Slowing global economic growth has cut into demand for construction materials, heavy equipment and breakbulk commodities, further pushing the global breakbulk and project cargo markets uncertain to recover from the current stagnation. However, it is interpreted that along with emerging markets like India where ocean carriers are targeting breakbulk to diversify their business, Persian Gulf states in the Middle East hold some promise for future project and breakbulk cargo imports.
Upamanyu Borah
Market Forecast
Breakbulk, also referred to as Non-Containerised Cargo (NCC), Out of Gauge (OOG) and static cargo, is cargo that does not fit in or utilise standard shipping containers or cargo bins. Cargo is transported as individual pieces, shipped loose in the vessel’s hold and not in a container.
Breakbulk was the most common form of cargo for most of the history of shipping. Since the late 1960s, the volume of break bulk cargo has declined dramatically as container cargo shipping has become more popular and taken over open cargo.
Though breakbulk cargo shipping requires minimal port facilities, it is still very expensive and time-consuming process as compared to container shipping.
Breakbulk cargo has following advantages and disadvantages in modern shipping phenomenon:
- Breakbulk cargo requires special arrangements at the wharf.
- It requires longshoremen, massive amount of labour, special warehouses and dedicated transportation to carry the cargo.
- In the underdeveloped countries where ports are not offering modern facilities, breakbulk is still useful and works with minimal resources.
- While containerisation is growing and the world is moving towards a modular method of transportation, there are inherent difficulties in moving Super Over-Dimension Cargo (SODC)/heavy lift and breakbulk pieces as containerised mode.
“With the rise of containerised cargo shipping, the volumes of breakbulk and project cargo movements on traditional bulk carriers are going down and we predict a further gradual decline,” says Steve Felder, MD – Maersk, South Asia. However, in the current scenario, Felder feels that with shippers resorting to cargo movement in just-in-time (JIT) mode; basis the need and requirement of certain parts of cargo, as opposed to shipping the entire project all at once, it is increasingly possible to containerise breakbulk and project cargo into smaller dimensions and volumes.
According to Indroneel Sen, Director – Industrial Projects, DHL Global Forwarding, “In the immediate future, we will continue to see breakbulk shipments wherein specific expertise and competency would be required to move the units keeping in mind the parameters of size, weight and length and ultimately the final destination and on-carriage requirements to the final site.”
Rahul Rai, Head – Business Development and Key Account Management- Project Forwarding and Engineer Division, Allcargo Logistics observes, “Although there is a decline worldwide as breakbulk pieces are being split for safety and cost reasons to be shipped via containers, the demand for breakbulk is still high in developing sectors like Southeast Asia and Africa. Theft is a concern only at certain low volume ports, but these can also be mitigated with the use of security (which does not cost more than 1 per cent of the logistics cost).”
Globally, for large infrastructure projects, Rai believes, breakbulk is the only way and will continue as it is. “At present, there are multiple infrastructure projects that have been commissioned and are on-going in the country, namely IOCL Haldia, IOCL Barauni, HPCL Vizag, BPCL Kochi, Ladakh Solar Farm, IOCL Paradeep, NTPC Lara and Singrauli, Nepal/India 400kV Connected grid, along with various project exports by EPCs to regions like Nepal, Bangladesh, Afghanistan and Africa (West, East and Central). Import demand for these projects is also very high. So it can be said that the future is not as dim as it is made out to be. But caution on part of all players is definitely required to ensure safety of the project as well as cargo,” says Rai.
Complexities in Breakbulk Shipping
As rates for container and handy-size bulk carriers have escalated, these operators have been discouraged from competing for breakbulk cargo. This is good news for breakbulk shippers and the network of domestic ports reliant on their business.
Industry analysts have long noted that the constellation of breakbulk shipping is complex, comprising many distinctive industrial segments reliant on capital expenditure—both public and private.
“The complexities differ from segment to segment. The percentage of capital investment would depend on the nature of goods,” informs Felder. For instance, a public body requesting the transportation of highly sensitive chemicals from the port terminal to warehouses, factories and further, would have to invest more capital due to the toxic nature of the cargo and the handling and loading/unloading of the same. Whereas, the same body awaiting shipment of paper/paper reels would require less investment.
Talking about India, Rai informs, “Complexities in India range from the inception stage, i.e. assessment of the route, managing the relations to access the sites for Super Over-Dimension Cargo (SODC) where the required basic infra such as roads are lacking. Besides, there is still a lack of centralised body for approval of movement and if these issues are not dealt with at the inception/budding stage, the detention and idle time charges for specialised equipment can push the logistics budget of the project completely off the rails.”
Moreover, with regard to shipping, Rai says, there are limited specialised operators. The cost of shipping is pretty hefty if the schedule of these breakbulk shipping lines can’t be aligned to the project schedule.
Transportation Management
Going ahead, it seems, breakbulk does well when the global economy remains strong. However, breakbulk cargo transport requires that a number of uncertainties be well managed to mitigate risk of damages, missed key connections and accrued delay penalties.
“There would always be some situations which are not in your control as is the case when you move normal cargo; breakbulk is no exception to that,” Raajeev Bhatnagar, Vice President, HTL Logistics India. “One would need to rely heavily on their experience along with reliability and that is how one would be able to take a well informed decision to minimise the risk,” feels Bhatnagar.
Rai says that alignment and JIT principles are paramount to avoid delays and costs associated with the delays. “We keep a buffer of one day and ensure that all hydraulic and mechanical trailers are in the port and customs cleared for export at least 18-24 hours prior to loading. For import cargo, the trailers are ready at the port 2-4 hours before unloading starts. In both these cases, the strategy is to avoid any delay/detention for the ship as this would fall in the USD 9,000-20,000 per day bracket,” adds Rai.
While it is indeed correct to say that break bulk movements have a higher number of uncertainties that can lead to various issues along the supply chain, DHL Global Forwarding ensures quality by looking into the below mentioned aspects, prior to acceptance of an order.
- Confirmation of readiness and fabrication of the cargo
- Selection of the right sized business partners (Heavy lift transporters, vessel owners and other key partners)
- Adherence to a proper Transport Management System (TMS)
- Strict implementation of HSE standards– a recently introduced digital platform simplifies identification of best-performing suppliers according to risk exposure and compliance
- Deploying the right technical expertise
- Drawing up risk management protocols
- Implementing compliance
The world’s largest container shipping company, Maersk, as well, accords the highest level of priority to Project Cargo also known as ‘Special Cargo’. All cargo moving on Special Equipment is treated with high priority when it comes to berthing and handling. In terms of breakbulk, Maersk performs extra level of checks to assess the state of cargo. The company has also been constantly innovating on the loading, packaging and lashing techniques to help improve efficiencies with certain cargo. Maersk prefer to take only direct, linear connections, to avoid the risks arising out of multiple handling at transshipment points.
RO/RO Trends
Many Ro/Ro carriers, too, are competing for a diversity of cargo, including breakbulk and lift-on/lift off (lo/lo) shipments. Ro/Ro carriers are building ships designed to carry high and heavy and breakbulk cargoes. For example, Wallenius Wilhelmsen Logistics introduced the Mark V vessel a few years ago, a ship that the carrier describes as a Ro/Ro ‘super vessel’. A Panamax vessel that serves in round-the-world trades, the Mark V has over half a million square feet in deck area, of which over 330,000 square feet is reserved for high and heavy cargo. In short, everyone is competing against everyone.
“The advent of container carriers and Ro/Ro operators entering the field of complex breakbulk operations is a welcome move as this would lead to the end clients having various options to ship and receive the cargo,” observes Sen. Some of the container carriers are active in this segment to primarily secure tonnage on their direct port-to-port calls to increase their revenues. This trend is catching up and shipping lines are coming up with increased value additions for breakbulk bookings
Echoing an almost similar response, Felder informs that Ro/Ro and Lo/Lo carriers leverage their rolling and lifting capabilities respectively, to handle breakbulk cargo. As such, Ro/Ro carriers have also started deploying capacity to become a part of and profit from this high paying segment.
Pointing out issues of overcapacity that are rampant in the industry, Rai feels consolidation of Ro/Ro carriers is imminent and required. A few major routes are facing a supply glut, while lesser routes are overlooked and inducement charges for these push up the cost, which in turn forces the shipper to shift to containerised shipping, which becomes a vicious cycle increasing overall supply of breakbulk routes and not enough demand.
Balancing freight business in emerging markets
As weak demand and overcapacity conditions continue to haunt container shipping, India’s growing breakbulk/project cargo trade is becoming a sweetener for ocean carriers operating to and from the Asian emerging market economy.
In a prolonged, sluggish trade environment, ocean carriers have strategically shifted their focus to balancing their freight mix in order to create new revenue streams. Further, as India pumps billions into infrastructure development and accelerates domestic manufacturing efforts, ocean carriers believe the emerging market economy represents a lucrative market for all types of cargo — dry, refrigerated, and oversized.
Further, India’s increasing participation in turnkey projects in the Gulf and in Africa is seen as another factor propelling local demand for project cargo handling. The government of India, for example, has vowed to invest $500 million in the revamp of Iran’s Chabahar port, and vowed to sidestep logistics issues regarding a direct procurement of new harbor cranes from China for this project. Concerning the latter, Indian authorities were reportedly exploring the possibility of rerouting the ordered equipment via an Indian port.
Gulf Agency Company (GAC) is tapping into growing project logistics and breakbulk business potential in India. Mark Delaney, Managing Director for GAC India says, “The country’s burgeoning energy and infrastructure sectors have contributed to an increasing demand for project and oversized cargo handling, as well as breakbulk shipping.”
“Its potential is further bolstered by the significant investments made by India in Africa and the Middle East in the recent decades. With project cargo demand estimated to rise at a 17 per cent compound annual growth, project logistics is huge business,” says Delaney. Since the launch of ‘Make in India’, Delaney feels, there has been a significant increase in the project logistics business with the movement of construction equipment and manufacturing materials, among other Over-Dimensional Consignment (ODC).
Industry estimates showed project cargo demand in India would rise at a 17 per cent compound annual growth, to $19 billion, by 2020.
In another sign of that cargo trend, intended to achieve greater capacity utilisation, the MSC Sola — a 11,600-TEU ship deployed in the Himalaya Express Service between India and Europe — loaded a 100-tonne (110-ton) oversize freight item when it called at DP World’s Nhava Sheva (India) Gateway Terminal (NSIGT) in April last year.
The shipment is the heaviest lift ever by any terminal at Jawaharlal Nehru Port Trust (JNPT) and that the complex operation cements its position as the most efficient terminal at JNPT.
Rai underlines the reason for ocean carriers targeting breakbulk in India as a mix of both weak demand and overcapacity conditions that continue to haunt container shipping and to achieve greater capacity utilisation. “Greater capacity utilisation goals due to overcapacity are forcing breakbulk carriers to look to India. However, India is a tough country to crack, with immense pressure on safety and other standards while intense competition on the pricing part,” says Rai.
Felder expresses a contrasting opinion. In the current market, Felder says, their general cargo business volumes are growing, hence, they do not see it as a case of weak demand and over capacity, rather a straightforward approach to tapping into a higher-yielding cargo segment and hence superior capacity utilisation. “The project business will only grow if the overall economy is growing, which in the case of India is what we are witnessing both on imports and exports of project cargo,” adds Felder.
Achieving the vision
Many Indian ports has perceived that to further climb the ladder up by focussing on break and breakbulk cargoes, they have to remove certain major constraints that are impeding operations. Critical steps need to be taken to ensure seamless connections at port hubs and facilitating improved cargo operations.
Sen observes that productivity at Indian ports is one of the major areas that need improvement thereby allowing vessel owners to be able to reduce their costs and pass the savings to the final customer. Besides, HSE and safe operations are another aspect of the port that needs to be regularly looked into and improved which would make shipping to/from Indian ports a viable business opportunity for the industry.
According to Rai, current wharves have load restrictions that make them unsuitable for SODC, therefore the first and most critical step should be re-enforcing wharves across the country which will have larger per sq m strength as well as space to manoeuvre hydraulic trailers and large capacity cranes. The next step should be to improve access to major highways from ports with greater height and width clearance.
Meanwhile, talking about the container shipping industry, Felder says that it is imperative to focus and improve breakbulk movement. “In order to achieve this, it would require terminal acceptance for handling ODC parcels. This includes overweight cargoes as well as odd dimensions cargo, for which terminals should obtain technical skills in order to operate and handle the same on a container vessel,” further says Felder.
Highlighting the ground realities, Bhatnagar is of the opinion that in India the export and import of commodities by nature moves in bulk, and that customers are looking for easy accessibility to the port, smooth operations and single window clearances along with regular inducement of vessels so that they can reach out to market faster and sell their products. Bhatnagar believes aligning these would be a critical first step towards realising the vision.
Deployment options
Coinciding with how shippers negotiate rates with carriers, comes the challenge of selecting the ideal port for saving on total landed costs.
While many of the world’s largest container ports can accommodate breakbulk, a handful of smaller ocean cargo gateways are becoming competitive specialists in this niche. In the Pacific Northwest, for example, the Port of Portland is marketing its Terminal 6 as a premier breakbulk option, although it can also handle containerized cargo. Portland’s Terminal 2 is a pure-play breakbulk terminal capable of handling steel rail imports from Asia.
This is a good trend and India is no exception, says Bhatnagar. “We have a vast coastline and we must capitalise the same by offering competitive services as this helps in reducing the transit time, as cargo can then reach the nearest port quickly rather than always looking to move from few big ports in India,” states Bhatnagar.
In India, Krishnapatnam, Dahej, Tuticorin are a few examples of ports that are focussing on attracting BB cargo with lower port charges and attractive location to nearby large fabricators as well as projects.
“There is an increase in the inward and outward movement of project shipments with the growing Indian economy. Increasingly container shipping lines are trying to diversify their presence in breakbulk as it is perceived to be a profitable segment. This is creating necessity for gateway port terminals to invest in cargo handling capabilities,” mentions Felder. While this is a growing trend, imperative would be to work towards improvement in the sector in order to reach greater potential in breakbulk.
“It is all about cost and service optimisation, and indeed many niche ports in India are gearing up and improving their graft restrictions, length of the piers, lifting capacities, etc. which would enable more breakbulk vessels to call on and provide a secure gateway for both the export and import cargoes,” notes Sen.
Futuristic Remarks
Even in future, certain commodities will forever come under breakbulk cargo segment. And to retain its attractiveness, the transportation of breakbulk has to be more efficient.
“There are currently no alternatives to breakbulk transportation across the globe for ODC and Over Weight Consignment (OWC) cargo. This makes BB transportation attractive inherently,” says Rai. However, Rai explains, there is a need to reduce delays in emerging markets like Southeast Asia as well as standardise processes for lashing/securing and inland transportation to ensure peace of mind for both shipper and consignee.
With above, Bhatnagar believes that the segment can be made more attractive by ensuring that handling is flawless, visibility is created, quick solutions are found to the problems and easy access to the ports is facilitated.
Nonetheless, those that have invested in breakbulk-related IT has demonstrated some dramatic results. Just who will push more technology will survive in this era of uncertainity. Terminals are an obvious leader, but the actual owners of the cargo must have to pressure a thrust in technology. Tracking the cargo as they are unloaded from a vessel, moved into storage and eventually retrieved and shipped out, is absolutely essential. After all, better identification and tracking means the cost of transport will come down.
