Breakbulk, project cargo slump being approached constructively

The breakbulk and project cargo industry downturn doesn’t mean supply chain players – from ports to shippers – haven’t stayed busy. Nor does it mean they’ve turned entirely pessimistic. That message rung true in late September as some 5,000 industry leaders gathered at the George R. Brown Convention Center in Houston for the 27th edition of Breakbulk Americas. Not only was the exhibit hall floor bustling with activity, with nearly 500 exhibitors, but many of the speakers in Sept. 28-29 business sessions found ways to put a positive spin on the slump. The Port of Houston, the No. 1 U.S. tonnage port, is using the down time for project and breakbulk cargo business, including depressed steel volumes, to concentrate on advancing infrastructure projects, according to Roger Guenther, executive director of the Port of Houston Authority. “We use these times to strategically invest in our facilities, because we know growth is ahead,” Guenther said in welcoming attendees.

Speaking on a panel of shippers, Gary Sostack, administrator of the logistics and services division at Aramco Services Co., the U.S. arm of Saudi Arabia’s state-owned oil company, said his firm is taking advantage of the down time to accelerate implementation of radio-frequency identification, or RFID, in a commitment to satisfy demand for end-to-end supply chain visibility. “A wise man said, ‘Never let a good crisis go to waste,’” Sostack said, paraphrasing quotes attributed to such political leaders as British statesman Sir Winston Churchill, Chicago Mayor Rahm Emanuel and U.S. Democratic presidential nominee Hillary Clinton. Sostack added that, after enduring the roller coaster of four downturns and subsequent rebounds, he has learned the importance of meeting in the early stages of declines with vendors to establish cost reductions. Pascal Ochquee, global director of international logistics for the Halliburton Co., a Dallas-based global oilfield services firm, said the latest drop-off in business came much faster than expected, as did demands for lower costs. “Everyone is expecting you to bring your costs down almost immediately,” Ochquee said.

Bill Keyes, logistics director for Houston and the Americas at Irving, Texas-based multinational engineering and construction firm Fluor Corp., said the downturn has allowed his company to focus on its processes, including leveraging offshore engineering and cementing partnerships with logistics providers. “We see this marketplace as an opportunity,” Keyes said. “I think it’s actually making us stronger as an industry… You bring your ‘A game’ every day.” Lee Tipton, corporate logistics specialist at Houston-based energy equipment and services provider FMC Technologies Inc., said honing processes during down times is critical to being able to handle more freight when recovery occurs, adding that, like Ochquee, her company has reduced its supplier base while fortifying its relationships with remaining partners. Speaking on a risk management panel, Dennis Mottola, manager of the global logistics unit of San Francisco-based Bechtel Corp., the largest U.S. construction and civil engineering company, said solid relationships with trusted supply chain partners have become increasingly imperative.

“The big point is knowing who you’re doing business with,” Mottola said, also citing the importance of strong contract documents. Mottola said Bechtel annually conducts full financial analyses of carriers with which it does business, adding that evaluation of providers focuses on their demonstration of a value proposition and showing evidence of ability to be trusted to perform as sold. Dennis Devlin, senior director and head of business development for North American global projects for oil and gas at Germany-based integrated logistics provider DB Schenker, said he tries to avoid booking with disponent bare-boat charterers – parties with operational control of a vessel without actual legal title – commenting, “We try to book with owners – and owners whom we know.” Sune Thorliefsson, head of projects for SAL Heavy Lift, the Germany-based project cargo carrier unit of the “K” Line Group, interjected, “Shippers have to be much more careful with whom they are making contracts.” Offering his views in a discussion centered on the Great Lakes St. Lawrence Seaway System, Robert Drew, global logistics manager for Tata International Ltd., part of an India-based conglomerate with interests in metals, minerals, vehicles and leather goods, said historically low freight rates have actually led to increased inquiries from some sectors, including for shipping steel into the Great Lakes from Southeast Asia, “that previous market conditions and rates would have made cost-prohibitive.” On the same panel, Ed Bastian, director of global sales for Germany-based BBC Chartering, operator of the world’s largest multipurpose and heavylift fleet, said opportunities exist for bringing “generally decent-paying cargos” into the Great Lakes, but shipping into the region presents challenges associated not only with seasonal waterway closings but also comparatively high piloting and stevedoring costs.

Suzanne Bleau-Myrand, director of marketing for Montréal-based Fednav Ltd., Canada’s largest oceangoing dry bulk shipping company, said her firm stays busy bringing in steel from Europe and shipping out grain and other bulk exports via the waterway, as it proves more efficient than truck or rail, but added that the firm is actively fighting high pilotage rates. “The biggest challenge is keeping costs to a minimum,” Bleau-Myrand said. The importance of a strong Export-Import Bank of the United States was the focus of another panel discussion, moderated by Capt. William G. Schubert, former administrator of the U.S. Maritime Administration and now president of Pinehurst, Texas-based consultancy International Trade & Transportation Inc. Citing the need for congressional reauthorization of the Ex-Im Bank, which saw its full strength lapse in 2015, Schubert said the United States already lags behind the United Kingdom, Japan, India, Italy, France, Germany and, most notably, China in official export credits needed to spur cargo activity as well as jobs. “There is a solution, but we need it sooner than later,” Schubert said, urging conference attendees to write to elected representatives in support of Ex-Im Bank charter renewal. Will Terrill, vice president of U.S. flag services for project and breakbulk carrier Intermarine LLC, said his firm has lost cargo volumes due to the lack of a full-force Ex-Im Bank, commenting, “One thing that’s incredibly important that Ex-Im provides is cargo… All U.S. business interests benefit from Ex-Im.”

Steve Drugan, regional vice president for the Americas of Houston-based project freight forwarder Deugro (USA) Inc., and John Masterson, director of financial derivatives for CB&I, a major engineering, procurement and construction company headquartered in The Woodlands, Texas, both said key projects will continue to get financing, but the backing will come from other countries that have stronger export credit agencies than the United States. Scott Mogavero, global logistics and planning manager for Schenectady, New York-based GE Power, said the largest industrial business unit of the General Electric Co. has shifted some of its production of such items as wind energy turbines to non-U.S. factories, stating, “We continue to move our supply chain where the numbers are.” (For Breakbulk Americas reception photos see page 22.)