Heavy lift/project cargo subject to same economic pressures as containerized freight

By: | at 08:00 PM | Channel(s): Maritime  

By Karen E. Thuermer, AJOTWhile requirements for shipping heavy lift and project cargo may be world’s apart from the handling of containers, the way the shipping industry is shaping up these days seems to imply there is little difference.
“We’ve definitely felt the slowdown in all trade lanes,” comments Roman Zhekov, vice president of Global Projects for BBC Chartering, a heavy lift and project chartering company with operations around the world.
Of course, success of the project cargo market is related to the projects themselves.
“Right now there are a lot of restrictions on cash flow and delivery dates,” Zhekov states. “A lot of projects are also being re-bid and rescheduled. All of this relates to the slowdown in project cargo.”
Industry experts concur that the trend is universal and across the board regardless of whether talking about the market for renewable energy equipment, power generation, and mining, or oil drilling equipment.
Take the oil and gas industry, for example. Drilling has become unprofitable, meaning less demand for drilling equipment. During March 2009, oil prices fell below their levels in 2005 while production costs were close to double what they were in 2005. As a result, low oil and gas prices have the potential to force oil and gas companies to cut production in order to reduce costs. Domestic oil production in the Gulf o f Mexico is expected to increase, but many oil and gas companies cut back on oil and gas production as well as capital investments in 2009.
The power generation arena is experiencing serious issues as a result of the economy and technological change across the industry. Nevertheless market analysts suggest that the market for power generation equipment and power transmission equipment will reach $135 billion by the end of 2011.
Meanwhile, demand for wind turbines remained strong in 2009. According to the American Wind Energy Association, the U.S. continued to see strong growth in Texas and the Northwest. One up-and-coming area of growth in 2009 was the Midwest states of Indiana and Illinois. Texas again installed the largest amount of new capacity, driving it past the 9,000-MW mark in total installations. This demand obviously generated demand for transporting this equipment.
Zhekov contends that demand for shipping power generation equipment remained steady, even during the economic slowdown. “There are projects that are finishing up, and there are still some back logs left from the old markets,” remarks Zhekov.
A number of projects have been on the move. While BBC Chartering does not detail project moves on its website, Albacor Shipping USA states that it recently handled the shipment of two cranes—each 420 metric tons and 34 x 12.5 x 23.5 meter in size—from the Port of Vlissingen in the Netherlands to Corpus Christi, Texas. It also handled a shipment of two complete generator sets with a total of 3000 CBM from Houston to Fremantle, Australia.
“There is cargo for sure, but the amount is not like it was during the boom times that companies experienced several years ago,” Zhekov says.
From his perspective, the industry is experiencing a cycle. “ Business has just scaled down, but we are prepared for this,” he remarks. “We have a strong customer base, which gives us a competitive advantage.”
But the business environment seems to be changing. In fact, Zhekov reveals that BBC Chartering has experienced a few months where some ships had sold out a month ahead.
“This is an indicator that trade lanes are firming up,” he says.
But how long this trend will last is hard to determine. Zhekov believes the trend is normal volatility in the industry. In fact, unlike the go-go years that ended in 2008, he finds market conditions now more manageable.
Signs indicate that the market for project cargo will improve in 2011, the experts contend.
“More projects are coming on line that will go forward and take capacity [among steamship companies],” Zhekov says. “The same pressure is going to built one way or

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American Journal of Transportation