a 2012 Airbus report, the average value for each kilogram transported by air was US$127, while for ships it was about US$1.10. This cost consciousness generated a rethinking of supply chains for least cost during the recession, and it has continued to be a dominant consideration in logistics decision making, including when to use air cargo.

“Even five years ago, I can think of only one high-tech manufacturer that shipped all of its goods by air,” said DHL’s Davel. “Today, manufacturers have reconfigured their supply chains to where up to 70 percent of their goods are now transported by ocean, and air cargo is reserved only for emergency situations.” Manufacturers are also doing more near-shoring, where shorter transport distances are called for.

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equipment shipments for revenue. enue growth of 5 percent per year, and “Air cargo remains a tough and are projecting the same for 2015. That sometimes unpredictable business, but should be very easy to achieve.” the demand is consistently there on the As the air cargo industry looks at project cargo side,” Van der Stichele breakbulk and heavy equipment shipACL WroteBook_Breakbulk_2015_ACL 4:01 PM Page 1 it has focused its noted.

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attention on reducing unit costs by replacing narrowbody aircraft with mid-sized or larger freighters. The larger aircraft come with bigger belly capacity, and are more suitable for heavy cargo.

“We are seeing expansion in heavy air freight shipments now,” said DHL’s Davel. “This is presenting new air freight opportunities.”

However, Davel also mentions near-shoring, where shorter transport distances are called for and air cargo is less in demand. “If you think back over the last 10 to 20 years, it was commonplace for these manufacturers to go to Asia for their goods,” he said. “Now, they are sourcing their goods and components from locations that are at closer ranges – such as Mexico and Costa Rica, if the manufacturer is in North America. New trade agreements are also shifting business to areas where it wasn’t conducted before.”

Despite these changes, the air cargo business continues to reinvent itself and to provide services to companies that need them.

In its 2013 air cargo forecast and assessment, Airbus predicted that more than 870 newbuild aircraft, roughly divided between mid-sized and largesized planes, would be needed over the next two decades, and that an additional 1,859 aircraft will be converted into air cargo haulers, with about one-third of them being small freighters, and half being mid-sized freighters. The same forecast projects that 86 percent of air cargo traffic will be in North America, Europe and the Asia-Pacific region.

This will be accompanied by increases in air cargo traffic to developing markets in the Far East, Africa and South America, the “virgin markets” in transportation.

“Air cargo has always survived, and it will grow, but this growth will be fostered by carrying different products to new areas of the world,” Davel said.

“Air cargo has the ability to both adapt and adjust as it faces key challenges in areas of world trade and security. More than likely, these and other pressures will drive air freight to operate in leaner ways going forward than it has in the past. This might ultimately mean there will end up being fewer air cargo players with greater degrees of air cargo specialization.” BB MAY-JUNE 2015

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Ports Breathe Easier as China Lifts Valemax Ban

GREEN LIGHT

FOR STEEL

By Eric Johnson

C

Shipowners’ Association (CSOA) on one side, and the owner-operator of super-sized Valemax iron ore carriers – the Brazilian mining concern Vale SA – on the other.

The controversy ended in January when, according to Chinese state media, China’s Ministry of Transportation lifted a three-year-old bulk carrier-capacity restriction that had indirectly barred Valemax vessels from Chinese ports. Officials with Vale confirmed the decision, saying their ships

Credit: Shutterstock

hina is hands-down the world’s largest steel manufacturer. But it lays claim to that distinction only by means of its status as the world’s largest importer of iron ore, without which the nation’s steelmakers would be flat out of business.

Which is why the steel industry, as well as port operators, shipping companies and logistics providers, for years have closely watched a debate pitting the Chinese government and the China

In June 2014, the Vale Brasil became the first Valemax iron ore carrier to dock at the port of Kashima, Japan. / Credit: Erika Tatsumi/ Vale 78 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

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The Berge Everest, shown docking at a terminal in Malaysia in March 2014, was the first Valemax to deliver iron ore to China in 2011. / Credit: Mohamed Darus bin Hasib/Flyborg Films/Vale

had won a green light to serve five mainland ports, and that they hoped to add more ports in the future.

The long, drawn-out controversy over Valemax docking rights has shed light on the complexity of commercialgovernment relations in China, and how these relations affect ports and the companies that serve ports. For example, by ruling to bar Valemax carriers the Chinese government sided with domestic shipowners but denied port operators access to Valemax business.

Vale has owned or chartered vessels in the Valemax-class fleet since placing its first order with a Chinese shipbuilder in 2008. About three-dozen carriers, each with a capacity of up to 400,000 deadweight tons, are hauling ore from Brazil to ports in Europe and Asia.

Because of China’s restriction, Vale has been relying on a transshipment site at Subic Bay in the Philippines to serve 80  BREAKBULK MAGAZINE  www.breakbulk.com

Chinese clients since 2012. At the site, ore is transferred from Valemax holds to smaller carriers that are allowed to discharge at mainland ports.

China received its first Valemax load of Brazilian ore in late 2011, when the carrier Berge Everest delivered more than 300,000 tons to the port of Dalian.

A few weeks later, the Chinese government clamped down. Citing safety concerns, the transportation ministry said bulk carriers with capacities greater than 250,000 dwt could neither dock nor moor at a domestic port. Valemaxes were already safely sailing into ports in Italy and Japan, but they were MAY-JUNE 2015

ocean services

The Valemax vessel Vale Caofeidian undergoing an iron ore loading test at a terminal in São Luís, Brazil, in September 2013.

Credit: Ribamar Nascimento/ Farol Digital/ Vale

no longer welcomed in China.

The government’s decision reflected strong opposition against Valemaxes led by CSOA, whose members include COSCO, China Shipping and Sinotrans. CSOA Secretary-General Zhang Shouguo at the time blasted Vale for expanding into the shipping business. He also charged the Brazilian company with “unfair competition” against established shippers.

“Vale is an iron ore producing corporation that obviously lacks experience in ship safety management, ship pollution prevention and ship operation and management,” Zhang said at the time.

Moreover, he claimed the Valemax fleet was guilty of “monopoly and unfair competition, which not only harms the shipping interest of mainland China but also that of South Korea, Japan and the Taiwan area.”

Unlike Zhang, Chinese government officials declined to comment during the years-long debate. Vale officials were usually tight-lipped as well, although in mid-2012 company repre82 BREAKBULK MAGAZINE www.breakbulk.com

sentative Joao Mendes Faria was quoted

by Chinese media as saying, “we hope that in the near future we can directly berth at ports in China. But we’re not sure.” In mid-2014, Vale CEO Murilo Ferreira was quoted as saying that the company was still negotiating with Chinese authorities.

Port operators were also reluctant to address the issue, although occasionally over the years state media reported that some ports were competing among themselves and behind-the-scenes for what they hoped would be future Valemax business.

Officials at the port of Lianyungang, about 480 kilometers north of Shanghai, had nothing to say in April 2013 when, in a subtle challenge to rulemakers, a partially loaded Valemax paid a visit. The ship could legally dock at Lianyungang because it was carrying only 200,000 tons of ore. That was the only publicly disclosed Valemax call in China between 2011 and this year.

Meanwhile – and out of the public eye – talks were held through the years

between Vale and CSOA membercompanies. According to Chinese media, Vale eventually cut profit-sharing deals with shipowners COSCO and China Merchants Energy Shipping. Terms were not disclosed. The reported deals preceded the government’s decision to lift the carrier-capacity restriction.

Now that the dust has settled, Valemaxes are rolling into China and contributing to what’s expected to be a 1.7 percent increase for iron ore imports in 2015 over last year, to nearly 1.16 billion tons, according to the state-affiliated China Metallurgical Industrial Planning and Research Institute. Australia and Brazil are the biggest sources of this imported ore.

Moreover, the institute said, Chinese ports-of-call for Valemaxes and smaller bulk carriers are expected to handle more than 80 percent of the country’s iron ore demand this year. That import forecast represents a significant increase from the 75 percent recorded in 2014, at a time when Valemaxes were still barred from China’s ports. BB MAY-JUNE 2015

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technology

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then sent by barge down the Mississippi River to the Gulf of Mexico.

“We were doing all of this scheduling on Excel spreadsheets that we had to maintain manually, and this took time and led to the potential for error,” said Jason Marquis, the company’s president.

The manual work made it harder to spot logistics issues as they came up. This caused delays, complications and, consequently, added costs.

Marquis found that a new project management system could give it supply chain visibility, provide timely and actionable information that expedited decisions, and eliminate most manual spreadsheet entry. After implementing the project management software, Marquis could respond faster to situations. It also had the ability to make a single change in a scheduler, with the system automatically applying the revisions required for that change throughout all scheduling.

Project management systems, coupled with in-field and mobile communications and Internet cloud-based services like mapping and weather can save money and effort for project cargo – but those using the technology must also know how to adapt these tools to the specific needs of their businesses.

Project Cargo “Uniqueness”

By Mary Shacklett

INFORMATION

INNOVATION Logistics Melds Technology With Expertise

W

hen Marquis Energy Management wanted to improve the visibility and operational efficiency of its project logistics planning, scheduling and execution, it looked for project management technology to replace the 84 BREAKBULK MAGAZINE www.breakbulk.com

myriad spreadsheets, whiteboard planning sessions and manual operations it had been using.

Marquis was transporting bulk oil from the Bakken Formation in North Dakota, using a variety of railroad routes to its Hayti, Mo.-based terminal. Oil was

“Project and breakbulk cargo is different than other traditional shipping projects, which is why those who bid on these projects need to understand the dynamics of project cargo transportation and overhead so their shipping costs don’t spiral out of control,” said Janet Marlowe, president of the Planet Shippers project cargo consultancy and a partner in Project Cargo USA. “There are different types of project management, so it is difficult to standardize cargo project approaches.”

Marlowe references one case where a fabrication company in Singapore won a contract to fabricate huge drilling platforms for global companies that drill for oil.

“The engineering of the drilling platforms and the bidding of the contract was all done in Singapore. But the materials used in the building of the drilling platforms had to be brought in from everywhere throughout the world,” Marlowe said. “The professionals who work projects like this know what they’re MAY-JUNE 2015

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technology

doing and where the risks are – but a small company in the states that is just getting its feet wet in the bidding for a desalinization project in the Middle East often puts its emphasis on just winning the bid with the lowest price.”

Starting with procuring materials, the company quickly discovers the outside-the-box realities of project shipping logistics – like most materials won’t fit in a container-style ship and the heavy-lift and multipurpose vessels don’t maintain scheduled liner services as the box ships do.

“The result is that the people on the project just sit around and the cost begins to overrun,” Marlowe said. “You can set yourself up for huge losses in a situation like this.”

Bringing technology to bear on unique projects like this can be challenging because vendors who provide the technology recognize they can’t develop

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a one-size-fits-all solution.

Ron Thorburn, global marketing manager for QuintIQ, a provider of project management and supply chain optimization technology, said his company uses a standard software platform for all customers, from which industryspecific solutions are available to manage metals, manufacturing, logistics, workforce, or a combination of these.

“Within each area, there are even more industry-specific solutions, so that if we are talking logistics, you might have trucking, vehicle routing, vessels, rails and ports and terminals. All of these options are configurable to the project,” he said.

Thorburn acknowledges that projects require advanced planning, with management of multiple resources. For instance, what kinds of equipment, people and talent is the project going to require? When will these resources be needed in the project life cycle? And if something goes

wrong in real time, are there automatic triggers that can immediately alert the right people to the situation so they can address it without delay?

“When we configure project management software for our clients, we aim for a 100 percent fit,” Thorburn said. “But to achieve, this, we spend time onsite with the client to do a thorough needs analysis for the business or the project. From here, we develop a blueprint for the project management system that will be needed.

“Developing and tuning this system is an iterative modeling process until everyone agrees that we have achieved our goals. What happens during modeling is that the client sees the data and says, ‘Oh, I need it to do this.’ The system has options that the customer can select from, and once we know these selections are going to work the way the customer wants them to, we can automate. The bottom line is, we want our customers to

MAY-JUNE 2015

trust the system.”

Marlow offers an example of a company moving huge pieces of equipment for aluminum smelters through the middle of Russia. “The company had wanted to ship the equipment from Saint Petersburg to Vladivostok, but it saw that there were no roads or infrastructure that facilitated this. Each piece of equipment being shipped was worth around US$11 million, and stood the risk of being hijacked and sold for scrap – so the company had to set up armed guards to travel with the equipment until it arrived at its destination,” she said.

Despite the efforts of technology purveyors, however, those involved in project cargo recognize that some of project cargo’s uniqueness is best addressed by people who understand the ins and outs of the projects they manage.

“In one case, a company in Alaska got bids from three different companies

in three different countries for a fertilizer plant it was selling, and a company in Nigeria ended up winning the bid,” recalled Marlowe. “Unfortunately for the selling company, it didn’t have much knowledge of the logistics that were involved, and there were also issues of cultural mistrust because the company didn’t understand how business was conducted in Nigeria. This is a common problem for many companies looking to expand their book of business into areas like Malaysia, Africa or the Middle East – and a reason why many people ultimately decide not to get involved.”

Thorburn concurs. “On both the tactical and strategic levels, software is capable of creating ‘what if’ scenarios that enable the cargo project manager to explore different project approaches.

But regardless of which system you use, there are always cost and risk implications. At some point, the project manager

has to take the reins of the system and make a ‘manual’ call on what the best decision for the project is.”

In-field Connectivity

To reduce the level of unknown factors, many project cargo transport decisions have been based on “on the ground” information at the project jobsite, because the systems that the project cargo manager had in place couldn’t give him the granularity and needed visibility of the end-to-end project.

In-the-field data communications is an area where technology is making major strides, thanks to a plethora of mobile devices that can handle a variety of text; graphics and pictorially based data; as well as sensor- and radio frequency identification, or RFID-based technology that is capable of tracking pieces of project cargo en route and ensuring they arrive at their destination.

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technology

What makes this information all come together is the project management software that is able to accept the inputs from these sensors and mobile devices, and then translate them into formats that can be imported into the system’s central information banks.

“Today, mobile devices are very connectible to centralized project management systems,” Thorburn said. “There is a single point of entry into the system for these devices, and that enhances security. The presence of mobile technology has really made a difference in information access to workers on the project who are stationed in the field.”

These centralized project management systems are capable of rendering real time updates of information, and either pulling that information in from field-based mobile devices, or pushing real time information back out to these devices. Project managers can

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also determine how “real time” their information really needs to be (whether information flows immediately or is updated every minute or hour).

Some project management systems can also receive mapping information from a variety of vendors. Marlowe sees this as an important benefit. “Google Earth now gives you the ability to do some route surveys, especially in the U.S. It enables you to look at bridges, roads and terrain and gives you the ability to simulate how you would drive down a certain route if you needed to bring a piece of equipment in to a jobsite.

“For instance, if there are load clearance issues, you could see how many utility lines you might have to lift. Or, the technology could give you the height of a bridge, or the degrees of the angles on a winding road that a truck would need to turn,” she said. This beats the current alternative of paying someone to be on-site.

New Directions

Thorburn believes that in the future, more companies are going to want to increase their use of mobile technology in project cargo. This is especially true with the expansion of the Internet of Things (IoT) with its wealth of humanand machine-generated data that can be captured directly from the Internet.

“Sensor emissions on material tracking and quality can be machine fed directly into project tracking and monitoring software for purposes of logistics and analytics,” he said. “This information can be tailored by companies to meet the specific information input and output needs of the cargo projects that they undertake.”

A second area where technology will improve is in battery life and battery technology. Improvements in mobile device longevity and performance on battery will increase companies’ reliance

MAY-JUNE 2015

on mobile technology, and its inputs into project information.

The ability to integrate visual applications like mapping into project management for cargo will continue to improve – and this is likely to lead to unmanned drones being dispensed to perform surveys on identified project site areas. The use of these drones could reduce project costs and improve the safety of cargo project personnel.

“There are also a few software programs available that are capable of managing long lead projects with multiple line items,” Marlowe said. “This is especially important if you’re purchasing materials that take two years to make, and that may contain as many as 200 or 300 line items. If the manufacturers’ information is uploaded electronically to freight forwarders and shippers with the status information on the materials included, it’s easier to coordinate transportation with

the timing of equipment manufacture.

“On the transportation side, you can have system visibility of three pumps that are ready on a certain date, and develop your shipping plan. Your goal is to eliminate bad surprises and to make educated decisions that are not last minute,” she said.

Coping With the Unforeseeable

Nevertheless, there is always the unforeseeable that no technology can plan or anticipate.

“Mistrust between business partners from different countries is still a major issue,” said Marlowe. “Many companies are still not comfortable granting access to their information through the firewall.”

This affects the end-to-end visibility of project management software, because if you can’t get all of your project partners to use the system, you lose the ability to see your supply chain in its entirety.

“We still have a lot of customers who

prefer an on-premises (instead of a cloudbased) system for this reason,” Marlowe said. “They want custody of their project information exclusively in-house.”

So how do you deal with this?

“The No. 1 thing is to have someone on your staff who is looking after your project’s logistics planning,” Marlowe said. “Paying a person well who has the know-how is a strategy most of the experienced companies use. A knowledgeable person with a trained eye can immediately see where shipping companies add in ‘fluff.’ Also, if you don’t have an internal logistics person, you run the risk of your employees or contractors accepting kickbacks from shippers of as much as 2 percent to 10 percent. In large projects, this can add up to US$200,000 to US$500,000 in bribes.”

An additional approach is to seek out opportunities where technology can work – and work well – with your projects. BB

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logistics perspective

FROM MYTH TO MEDIATOR James Chan’s Bicultural Roots Help Businesses Connect With China

By Alan M. Field

W

hen it comes to selling heavy industrial products to China, few people have enjoyed the benefits of a bicultural background more fully than James Chan, founder and president of Asia Marketing and Management, a Philadelphia-based consultancy.

Since 1983, Chan has advised more than 100 U.S. industrial equipment manufacturers, technology firms, and professional services organizations about the mysteries of succeeding in China, which has rapidly become the world’s largest exporter and its thirdlargest importer (after the U.S. and the European Union).

The roster of Chan’s China-bound manufacturing clients has included Catawissa Lumber & Specialty; Colonial Metals Co. (recycled copper ingots); Fielco Adhesives (industrial adhesives); International Products Corp. (cleaners and lubricants); Kingsbury Inc. (specialty bearings); aerospace giant Lockheed Martin; Sylvin Technologies (PVC plastics); Vulcan Spring Mfg. (specialty springs); and Westinghouse Electric (electric power technology).

Chan is also a keynote speaker at annual conferences of trade and professional associations.

‘Peace of Mind’

Born in 1949, Chan grew up in Hong Kong, “thinking that I was a Cantonese of 100 percent Chinese origin, but knowing that I was a subject of the British Empire. I was also bicultural, without my knowing it,” he said.

While all of his professors were Westerners, he and his classmates did not rebel against their authority, he says, because “we knew that we would become Chinese citizens” in the future, Britain’s treaty obligation to return Hong Kong island to China in 1997.

94 BREAKBULK MAGAZINE www.breakbulk.com

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logistics perspective

As British subjects, Chan and his classmates were not isolated from the rest of the world after the inwardlooking communist regime took control nearby. “We did not suffer the consequences of the Cultural Revolution” that shook the People’s Republic from 1966 to

1976, he said. That gave Chan “deep psychological peace of mind.”

After graduating from Hong Kong University, majoring in geography, Chan felt comfortable enough living with Anglo-American culture to pursue graduate degrees at the highly rated

University of Chicago and University of Michigan.

“My goal was to be a scholar. Chinese culture worships scholars,” not just because scholars traditionally ruled people below them, but because Chan “bought a bit into the snobbish mindset”

ADVICE FROM A MEDIATOR Whatever the industrial sector, James Chan cautions, “It will take several years to break into the Chinese market. Don’t get discouraged if business stays flat during the initial years.

Chan, the founder and president of constancy Asia Marketing and Management, said, “One of my industrial original equipment manufacturer (OEM) clients put in seven years before we got our first $350,000 order from China. But, once the order came, other orders began coming through. We’ve been selling our industrial components to China since 1984. We’ve made two China-based agents millionaires in U.S. dollar terms.

Success in China feels somewhat like growing an apple orchard, not truck farming.”

Chen offers advice he believes essential to industrial and technical products manufacturers in marketing to China and Asia: Realize that whatever you sell in China that is of high quality is going to be replicated by “copycats” and “pirates.” Don’t let this paralyze you from expanding in China. Good customers in China appreciate high quality. They are willing to pay top dollar to buy Western-made industrial products that provide stability, dependability and consistency to their turbines, compressors, gearboxes, blowers, medical equipment and other high-ticket machinery.

Pirated products, while they sell

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for a fraction of your cost, will break down and lead to very costly repairs and damages.

Recruit a good and effective agent in China to export to China or Asia. A good agent is someone who is honest and will tell you what you must know, as opposed to what pleases your ears. An effective agent is someone who gets things done despite seemingly insurmountable barriers. The right agent does not have to be an expert in your industry. But the agent has to be a good salesperson that can handle engineering drawings and hold technical discussions with prospects and customers. However, remember that it takes time to find and train a sales agent. If may take a repeated process of trial-and-error before you’ll find the right one.

Some U.S. companies make the strategic mistake of hiring experts in their fields as their agents. This common mistake can be fatal.

Agents with industry expertise turn out to be head-to-head rivals after having worked with the firm for a while and gaining access to its customer list and other trade secrets.

This scenario happens to firms that are owned by other Asian and European firms.

Don’t rely on e-mails and text messages to communicate with your China agent. Telephoning your agent as often as you can is

the best way to avoid misunderstandings, and helps you and your agent understand each other’s points of view and come to an amicable compromise. Consider making daily phone calls.

Visit China at least once a year and as often as you can. Travel with your agent to meet with customers and prospects. Even the best agent needs to have technical experts and executives from headquarters accompany him on these visits to authenticate their roles.

Be prepared to say “no” to prospects and customers in China.

Part of the Chinese negotiation strategy is to ask for impossible concessions. They want to know what your limits are. If you don’t say “no,” you will have no business in China. Saying “no” to customers in the China market is a mark of strength, not weakness.

Learn to befriend those people who like and respect you. Find a time and place to meet these people privately. They will tell you how you can work the system so that your customers can get your products and your company will get paid. Chan call these people his “insiders.

“They tip us off on how to work the ‘system.’ I never put them on the spot during a public meeting to talk to us. This is a critical soft skill that gives us our million-dollar orders,” Chan said.

MAY-JUNE 2015

that underpins their authority. “I fell in love with the act of loving knowledge.”

Although Chan taught geography at Boston University and the SUNY campus in Cortland, N.Y., he gradually recognized that he “had no patience” to devote his life single-handedly to the world of books and other written materials. “I wanted to be with people. I wanted to explore their minds.”

Fortunately, Chan was studying a very practical sort of geography that focused on “what was where, and how to get to that stuff.” This kind of economic and cultural geography could be leveraged by active, inquisitive minds to identify foreign markets, and appeal to their needs, not just in China, but also elsewhere around the world. To do that, he needed a job, a process more easily said than done.

Chan wrote some 500 letters to multinational corporations that would likely be able to use his bicultural background and academic acumen.

“They all offered me a job,” he says, “but first, I had to see their HR [Human Resources] people” to complete the hiring process. What ensued was a classic process of Catch-22. Whenever the HR people asked if he had a Green Card, Chan said, “I am illegal, but if you hire me, I can change my status.” HR coun-

tered that they would hire him only if he changed his status first.

In all, before Chan could apply his talents in a non-academic context, he suffered through three separate deportation hearings by U.S. authorities. As Chan writes in his autobiographical self-help book, Spare Room Tycoon, he spent $20,000 on legal fees, emptying his pockets, only to find out that “my situation was, essentially, hopeless.”

And then, one day when he was nearest despair, he walked into Philadelphia’s Cathedral of Saints Peter and Paul.

Although he has never been a Catholic, he knelt in a pew and silently addressed God: “If you can let me stay in this country legally, I promise to help pull China and America closer together.”

‘Forged My Own Myth’

His bargain with God gave Chan “a reason for me to be on this earth,” he wrote in his book. “I had discovered a story of which I could be the hero. I had forged my own myth.”

Not long thereafter, his prayer was answered in the form of a phone call from an American business executive who had been struggling to make progress, selling scientific monographs in China. Although business was foreign to Chan, he realized that the American

company was interested in hiring Chan for his knowledge of China.

While “not a business person,” he says, he was “100 percent confident that I knew China as a psyche and as a culture.

And I was psychologically open to meeting people and making friends.”

To get up to speed about the world of academic publishing, he learned from the ground up, talking with librarians who purchased the academic studies, rather from professional experts. “I learned from the cooks who make dumplings, not from the cookbooks.”

Many of the lessons he learned in the world of academic publishing would prove valuable when he moved soon after into the world of industrial marketing, in response to a huge surge in demand by Chinese companies for precision-engineered industrial components for oil and gas companies; gas turbines, compressors, giant blowers for digging tunnels, and so forth.

Chan’s foreign-born clients in China “did not need me for my engineering knowledge,” but for his ability to “decode” the Chinese character and mindset. “I became the mediator that both sides will come to.” In all, he has developed marketing strategies for more than 100 U.S. manufacturers, privately held firms and service organizations. BB

www.breakbulk.com BREAKBULK MAGAZINE 97

country report

The Novovoronezh Nuclear Power Plant II (NvNPPII). It is being built on the same site as the present Novovoronezh Nuclear Power Plant.

Credit: Rosatom

COPING with DEMAND Projects Point Up Russia’s Heavy-lift Needs

By Eugene Gerden

C

onstruction of the Novovoronezh Nuclear Power Plant II (NvNPPII), one of Russia’s largest nuclear power plants, is expected to be one of the most 90 BREAKBULK MAGAZINE www.breakbulk.com

expensive Russian cargo transportation projects since the collapse of the USSR in 1991, according to a Russian Ministry of Energy spokesperson.

NvNPPII will comprise two AES2006-type water-water energetic reactors (WWER), the first of their kind.

Total cost of NvNPPII is estimated at

€4 billion, of which about €500 million is devoted to transporting the nuclear reactors and other equipment to the production facilities of the plant.

Transporting the 330-tonne reactors, each 11 meters long and 5 meters in diameter, happened from late 2013 through August 2014, and followed a MAY-JUNE 2015

LEFT: Construction at Moscow’s Luzhniki Stadium in preparation for the 2018 FIFA World Cup. / Credit: ID1974 / Shutterstock.com RIGHT: Construction of the ice hockey rink for the 2014 Winter Olympic Games in Sochi. / Credit: Martynova Anna / Shutterstock.com

similar scheme from Saint Petersburg to Novovoronezh, a town in Voronezh Oblast located on the left bank of the Don River 55 kilometers south of Voronezh in Central Russia. The process required a special timetable designed by the Saint Petersburg government and Rosatom, Russia’s nuclear monopoly and sole operator of nuclear power plants in Russia.

The project also pointed up that, while project business progresses despite Russia’s economic and political issues, the region suffers from an absence of qualified heavy-lift providers, those involved said.

In addition to Rosatom, state-owned corporations Rosneft, Gazprom and Rusnano are driving demand for heavy cargo transport services, according to

Natalia Timofeeva, chairman of the Russian Union of Carriers of Heavy and Dangerous Cargo (RUCHDC), a public association uniting Russia’s largest heavy cargo carriers.

However, this has not resulted in the influx of foreign companies in the domestic market of heavy cargo transportation, despite its potential, Timofeeva and others say.

Sergey Kirienko Sergey Kirienko, director general of Rosatom and a former prime minister of Russia under Boris Yeltsin in 1998, said there were foreign bidders for transport contracts for the

Novovoronezh plant as well as Rosatom’s other nuclear plants in Russia. However, Kirienko said foreign transport providers decided against participating mainly due to high levels of corruption associated with the execution of the contracts.

Vladimir Kashchenko, director general of Atomenergomash, part of Rosatom and Russia’s Vladimir only manufacturer Kashchenko of steam generators for nuclear plants in Russia, said his company is working primarily with European and U.S. companies on the www.breakbulk.com BREAKBULK MAGAZINE 91

country report

The reactor is transported on the streets of Voronezh, 50 kilometers from Novovoronezh. / Credit: Rosatom

project. He said Russian cargo carriers do not have the necessary experience to participate in Rosatom’s foreign projects.

Timofeeva echoed that among the main problems facing heavy cargo transportation are high levels of bureaucracy and corruption.

Russian legislation requires state permissions for transportation of cargoes of 60 tonnes ore more. These permissions are issued by Russian Road Monitoring (Rosdormonitoring), a state agency that controls heavy cargo transport in Russia. Current Russian legislation requires police escort if the cargo’s width is more than 4.5 meters, however the provision of such cars are also subject to traditional Russian bureaucracy and delays.

Other problems the industry faces includes poor roads conditions as well as seasonal restrictions on the passage of heavy trucks.

According to RUCHDC analysts, amid the growing number of orders, local carriers cannot cope with the 92 BREAKBULK MAGAZINE www.breakbulk.com

demand. At the same time the quality of services provided by them remains generally low, requiring Russian businesses to attempt to attract foreign companies.

Russia’s heavy cargo transport market remains highly fragmented across all transport modes, with no company holding more than 1 percent of the market. Most companies operate fleets of five to seven units. Since 2008 the average growth rates of the market have been in the range of 13 percent to 15 percent per year, due to the implementation of largescale infrastructure projects in Russia, in particular the Sochi Winter Olympics and the forthcoming World Cup 2018.

Rosneft is preparing for participation in one of the most important projects in recent history, oil development of the Arctic shelf. The company plans to begin moving the first supplies of equipment to the Universitetskaya-1 oilfield this year, a Rosneft representative said.

In addition to the state-owned corporations, demand for heavy cargo

transportation from private companies has also increased in recent years.

A Rosatom spokesperson said the company still aims to attract foreign companies to fulfill its plans for significantly expanding its portfolio of foreign projects during the next several years.

According to a Rosatom spokesperson, one project involves building a nuclear power plant in the UK by 2019 that would be based on the Russian WWER reactors.

The spokesperson added Rosatom has already started preliminary talks with EU heavy-lift transport companies regarding the projects.

Reactor Transport

Work of the Novovoronezh Nuclear Power Plant II was started in 2007 as part of a federal program for development of Russia’s nuclear industry through 2020. NvNPPII will replace the existing Novovoronezh Nuclear Power Plant I will be decommissioned by 2020.

Both reactors for NvNPPII were MAY-JUNE 2015

Installation of part of the NvNPPII nuclear reactor. / Credit: Rosatom

produced by Izhorskiye Zavody, a Russian machine building company, which is part of a local industrial conglomerate Uralmash-Izhora Group, based in Kolpino, Saint Petersburg.

The reactors were transported by water through the Neva River, the Ladoga and Onega lakes, the Volga-Baltic Canal, and the Volga and Don rivers. Total length of the route was about 3,800 kilometers.

Transporting the reactor to the Neva River berth required the use of Goldhofer THP/SL-E36 modular road platforms, which are specially designed for transportation of super-heavy cargo.

After completion of the marine shipment, the reactor was uploaded to modular conveyors, specially designed for the transportation of heavy cargo, and delivered to the production site of NvNPPII. “The transfer of both reactors to the production site required the use of some unique technologies and construction equipment, and in particular a crane for

super-heavy cargo, specially designed by the scientists from the Russian Omsk region,” said Vadim Sverdlov, deputy director of department of repair and capital construction of NvNPPII. “In addition to the Novovoronezh project, the crane was used during the implementation of some other largescale projects in Russia, and in particular the construction of the Russky Bridge, which was built across the Eastern Bosphorus strait. The crane had the capacity to move up to 400 tonnes of cargo,” Sverdlov said.

Rosatom also recently completed the delivery of a transport sluice for the plant’s first unit. The sluice was produced

by AEM-Technologies, part of Rosatom.

The sluice was transported about 700 kilometers via the Don River. The 228tonne sluice was more than 12 meters long and 10 meters in diameter.

Transportation of the sluice was carried out by Incotec Cargo, one of Russia’s largest carriers of super-heavy

and oversized cargo and a long-term partner of Rosatom. Incotec Cargo has provided carrier services for Rosatom’s Kudankulam nuclear power plant project in India, the Bushehr nuclear power plant in Iran, and the Tianwan nuclear power plant project in China, in addition to the Russia projects.

Other cargo for the project may be handled by Volga-Dnepr, Russia’s leading air cargo carrier and operator of Antonov An-124 Ruslans, Rosatom said.

SWTrans Co., another Russian oversized and heavy-cargo transporter, will handle additional transport, including delivery of a boiler superheater, a separator and a steam heat exchanger for the needs of the II. The weight of the cargo will range from 80 to 100 tonnes per item.

For cargo to reach the Novovoronezh production site, Rosatom has commissioned a 4.9-kilometer railway line. Sergey Kirienko, director general of Rosatom, said railway line would continue to serve the plant after its completion. BB www.breakbulk.com BREAKBULK MAGAZINE 93

port news

Each shipment of steel coils carries a unique bar code, which makes it possible to identify and separate each shipment according to its particular usage, customer and destination. / Credit: Alabama Steel Terminals

MOBILE COILED FOR GROWTH Steel Finds Sweet Home in Alabama

By Alan M. Field

W

hile much of the U.S. manufacturing sector may be recovering at only a modest pace, steel trade at the Gulf of Mexico port of Mobile, Ala., is booming thanks to unprecedented demand for steel from major vehicle manufacturers that have located facilities in America’s long-rural southland.

Responding to that opportunity, the Alabama State Port Authority and Alabama Steel Terminals recently dedicated a US$36 million steel coil handling facility at the Port of Mobile, in a joint venture involving TriState Maritime Services and 98 BREAKBULK MAGAZINE www.breakbulk.com

the Richardson Group of Cos. Steel tonnage at the Port of Mobile has skyrocketed more than seven-fold in four years, said Judith Adams, vice president of marketing at the Alabama State Port Authority (ASPA). That growth has transformed Mobile into the secondlargest U.S. steel port last year, trailing only Houston, the largest port on the Gulf of Mexico.

“We were crowded and we needed additional capacity,” said Adams, explaining the genesis of the project, a public-private partnership between ASPA and the private sector firms. ASPA owns and operates the state of Alabama’s public, deepwater facilities at the Port of Mobile.

Mobile steel volumes jumped 732

percent from 701,173 short tons in fiscal year 2010 to 5.13 million short tons for its fiscal year ended Sept. 30, 2014. Imports accounted for about 70 percent of steel trade, but Adams said, “our export market is rapidly growing, and we expect close to 50-50 or balanced trade as the newer mills and the recent mill expansions from those customers continue to ramp up their production.”

To serve the growing demand, the new steel coil handling facility at Mobile provides 178,200 square feet of covered bay area, equipped with three 50-toncapacity overhead bridge cranes, and 168,000 square feet of open storage yard that can handle an estimated 700,000 tons annually. Overall, the broad range of MAY-JUNE 2015

steel products moving through terminals in Mobile includes hot strip, hot rolled and cold rolled, galvanized, plate, billets, reinforced bars and stainless steel coils.

James K. Lyons, ASPA’s chief executive, explained that the new facility is not only large, but also highly productive because of its modern technology. While terminals normally use forklifts to carry steel coils, Mobile’s new terminal’s overhead bridge cranes are outJames K. Lyons fitted with handling tongs similar to those used in steel mills, thus reducing the risk of damaging its sophisticated, valuable cargo.

Each shipment of steel coils carries a unique bar code, which makes it possible to identify and separate each shipment

according to its particular usage, customer and destination. Lyons said the bar coding and overhead cranes make it “quicker and easier to locate” and retrieve each shipment from within the football field-sized warehouse.

Tom Adger, vice president of Alabama Steel Terminals, said that collaborative planning and port authority’s support for the project helped create a facility “emphasizing both innovation and customer service for steel manufacturers and shippers.” The new terminal will create 50 jobs, at an annual payroll of US$2 million. Alabama Steel Terminals has an option to add a 194,400-square-foot bay area equipped with three additional 50-ton overhead bridge cranes, which would double staff size.

The port authority boasts its terminals all have immediate access to two U.S. Interstates, five Class 1 railroads, and nearly 15,000 miles of inland water-

way connections.

Alabama’s steel trade boom has been fueled by the continued expansion of several nearby steel mills that serve assembly plants operated by major vehicle companies, such as Nissan, Honda and Daimler. In recent years, noted Adams, Alabama has become the third-ranked manufacturing location for vehicles, also handling a significant volume of inbound steel products made in South Korea, Germany and Brazil.

Major global steel producers operating mills in Alabama include: • Arcelor Mittal Nippon Steel (AM/ NS), a 50-50 joint venture between India’s ArcelorMittal and Japan’s Nippon Steel/Sumitomo Metal Corp. (NSSMC), located in Calvert, Ala., about 35 miles north of Mobile. Formerly operated by ThyssenKrupp, the plant can produce up to 5.3 million tons of flat-rolled carbon steel products annually.

www.breakbulk.com BREAKBULK MAGAZINE 99

port news

PORT OF MOBILE STEEL TONNAGE Steel volumes through Alabama State Port Authority’s facilities have grown five-fold since fiscal year 2010.

6 5 4 3 2 1 0

2010

2011

2012

2013

2014

In million short tons. Fiscal year Oct. 1-Sept. 30.

Source: Alabama State Port Authority

One of the world’s most advanced steel finishing facilities, AM/NS is highly complementary to ArcelorMittal USA’s product portfolio, according to the company. Its facilities include a river terminal, hot strip mill, cold-rolling mill, three hot dip galvanizing lines, a rail yard and supporting infrastructure. Its product lines include all forms of carbon steel, hot-rolled bands, hot rolled, pickled and oiled, coldrolled, and advanced coated products.

• Outukompu, a Finland-based producer of stainless steel and high performance products. It acquired Inoxum GmbH, the stainless steel arm of ThyssenKrupp, in 2012.

• SSAB, headquartered in Stockholm, Sweden, is a leading global producer of advanced high-strength steels and quenched and tempered steels, strip, plate and tubular products, and construction solutions. In 2007, SSAB acquired IPSCO, a U.S. steelmaker located in Axis, Ala., where SSAB now produces carbon steel plate and coil.

• Nucor Corp., the largest U.S. steel producer, operates three mills near Mobile. In Tuscaloosa, Ala., Nucor produces carbon and high-strength, low-alloy steel products. In Decatur, it produces all forms of carbon sheets; and in Birmingham, it produces carbon steel reinforced bar, rounds and squares.

• Steel Dynamics Inc. produces flatroll steel in Columbus, Miss., at a plant it 100 BREAKBULK MAGAZINE www.breakbulk.com

Alabama Steel Terminal’s new 50-ton-capacity bridge cranes are equipped with handling tongs similar to those used in steel mills. / Credit: Alabama Steel Terminals

acquired last July in its US$1.625 billion acquisition of Severstal Columbus LLC. Located in northeastern Mississippi, the Columbus facility is one of the newest and most technologically advanced minimills in North America.

Other major vehicle plants nearby include Daimler AG’s plant in Vance, Ala.; Toyota’s plant in Blue Springs, Miss.; Nissan’s plant in Canton, Miss.; Honda’s plant in Lincoln, Ala.; and truckmaker Paccar’s

plant in Columbus, Miss.

Although the recent rise in the value of the U.S. dollar has made it more expensive for foreign firms to invest in the U.S. – and made some U.S. exports less competitive in the short run – Lyons said he isn’t concerned that Mobile’s steel business would slow down significantly over the long haul. “The market is still strong, and it will continue to grow,” he insisted. BB MAY-JUNE 2015

Ships in the waters off Hong Kong.

Credit: Shutterstock

ALIVE AND WELL Despite Competition, Hong Kong’s Port Prevails

By Eric Johnson

M

ark Twain never sailed into the Port of Hong Kong, but the American humorist’s often-repeated retort about his death being exaggerated might well apply to what some in the shipping and cargo industry are saying these days about the port’s state of health.

Port operators in Hong Kong’s picturesque harbor, strategically located at the crossroads of southern Chinese

manufacturers and the world, are feeling the heat of competition from several upand-coming shipping terminals within a 150-kilometer radius on China’s mainland. As these competing ports have grown, so has speculation about Hong Kong’s potential demise.

But industry analysts who’ve closely studied Hong Kong shipping and cargo activity in the face of this rivalry see no reason to write off the former British colony. Hong Kong still has solid advantages over mainland ports, they say, and will likely maintain its traditional status

as a vibrant, popular and profitable global shipping hub for years to come.

It’s true that a lot of cargo ships that might have called at Hong Kong 20 years ago are now sailing to and from the mainland ports nearby. Shippers can opt for any of eight container terminals and breakbulk cargo handling facilities near Hong Kong in the mainland cities of Shenzhen, Guangzhou, Zhuhai and Humen.

For most of this cargo, the principle points of origin and destinations are manufacturing plants and cities in southern China, a region that in Hong Kong shipping circles is often called “the hinterland.”

“Hong Kong, Shenzhen and Guangzhou basically share the same hinterland,” explained Dickson Ho, an economist and head of the Asian and Emerging Markets Research Team at the Hong Kong Trade and Development Council (HKTDC). www.breakbulk.com BREAKBULK MAGAZINE 101

port focus

“There is overlapping business.”

Terminals. But facilities at mainland And there’s no denying that Hong ports have been growing rapidly.

Kong’s share of the hinterland cargo No wonder the mainland-cargo-related market has been falling in recent years. market share has shifted dramatically to One reason is its geographic proximity mainland ports: Hong Kong handled 71 to mainland factories. As the crow flies, percent of all TEUs (actual boxes shipped, only Zhuhai is farther not throughput) that were moved to and than Hong Kong from from southern China in 2001, according to the region’s major the BMT study, as opposed to Shenzhen’s makers of electronics, 29 percent. But by 2011, the latest figures appliances, textiles available, Hong Kong’s share had slipped and toys. Ports in to just 38 percent while Shenzhen comShenzhen, Guangzhou manded 54 percent and Guangzhou the and Humen are in the rest. The gap has likely widened since that factories’ backyard. year’s report.

Another reason “As far as the container trade is conis physical space for cerned, Hong Kong has lost a bit of its Dickson Ho ships: The 24 berths competitiveness,” Ho acknowledged. available for ocean-going vessels in “It’s been slackening.”

Hong Kong compare to 41 at Shenzhen, Meanwhile, handlers of breakbulk and 16 serving Guangzhou, and four each at other non-containerized cargo are lookHumen and Zhuhai, according to a study ing at flat to slowly declining demand over on the Strategic Development Plan for the next five years, the BMT study said.

Hong Kong Port 2030 released last OctoAbout 8 percent of this trade – forecast to ber by the consultancy BMT Asia Pacific. fall to 66.5 million tons by 2030 from 67.6 Cargo handling capacity is also a million tons in 2015 – involves traditional factor, particularly in light of soaring breakbulk such as iron and steel pieces, demand for moving containerized goods while petroleum products comprise about to and from southern China.

45 percent of the non-containerized cargo, Shenzhen and Guangzhou have and bulky stone, sand and gravel make up been adding container capacity over the about 25 percent. past decade, while Hong Kong’s ability On a broader scale, Hong Kong’s stato process roughly 20 million 20-foot tus as a port powerhouse serving Asia and equivalent (TEU) containers annually the world has been diminished in recent has barely changed. In fact, capacity has years by fast-growing Shanghai and bbean Line Advertisement Break Bulk Magazine been exceeded at Hong Kong(May by up to2015) 4 Singapore.

The World Shipping Council million TEUs a year since 2003.

And the ranks Shanghai as the busiest and SingaSize: 178mmW x 60mmH, with 3mmpore bleed city government might build a new teras the second-busiest port in terms r: Full color minal after 2020 to supplement today’s of containers and total tonnage. Shenzhen main facility, the Kwai Tsing Container is the third-busiest container port and

PATHED

102 BREAKBULK MAGAZINE www.breakbulk.com

Hong Kong ranks fourth. In terms of total tonnage, Hong Kong ranks 11th globally.

Meanwhile, China economic slowdown has affected the cargo business nationwide including the Hong Kong region. China’s GDP growth rate slipped to 7.4 percent last year, the lowest in 24 years. And the Chinese government has been encouraging manufacturers to move away from the nation’s coastal regions to less expensive inland provinces.

Given these factors, why should anyone be optimistic about the future of port operations in Hong Kong?

First and foremost, the port is on sound commercial footing because of its strong transshipment business, which is related to the city’s status as an international sourcing hub. Second, the global maritime services sector has longstanding and firm roots in Hong Kong. Although the city is owned and ultimately supervised by the communist government in Beijing, it still maintains largely independent legal and tax systems that complement its businessfriendly environment.

More than 7 million containers moving through Hong Kong in 2011 were transshipped, up from about 2.8 million 10 years earlier, according to BMT. In transshipment, a wharf can be used to temporarily store cargo that’s offloaded from one ship and later loaded on another vessel before heading to a final destination.

“We’ve seen a major impetus for transshipment driving growth in Hong Kong,” said Ho. “Now, two-thirds of the containers are transshipped.”

International transshipment has been spurred by world trade and growth

MAY-JUNE 2015

in container shipping, the BMT report said. Efforts by port terminal operators to actively recruit companies that handle international transshipment have worked well, as they’ve focused their pitch on Hong Kong’s advantages. And because shipping companies are increasingly reliant on container transshipment, the report said, Hong Kong can expect even more of this business in future years.

Ho said Hong Kong port operators have in fact learned to “specialize in rationalization for short-haul transshipment.”

Indeed, BMT said that while the outlook for the cargo business to and from factories in southern China is “mixed” for Hong Kong, the future of international transshipment operations in the city is “mostly positive.”

Hong Kong’s port is indeed “facing increasing competition from other south China ports. Existing shipments for which (Hong Kong) is competitive are likely to

BERTHS FOR HONG KONG, COMPETITORS Thanks to its four terminals, the Port of Shenzhen has nearly twice as many berths for ocean-going vessels as Hong Kong.

Shenzhen Guangzhou Humen Zhuhai Hong Kong 0

10

20

30

40

50

Source: BMT Asia Pacific

remain at (Hong Kong) in the short to medium term,” the report said. But international transshipment at Hong Kong “is largely captive (due to current mainland cabotage rules) or competitively served.”

Hong Kong is also fortunate to be at

the right place for trade between China and Southeast Asia, and at the right time, as the Chinese government is now keen to strengthen ties with regional emerging countries such as Malaysia and Myanmar.

The port provides “an ideal link to the emerging markets in the Chinese mainland and Southeast Asia,” said the HKTDC report. “The rise in intra-Asia trade is set to fuel further growth in the trade throughput of Hong Kong as a trade hub.”

In addition to geographic advantages including proximity to the mainland and plenty of deep water, the cargo shipping industry appreciates Hong Kong for its low taxes and a stable legal system with roots in British maritime law.

Hong Kong is a free port, which means it imposes no levies on goods sailing in and out. It’s also a convenient and comfortable city for doing business, which is why ship owners and traders have been meeting to hand-sign contracts

www.breakbulk.com BREAKBULK MAGAZINE 103

port focus

MAJOR TERMINALS IN THE HONG KONG REGION Regional ports include four under the jurisdiction of the Municipality of Shenzhen and two in Guangzhou.

G u a n g z h o u City

Do n g yu an

Huiya ng

H umen

GUAN G Z H OU P ORT

Ba o’a n

Nan sh a

Zhongshan

Dac h an B ay

S H EN ZH EN PO RT

Ya nt ia n

Ch iw an S h ek ou Port

H O N G K O N G PO RT Zh u h ai

Kwa i Tsing

Main City Province

Source: BMT Asia Pacific

104 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

in Hong Kong since the 1940s.

Ship owners have also been registering vessels in Hong Kong for decades.

An influx of Japanese ship registrations 30 years ago preceded similar moves in recent years by mainland companies such as China Shipping Container Lines and COSCO. “Hong Kong is now home to vast numbers of ship owner-operators,” said a 2012 HKTDC report focusing on the port’s business status. In terms of deadweight tonnage, the report said, Hong Kong stands tall as home base for the owners, managers and operators of up to 9 percent of the world’s commercial vessels.

The maritime industry is also important to the local economy. The Hong Kong government’s Census and Statistics Department says nearly 15,000 locals are working in the so-called “cross-border water transport” industry, which includes about 450 companies from ship agents to logistics companies. And the BMT study said more than 93,000 people are directly employed at the city’s port facilities.

Ship broking, insurance and financing are among Hong Kong’s strongest service-related businesses. As of mid2012, according to HKTDC, some US$10 billion worth of ship-related loans had been issued in Hong Kong.

The same analysts who give Hong Kong a thumbs-up despite competition from mainland rivals have also suggested that the city government look for ways to maintain and perhaps improve the port’s good health.

HKTDC, for example, has recommended streamlining the tax regime and trade agreements with Southeast Asia.

Ho said the government is also looking at cutting harbor anchorage costs for ships in order to lure more vessels.

HKTDC has also suggested the city build on its maritime law strengths by forming a regional arbitration center attached to an admiralty court. Such a court would be in a good position legally, culturally and geographically to handle disputes between international and Chinese shippers, for example.

Like many other analysts, Ho is realistic about Hong Kong’s future and current competitive position in the face of fast-growing ports on the mainland and economic realities. But he’s watched the port succeed by keeping its head

above water “over the past eight years of sluggish growth,” he said.

The city has strengthened its port business by expanding into transshipment, keeping the container business healthy and promoting maritime ser-

vices. That’s why Ho adds no “buts” when he says, “I think Hong Kong is still very competitive.”

It seems anything less than a positive prediction about the Port of Hong Kong’s future would be a grave exaggeration. BB

“Shipping should be straightforward and personal again”

Breadbox Shipping Lines B.V. Schiedam, Rotterdam The Netherlands Phone +31 10 4776473 www.breadbox-shipping.com

Breadbox_187mmx117mm.indd 1

www.breakbulk.com BREAKBULK MAGAZINE 105

14-03-14 12:33

header

INDEX

B

reakbulk cargo is an eclectic mix, encompassing forest products, steel, pressure vessels, windmill blades, rolling stock and out-of-gauge items.

With this in mind, BREAKBULK INDEX data ranges from steel production to details of planned capital projects.

PIRACY

The global nature of today’s breakbulk and heavy-lift sectors requires transportation professionals to be on top of economic trends worldwide, which calls for inclusion of focused macro-economic data on prices and events that affect EPCs, the breakbulk community and the multipurpose fleet.

PIRACY NIGERIAN MARITIME SECURITY INCIDENTS

SOUTHEAST ASIA MARITIME SECURITY INCIDENTS

Hijackings in Nigerian water held steady in March after doubling in February. Efforts to combat piracy off the Horn of Africa have been largely successful, although there was a single hijacking in March.

2015 continues to see an increase in attacks in Southeast Asia, compared to the year earlier, with 17 attacks in March, compared to just nine in March 2014.

Total Failed Attacks Hijackings Attempts Theft Robbery

December$‘13 3 January ‘14 5 February 7 March 10 April 4 May 5 June 6 July 3 August 7 September 5 October 9 November 13 December 9 January ‘15 3 February 7 March 8

1 3 3 5 0 1 5 1 3 1 6 5 2 2 4 3

2 0 0 2 0 0 3 0 1 4 0 1 3 0 1 1 0 2 1 0 0 2 0 0 3 0 1 1 0 3 3 0 0 7 1 0 5 1 1 1 0 0 2 0 1 3 1 1

Note: “Failed” includes attempted robberies/thefts as well as hijackings.

“Hijackings” include kidnappings from vessels.

Total Failed Attacks Attempts Hijackings Theft Robbery

December ‘13 13 January ‘14 1 February 7 March 9 April 12 May 18 June 15 July 14 August 14 September 8 October 26 November 20 December 16 January ‘15 15 February 14 March 17

3 0 1 2 1 11 2 5 6 2 7 9 7 6 4 9

0 0 0 2 4 1 3 2 1 3 4 0 1 2 2 0

9 1 0 1 0 6 1 4 5 2 2 4 4 6 1 6 4 3 2 1 8 7 5 6 3 5 3 4 4 4 3 5

Note: “Failed” category is for attempted robberies/thefts, not hijackings.

Source: Risk Intelligence, www.riskintelligence.eu 106 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

CRUDE STEEL PRODUCTION 2013-2014 Crude steel production in 2014 increased 1.4 percent over 2013 in the 65 countries tracked by the World Steel Association. Chinese production, up 0.9 percent for the year, accounted for half of the world total.

2013 2014

% CHANGE 2013/2014

Austria

7,952 7,859

-1.2

Belgium

7,093 7,331

9.3

Bulgaria Croatia Czech Republic Finland

523 612 17.0 135 167 23.7 5,171

5,360

3,517 3,807

France

15,685 16,143

Germany

42,645 42,943

Greece Hungary Italy

1,030 1,022

11.1 2.9 0.7 -0.7 -1.4

Luxembourg

2,090 2,193

4.9

Netherlands

6,713 6,964

3.7

Poland

7,950 8,541

7.4

Slovakia

4,511 4,705

4.3

Slovenia Spain Sweden United Kingdom Other EU European Union

Mexico

% CHANGE 2013/2014

18,208 18,995

Trinidad and Tobago United States North America

4.3

616

487

-20.9

86,878

88,174

1.5

118,876

121,233

2.0

UE

3.7

883 1,152 30.5 24,080 23,735

2013 2014

Argentina

5,186 5,488

Brazil

34,163

5.8

33,912

-0.7

Chile

1,323 1,129 -14.7

Colombia

1,236 1,208

Ecuador

-2.3

570 662 16.1

Paraguay

45 47 0.4

Peru

1,069 1,150

Uruguay

7.6

91 94 3.3

Venezuela

2,139 1,485 -30.6

South America

45,822

45,174

-1.4

618 615 -0.5 14,252 14,249 4,404 4,549

0.0 3.3

11,858

12,120

2.2

5,233

5,228

-0.1

166,343

169,297

1.8

Algeria

417 415 -0.5

Egypt

6,754 6,485

-3.8

Libya

712 712

Morocco

558 501 -10.2

South Africa

7,253

6,550

Africa

15,694 14,662

Iran

15,422 16,331

0 -9.7 -6.6

Bosnia-Herzegovina 722 793 9.8 Macedonia

100 188 88.0

Norway

605 600 -0.8

Serbia

396 583 47.2

Turkey

34,654 34,035

-1.8

Other Europe

36,477

-0.8 11.9

36,199

Byelorussia

2,245 2,513

Kazakhstan

3,275 3,681 12.4

Moldova

190 344 81.0

Russia

68,856 71,461

3.8

Ukraine

32,771 27,170

-17.0

Uzbekistan C.I.S. Canada

746 730 -2.1 108,083 105,900 12,349 12,730

2,236

3,019

5.8 35.0

Saudi Arabia*

5,471

6,291

15.0

United Arab Emirates

2,878

2,390

-17.0

Middle East

26,007

28,031

7.8

China

815,361 822,698

India

81,299 86,530

Japan

110,595 110,666

South Korea Taiwan, China Asia

66,061

71,543

22,282

23,121

1,095,598 1,114,557

0.9 6.4 0.1 8.3 3.8 1.7

-2.0 3.1

Cuba

322 331 2.8

El Salvador

118

Guatemala

385 395 2.6

121

Qatar

Australia

4,688 4,607

New Zealand

900

Oceania

881

5,588 5,488

-1.7 -0.1 -1.8

2.5 TOTAL 65 COUNTRIES

1,618,488

1,640,541

1.4

The 65 countries included in this table accounted for about 98 percent of total world crude steel production in 2014.

In 1,000 tonnes * HADEED only.

Source: World Steel Association (www.worldsteel.org) www.breakbulk.com BREAKBULK MAGAZINE 107

STEEL PRODUCTION

STEEL PRODUCTION

EE

ECONOMY, EUROPEAN UNION GDP FORECAST Economists forecast steady improvements in GDP growth among European Union countries in 2015 and 2016.

3%

2013 2014

2%

2015* 2016*

1%

0%

$

-1%

ITA LY

FR AN CE

BE LG IUM

SP AIN

NE TH ER LA ND S

*Forecast

SW ITZ ER LA ND

GE RM AN Y

U.K .

NO RW AY

SW ED EN

-2%

INFLATION FORECAST Inflation rates are projected to fall slightly in the region before rising in 2016.

3% 2013 2%

2014 2015* 2016*

1%

0%

-1%

SW ED EN

SP AIN

ITA LY

FR AN CE

BE LG IUM

GE RM AN Y

SW ITZ ER LA ND

*Forecast

NE TH ER LA ND S

NO RW AY

U.K .

-2%

CURRENT ACCOUNT FORECAST Current account balances are the difference between a given nation’s imported and exported goods, services and transfers and are an indicator of foreign trade trends. $300 2013 2014

$200

2015* 2016*

$100

$0

-$100

U.K .

FR AN CE

BE LG IUM

SP AIN

SW ED EN

ITA LY

NO RW AY

SW ITZ ER LA ND

NE TH ER LA ND S

-$200

GE RM AN Y

EUROPEAN UNION

bb index

*Forecast, in US$billions Source: Consensus Economics, www.consensuseconomics.com 108 BREAKBULK MAGAZINE www.breakbulk.com

MAY-JUNE 2015

EUROPE Pulp prices cost, insurance and freight to main European ports were normalized to 100 in January 2000 and are based on average euro prices of northern and southern bleached softwood and eucalyptus kraft and northern bleached hardwood kraft pulp weighted by production volume.

150 125 100 75

FOREST PRODUCTS

FOREST PRODUCTS: PULP INDEX

50 25 0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M 2011

2012

2013

2014

2015

NORTH AMERICA Delivered pulp prices were normalized to 100 in January 2000 and are based on average US$ prices of northern and southern bleached softwood kraft, bleached eucalyptus kraft, and northern bleached hardwood kraft pulp weighted by production volume.

200 150 100 50 0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M 2010

2011

2012

2013

2014

2015

ASIA Pulp prices cost, insurance and freight to main East and Southeast Asian ports were normalized to 100 in January 2003 and are based on average US$ prices of northern, southern and Russian bleached softwood, radiata, eucalyptus and mixed tropical hardwood pulp weighted by production volume.

250 200 150 100 50 0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M 2010

2011

2012

2013

2014

2015

Source: RISI, www.risi.com

EUROPEAN FREIGHT FORWARDING INDEX The index, based on European forwarders’ actual and expected freight volumes, remains below 50. Values below 50 on the zero-to-100 scale indicate a decline.

100 90

Actual

Forecast

80 70 60 50 40 30 20 10 0 M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M 2010

2011

2012

2013

2014

2015

Source: Danske Market Equities, www.danskebank.dk www.breakbulk.com BREAKBULK MAGAZINE 109

FORWARDING INDEX

2010

NUCLEAR POWER

bb index

NUCLEAR POWER WORLD NUCLEAR POWER REACTORS & URANIUM REQUIREMENTS This table includes only those future reactors envisaged in specific plans and proposals and expected to be operating by 2030.

COUNTRY

NUCLEAR ELECTRICITY GENERATION 2013

REACTORS OPERABLE

REACTORS UNDER CONSTRUCTION

REACTORS PLANNED

REACTORS PROPOSED

URANIUM REQUIRED

Apr-15 Apr-15 Apr-15 Apr-15 2015

billion kWh % e No. MWe net No. MWe gross No. MWe gross No. MWe gross tonnes U Argentina Armenia

$Bangladesh Belarus

5.7

4.4 3 1627 1

2.2 29.2 1 0 0

0 0 0 0

376 0

0 0

Czech Republic Egypt

Finland France

Germany Hungary India

0 0

0 0

0

0 1

950 0

0

1,405 0

94.3

16 19 13,553 0

0 2

13.3 30.7 2 1,906 0

China

0

2.8 2 1,901 1

Bulgaria Chile

2,400 0

13.8

0

104.8

52 7 5,943 0

0 0

2.1 26

0 0

23,144 23

0 0

25,163 45

751

92.1 15.4 9 12,003 0

0 0

405.9 73.3 58 63,130 1 14.5 50.7 4 1,889 0

0 2

0

0 0

0 0

0 0

Malaysia

0 0

13.9 0

0 0 0 0

11.4

Pakistan

4.4

Poland

Romania Russia

Saudi Arabia

0 0

0 0 0 0

1.7 43 40,480 3 0 0

0 0

0 0

0 0

0 0

0 0

132.5 27.6 24 21,657 4

Mexico

Netherlands

0 0

5,302 6

1,720 1

Italy

Lithuania

2.7

0 0 0 0

0 0 0 0

4.6 2 1,600 0 2.8 1

485 0

0 0

0 0

161.8 0

17.5 34 25,264 9 0

0

0

0

Thailand Turkey Ukraine

U.A.E. United Kingdom

5 33.6 1

696 0

5.7 2 1,830 0

54.3 19.7 7 7,002 0 63.7 42.7 10 9,487 0

25 36.4 5 3,333 0 0 0

78.2

0

0 0 0 0

0 0 0 0

43.6 15 13,168 0 0 0

0 3

64.1 18.3 16 10,038 0

110 BREAKBULK MAGAZINE www.breakbulk.com

2,400 2 2,400

1,720 1 1,100 0 0

2,400 0

0 0

21,300 35 40,000

30 4 4,000

2,000 7 6,300

0 1 1,200 0 0

0

3,036 9 12,947 3 4,145 0 2

0 2

2,000 600 2

600

5,600 8 11,600 0

0

0 0 0 1 0 0 0 0 0 0

0 2

13.6

Switzerland

0 0

10.7 19.8 2 1,310 0

South Africa Sweden

0 1

680 0

14.6 51.7 4 1,816 2

Spain

4,300 22

725 2

0

4.4 3

Slovakia

Slovenia

0

8,161

1,200 1 1,500

0 2

South Korea

324

1,784

1,700 1

915 0

North Korea

326

22.7 33.3 4 2,741 1

0 2

1.5 1

Kazakhstan

0 4 4,400

52,200 142 152,000

0

1,017

566

0 0

3.9

Jordan

1,500 3 3,800

0

2,400 1 1,200

0 0

Iran

Japan

0 4 4,000

88

0 2

0

3.4 21

Israel

0 2 2,400

215

29 35.9 6 3,766 0

30

Indonesia

0 3 1,600

1,060

0 2

2,400 0

40.6

Canada

0 1

0 2

Belgium Brazil

27 0

0 6

7,968 31 0

0

942 0 0 0

0 0 0 0

0 1

1,350 0

950 0

0 2 2,000 0 2 2,000 0 1 1,000

0 2 2,000

6,000 0 1,440 1

0

655

32,780 18 16,000 0

16

17,000

4,200 1 0 4

0

176

0

0

2,549

0

0

0

5,022

0

0

270

103

101 0

179

4,206

0

305

0 0

137

0

1,274

0 3 4,000

521

0 5 5,000

2

357

1,579

0 8 9,600

0 1 1,000

0 0 0

1,889

466

0 0

0 4

9,230

0 1 1,200

0 0 0 0

0

0

4,800 4 4,500

1,516

0 0

1,900 11 12,000

2,366

6,680 7 8,920

1,738

1,400 10 14,400

0

MAY-JUNE 2015

COUNTRY

NUCLEAR ELECTRICITY GENERATION 2013

billion kWh % e

REACTORS OPERABLE No.

790.2

19.4 99

WORLD**

2,359

c 11

0

REACTORS PLANNED

REACTORS PROPOSED

URANIUM REQUIRED

Apr-15 Apr-15 Apr-15 Apr-15 2015 MWe net No. MWe gross No. MWe gross No. MWe gross tonnes U

USA

Vietnam

REACTORS UNDER CONSTRUCTION

0 0 437

98756 5

0 0

380,770

65

6018

5

0 4

67,859

165

6063 17 26000

4800 6 6700 185,920

331

365,570

18692 0

66,883

Reactor data: WNA to April 1, 2015 (excluding eight shut-down German units) IAEA for nuclear electricity production & percentage of electricity (% e) May 2014.

WNA: Global Nuclear Fuel Market report Sept 2013 (reference scenario 2015) – for U. 66,883 tU = 78,875 t U3O8 Operable = Connected to the grid; Under Construction = first concrete for reactor poured, or major refurbishment under way; Planned = Approvals, funding or major commitment in place, mostly expected in operation within 8-10 years; Proposed = Specific program or site proposals, expected operation mostly within 15 years.

New plants coming on line are largely balanced by old plants being retired. Over 1996-2013, 66 reactors were retired as 71 started operation. There are no firm projections for retirements over the period covered by this Table, but WNA estimates that at least 60 of those now operating will close by 2030, most being small plants. The 2013 WNA Market Report reference scenario (Table 2.5) has 74 reactors closing by 2030, and 272 new ones coming on line (figures exclude closed Japanese reactors).

TWh = Terawatt-hours (billion kilowatt-hours), MWe = Megawatt (electrical as distinct from thermal), kWh = kilowatt-hour. ** The world total includes 6 reactors operating on Taiwan with a combined capacity of 4927 MWe, which generated a total of 39.8 billion kWh in 2013 (accounting for 19.1% of Taiwan’s total electricity generation). Taiwan has two reactors under construction with a combined capacity of 2700 MWe. It was expected to require 972 tU in 2015.

Source: World Nuclear Association (www.world-nuclear.org)

www.breakbulk.com BREAKBULK MAGAZINE 111

INFRASTRUCTURE

bb index

$

INFRASTRUCTURE

LEADING MENA-SOUTH ASIA INFRASTRUCTURE PROJECTS

In CG/LA Infrastructure’s annual ranking of infrastructure projects for the Middle East, North Africa and South Asia, total value was US$571 billion, with US$282.3 billion in the Middle East, US$145.5 billion in South Asia and US$38.6 billion in North Africa.

COUNTRY PROJECT NAME PROJECT SPONSOR STAGE

VALUE IN $BILLIONS

AIRPORTS Bahrain International Airport Expansion Bahrain Airport Company Phase 2 Planned Qatar Hamad International Airport Bechtel Corp.

Multi-phased Algeria Houari Boumediene International Airport Aéroport d'Alger Contract Awarded Turkey Istanbul New Airport – Recep Tayyip Erdoğan Gen. Directorate of State Airports Authority Planned

International Airport Kuwait Kuwait Airport 2nd Terminal Project Ministry of Public Works Bidding Oman Muscat Airport Expansion Ministry of Transport and Communications, Oman Contract Awarded India Navi Mumbai International Airport Airports Authority of India Bidding India New Pune International Airport Maharashtra Airport Development Co. Planned Jordan Queen Alia International Airport – Airport Int’l Group & Jordanian Design

Rehabilitation and Expansion Ministry of Transport Oman Sohar New International Airport Phase 2 Ministry of Transport and Communication Bidding India Taj International Airport Civil Aviation Dept, Gov. of Uttar Pradesh, India Planned Saudi Arabia The Abha Regional Airport General Authority of Civil Aviation Bid Submission

$1.00 $15.50 $0.91 $30.00 $3.60 $0.52 $1.60 $0.17 $0.02 $0.17 $0.8 $0.10

ELECTRIC GENERATION Jordan 52 MW Shams Ma'an PV Project Shams Ma'an Power Generation Contract Awarded $0.40

PSC/Kawar Energy Ltd. Kuwait Al-Abdaliyah Integrated Solar Combined Cycle Ministry of Electricity and Water Bidding $3.20 UAE Barakah Nuclear Power Plant Emirates Nuclear Energy Corporation Construction $20.00 Pakistan Dasu Hydropower Project Water and Power Development Authority, Pakistan Pre-Construction $4.91 India Dibang Power Project National Hydroelectric Power Corp. Ltd. Awaiting Approval $0.62 Pakistan Kalabagh Dam Ministry of Water and Power, Pakistan Proposed $2.53 Pakistan Lower Spat Gah Infrastructure Project Dev. Facility Planned $0.61 Bangladesh Rampal Power Station Bangladesh Power Dev. Board Proposed $1.50 India Seli Hydroelectric Plant Gov’t of Himachal Pradesh, India Contract Approved $0.49 Saudi Arabia Shuqaiq Steam Power Plant Saudi Electricity Co. Contract Awarded $3.30 Turkey Sinop Nuclear Power Plant Atmea Contract Approved $22.00 Jordan Tafila Wind Power Project EP Global Energy/Jordan Wind Project Co. Financial Close $0.30 Jordan Two Unit Nuclear Power Plant Jordan Atomic Energy Commission Planned $10.00 Egypt- Pan-Arab Grid (Egypt-Saudi Undersea Link) Saudi Electricity Company/ Planned $1.60 Saudi Arabia Egypt Electric Holding Co. Bahrain Riffa/Hidd/Umm Al Hassam Substations Electricity and Water Authority, Bahrain Planned $0.74 HIGHWAYS AND BRIDGES Algeria 1,000km Hauts-plateaux Motorway Ministry of Public Works Funded $8.95 Morocco 172km Berrechid-Beni to Mellal Highway Ministry of Equipment and Transport Planned $0.48 Libya 400 km Coastal Road Project Ministry of Transport Contract Awarded $1.29 Oman Al Batinah Expressway Ministry of Transport and Communications, Oman Bidding $2.60 UAE Al Ittihad Bridge Dubai RTA Bidding $0.29 Lebanon Beirut's Hekmeh-Turk Highway Beirut Municipality Planning $0.28 Turkey Çanakkale Suspension Bridge Ministry of Transport, Maritime Affairs, Planned $4.10

Communication Tunisia Henri Konan Bedie Toll Bridge Project Ministry of Transport, Tunisia Contract Awarded $0.38 Yemen International Road Projects Yemen Ministry of Public Works/World Bank Planned $3.50 Morocco Metropolitan Tangier Program Ministry of Equipment and Transport Announced $0.09 Qatar New Orbital Highway Ashghal Planned $0.91 India Port Connectivity Highway Project Ministry of Road Transport Planned $0.32

and Highways, India Algeria Port of Skikda Expressway Ministry of Public Works Planned $0.38 Bahrain/Qatar Qatar Bahrain Causeway (Friendship Bridge) Qatar Bahrain Causeway Foundation Planned $4.50 Egypt Upper Egypt-Red Sea Integrated Project Ministry of Investment Proposed $0.76 OIL AND GAS Libya Area 47 Oilfield Development Project National Oil Corp. of Libya Contract Approved Bahrain Bahrain LNG Terminal Project Bahrain National Oil and Gas Authority Bidding Kuwait Clean Fuels 2020 Project Kuwait National Petroleum Co. Contract Awarded India/Oman/Iran Deepwater Gas Pipeline South Asia Gas Enterprise Pvt. Ltd. (SAGE) Proposed Pakistan Gwadar Port LNG Terminal Ministry of Petroleum and Natural Resources, Pakistan Bidding Saudi Arabia Jizan Refinery Project Saudi Aramco Contract Awarded Tunisia Nawara Gas Field Development Project Tunisian National Oil Co. (ETAP) Contract Approved 112 BREAKBULK MAGAZINE www.breakbulk.com

$0.62 $0.80 $3.70 $4.00 $3.00 $7.00 $0.66

MAY-JUNE 2015

VALUE IN

COUNTRY

PROJECT NAME

PROJECT SPONSOR

STAGE

$BILLIONS

Bahrain Qatar Turkmenistan/ Afg./Pak./India Turkey/Azerbaijan

Saudi Bahrain Crude Oil Pipeline Sitra Refinery Expansion Trans-Afghanistan Pipeline

Bahrain Petroleum Corp. (BAPCO) Bahrain Petroleum Corp. (BAPCO) Asian Development Bank

Bidding Design Contract Approved

$0.35 $6.60 $7.60

Trans-Anatolian Pipeline

TANAP

Planned

$7.00

PORTS AND LOGISTICS Georgia Anaklia Deep Water Port Project Georgian Ministry of Economy/ Planning $0.90

Sustainable Development Pakistan Cool Chain System under National Trade Corridor Infrastructure Project Dev. Facility Feasibility Study Completed $0.06 India Delhi Mumbai Industrial Corridor Project – DMIC Development Corp. LLC Design $100.00

Various mega-projects India Dugarajapatnam Port Government of Andhra Pradesh, India Feasibility Study $1.27 Pakistan Gwadar International Port Project Government of Pakistan In Development $1.25 Turkey Kanal Istanbul Istanbul Metropolitan Municipality Pre-Construction $10.00 Saudi Arabia King Abdul Aziz Port Expansion Saudi Ports Authority Multi-phased $0.91 Bangladesh Payra Port Development Project Payra Port Authority Bidding $0.19 Oman Port of Sohar Logistics Development Gov. of Oman & the Port of Rotterdam Multi-phased $15.00 Egypt Suez Canal Development Project Suez Canal Authority Bidding $8.40 RAIL Egypt Ain Shams/10th of Ramadan Railway Project Ministry of Transportation, Egypt Feasibility Study Egypt Alexandria-Cairo High Speed Train Ministry of Transport, Egypt Planned Turkey Edrine-Kars Railway Line Turkish State Railway Planning UAE Etihad Rail Project Etihad Rail Bidding Qatar Integrated Rail Project Qatar Railways Development Co. Multi-phased Pakistan Islamabad - Muzaffarabad Railway Line Pakistan Railways Feasibility Study Pakistan Karachi Circular Railways Infrastructure Project Development Facility Approved Tunisia Kasserine-Sousse Line Reconstruction SNCFT Planning Kuwait Kuwait National Railroad Partnerships Technical Bureau, Kuwait Feasibility Study India Mumbai-Ahmedabad Hi-Speed Rail Indian Railways Contract Approved Saudi Arabia Saudi Landbridge Project Saudi Railways Organization Pre-Qualification Bahrain/ Saudi-Bahrain Rail Causeway Bahrain Ministry of Transport Feasibility Study Saudi Arabia Georgia Tbilisi Railway Bypass Project Georgian Railway LLC Planning

$0.73 $9.80 $30.00 $15.40 $36.00 $0.14 $1.56 $0.21 $10.00 $11.00 $7.00 $4.20 $0.45

URBAN MASS TRANSIT UAE Abu Dhabi Metro Project Abu Dhabi Department of Transport Bidding $7.00 India Bangalore Metro Bangalore Metro Rail Corp. Ltd. Planned $6.40 Egypt Cairo Metro Line 4 National Authority for Tunnels, Egypt Planned $3.60 Bangladesh Greater Dhaka Sustainable Urban Transport Asian Development Bank Planning $0.26 Saudi Arabia Jeddah Metro System Jeddah Metro Design $10.50 Kuwait Kuwait City Metro Partnerships Technical Bureau, Kuwait Feasibility Study $7.00 Saudi Arabia Makkah Public Transport Project Dev. Commission of Makkah and Mashaaer Planned $39.00 Saudi Arabia Riyadh Metro Arriyadh Development Authority Multi-phased $22.50 Turkey Samsun LRT Project Samsun Metropolitan Municipality Contract Awarded $0.14 Yemen Sana'a Urban Modernization – New Water City of Sana'a Feasibility Study $0.21

& Electrical Authority WASTE AND WASTEWATER Egypt Abu Rawash Wastewater Treatment Plant PPP Ministry of Housing, Utilities, and Urban Bidding $0.75

Development, Egypt/PPP Central Unit India Ajmer/Pushkar Water Supply/Sewage System Public Health Engineering Dep’t, Rajasthan Bidding $0.13 Kuwait Az-Zour North IWPP Phase 2 Ministry of Finance, Partnerships Technical Bureau Bidding $0.43 Qatar Doha Sanitation Project Ashghal Planned $0.47 UAE Dubai Water Canal Project Phase 3 Dubai RTA Pre-Construction $22.00 UAE Mirfa IWPP Abu Dhabi Water and Electricity Authority Contract Approved $1.80 Oman Qurayyat Independent Water Project Oman Power & Water Procurement Co. Bidding $2.40 UAE Ras Al Khaimah IWP Utico Bidding $0.45 Jordan Red Sea Dead Sea Canal/Desalination Plant Ministry of Water and Irrigation, Jordan Proposed $0.98 Morocco Rural Water Supply Project National Water Supply and Electricity Utility Funded $0.15 Algeria Water Supply Project - Athmania Dam Algerian National Agency for Dams & Water Transfer Procurement $0.32 Saudi Arabia Yanbu Power/Desalination Plant Phase 3 Saline Water Conversion Corp.

Planned $3.00 Source: 2014 Strategic Top 100 MENA + South Asia Infrastructure Report, CG/LA Infrastructure Inc., www.cg-la.com. www.breakbulk.com BREAKBULK MAGAZINE 113

opinion

NAVIGATING POST-SANCTION EURASIA

By Janet Nodar

W Credit: Keith Necaise Photography

Assuming that the walls around Iran come down, its resources could become another way for Europe to loosen itself from dependence on the Russian bear.

hen and if the Iran sanctions are lifted, Eurasia’s trade patterns will change dramatically – and we should see some interesting shifts in other relationships as well.

Thanks to the sanctions, one of the most important ways to reach the CIS from the Far East now is via the Black Sea and the Caspian – a long and convoluted journey.

If sanctions are lifted, much of the general cargo and standard project cargo bound for the CIS will quickly shift to Iran. This will save shippers money, but hurt Turkish and Georgian cargo traffic.

On the other hand, a sanctions-free Iran filled with eager consumers and major rebuilding needs would be a positive for Turkey and everyone else in the neighborhood.

I spoke with Cem Yilmaz, country head of energy solutions, Turkey, for Panalpina World Transport, and he noted that assessing Iran’s infrastructure and its ability to handle sensitive or heavy project cargo, particularly super-heavy cargo, would take some time. International companies have no information about the condition of the country’s roads, ports, cranes, bridges, etc., and will have extensive research to do.

Although Iran has much to comply with as far as the West is concerned, several countries continue to buy its oil, including Japan and South Korea, while others ignore the sanctions altogether. China is funding a pipeline that will bring Iranian natural gas to Pakistan. Globalink CEO and President Siddique Khan, based in Kazakhstan, mentioned this and pointed out that Turkmenistan and other central Asian countries already rely on an Iranian transit corridor.

If sanctions ease, global players could begin working on small- and medium-sized projects fairly quickly. However, multinational EPCs will wait until they see clearly that com-

114 BREAKBULK MAGAZINE www.breakbulk.com

pliance requirements have been met before they’ll be willing to shoulder the risks inherent in classic mega-projects such as refineries and petrochemical plants, Khan believes.

Meanwhile, low oil prices and Iran’s strict laws against foreign ownership of its oil resources give international oil companies little incentive to pony up for any post-sanction contracts, not that anyone is confessing to an interest in those right now.

In fact, recent signs that Iran is ramping up oil production have caused global prices to fall even further.

However, Iran’s natural gas reserves, thought to be even more abundant than its oil – estimated to be the world’s fourth-largest reserves – could also shape some interesting regional moves.

Assuming – and it’s still a big assumption – that the walls around Iran come down, its resources could become another way for Europe to loosen itself from dependence on the Russian bear, now a primary EU source for natural gas.

Construction has finally begun on the long-awaited Trans-Anatolian pipeline, a gas corridor that links BP’s Shah Deniz field in Azerbaijan across Georgia and Turkey to the European Union – and, please note, totally avoids Russia. Post-sanctions, Europe might take a page from the Chinese, already underwriting that Iran-Pakistan gas pipeline, and get to work on an Iran-EU pipeline that removes it even further from the irascible Russians.

Will depending on the Iranians be wiser than depending on the Russians? That will be a question for the history books.

MAY-JUNE 2015

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