Strong Kargo Global | Competition for breakbulk cargo heats up on high seas
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16 Jul Competition for breakbulk cargo heats up on high seas

Suddenly everyone wants to be the breakbulk and project cargo shipper’s new best friend. Facing weakness in their core markets, container and dry bulk carriers are pitching hard for multipurpose vessels’ traditional cargoes.

“It’s a buyer’s market,” said Susan Oatway, senior breakbulk analyst at Drewry Supply Chain Advisors, describing the new choices available to shippers and forwarders.

There’s never been a hard-and-fast demarcation between breakbulk/project cargo and other shipping markets. Container, dry bulk and roll-on, roll-off carriers have handled breakbulk cargo, including out-of-gauge shipments, for years. Dry bulk ships may carry grain or other bulk materials in one direction and steel or other breakbulk cargo the other way. Container lines move oversize shipments such as yachts and machinery on flatracks or above-deck platforms. Ro-ro carriers have designed ships to carry heavy and oversize cargoes.

Current overcapacity in global shipping has blurred the lines further. Container lines were among the most prominent exhibitors at the recent Breakbulk Europe conference in Antwerp. Carriers including Maersk Line, Hapag-Lloyd and Mediterranean Shipping Co. are putting new emphasis on specialized cargoes that don’t move in standard containers.

Container and bulk carriers’ increased interest in breakbulk and project cargo has been fueled by excess capacity that has created record low rates in the carriers’ primary markets. This has raised questions about whether some of new entrants will stick around after their core business rebounds.

Maersk, the world’s largest container carrier, says its commitment to the specialized cargo niche is long-term and supported by three regional teams in the U.S., Europe, and Asia. The company expanded its market presence with the 2005 acquisition of P&O Nedlloyd and has had a team dedicated to exceptional cargo since 2012.

“It’s not a new business area for us,” said Michael Juhler, Maersk’s global head of specialized cargo. “It’s something we’ve done for a long time, but it’s gaining more focus for us.” In recent months, Maersk has handled oversize shipments including a 350-ton tugboat, a 46-meter crane, and propellers for ships. “It really is a part of our DNA today, and is a part of our operating model and the way we do business.”

He said Maersk is careful to ensure that specialized shipments don’t interfere with container liner operations. “The minute we delay our own operations, we quickly lose the upside of catering for this cargo,” Juhler said. “This is something that requires quite unique capabilities throughout the organization.”

He said Maersk has the expertise and breadth of coverage to efficiently handle exceptional cargoes. “It is complex, and you need to know what you’re doing, but we as a company have invested in this,” Juhler said. “We are reaping the benefits of the historical knowledge and capabilities we have built over the years.”

Maersk officials say their company’s relative financial stability is another advantage. Years of excess capacity and low rates have left many bulk and container carriers in dire financial straits. No shipper wants to risk having a multimillion-dollar piece of machinery marooned on a ship tied up in a bankruptcy.

Handling specialized cargo on a container ship has pluses and minuses. On the plus side, a liner vessel’s weekly sailings can smooth supply chains by eliminating a shipper’s need to accumulate large volumes needed to fill a conventional vessel. On the minus side, adequate cranes may be hard to find in discharge ports, and specialized shipments can complicate operations at busy marine terminals already struggling to handle container volumes.

Others say many container lines’ current interest in breakbulk and project shipments appears to be opportunistic, and that the different types of carriers eventually will go back to doing what they do best.

Persistently weak bulk and container rates are causing carriers to look elsewhere for business, but this will change when those markets recover, said Ed Bastian, director of global sales at BBC Chartering USA. “The talk about the container operators and the bulk carriers coming in and sweeping away all of the project cargo is, in my opinion, a lot of hype. They’re never going to replace the heavy-lift carrier,” he said at the JOC Gulf Shipping Conference in Houston in June.

Operators of general smaller and older multipurpose vessels without heavy-lift capacity or other features have felt the added competition most keenly. The slump in the oil, gas and mining industries has cut into project business, and has forced higher-end project carriers such as BBC to look to more basic types of breakbulk commodity shipments in order to keep their vessels employed, Bastian noted.

Oatway has a similar view. She cited Drewry statistics showing that more than two-thirds of multipurpose and project cargo ships were basic vessels lacking specialized features such as minimum lift capabilities of 100 tons for project carriers and 250 tons for premium project carriers. “If you are just carrying the more traditional breakbulk … that’s where the problem is. There are too many ships out there that can do this,” she said.

Bulk carriers will continue to compete for steel, lumber and other basic breakbulk commodities that don’t require ships with heavy-lift capabilities or other features, Oatway said. But she said that when container lines’ rates recover, the carriers will decide that those cargoes aren’t worth the added hassle.

Dirk Visser, senior shipping consultant at Dynamar, said ro-ro carriers appear to be in the market to stay. Carriers such as Wallenius Wilhelmsen Lines and Atlantic Container Lines, he noted, have invested in efficient new ships to handle heavy and oversize cargoes,

These carriers can offer flexible services and handle heavy cargoes without the need for cranes or the threat of disrupting container terminal operations, Visser said.

Roger Strevens, vice president and global head of key accounts at Wallenius Wilhelmsen, said container shipping is based on standardized cargo handling that tends to be inimical to one-of-a-kind shipments of heavy or oversize cargoes. “It is really not what container carriers or container terminals are set up to deal with,” Strevens said. He noted that specialized shipments take up large numbers of slots on container ships, and that these cargoes throw a wrench into operations at heavily automated container terminals.

Strevens said he sees container lines’ current interest in breakbulk and project shipments as “more of a reflection of the container market than of the true appetite for these cargoes by container carriers.”

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