It’s difficult to discuss the future of breakbulk transportation with any degree of certainty at the moment. At Breakbulk.news we have been talking to some international industry logistics providers to hear what they have to say about their circumstances on the ground over the past few weeks.
Considering the weak economic situation all over the world, many in our industry will be badly affected. The outlook for the future in our market is therefore bleak for 2020, and rate of improvement largely depends on the course and duration of the coronavirus disease and associated transportation limitations. Are there any opportunities to be seized in all of this and if so, where are there?
Here’s what we have learned so far…on the ground
In Germany, they do not see many opportunities right now. Their international projects are all “on ice” but they are still receiving requests for quotations. They are surviving on previously booked cargoes and some local trucking projects in the energy sector.
In the Netherlands, freight forwarders have not been hit too hard yet, but companies specializing in imports from China and the Far East have seen business dry up. Businesses such as e-Commerce handling forwarders / couriers dealing with Chinese imports may not have had any business for weeks or even months.
Regular cargo flows with the Middle East or USA have continued so far, but for how long? “Credit lines worldwide are stretched, so automatically we get paid later too, some shippers are afraid to deliver because of this.”
In their projects division, some XXL projects are delayed by 6-9 months, and the supply for these projects is delayed too.
In Tunisia, they are on lockdown but their offices can be open for documents exchange or delivery order (D/O) remittance, but only on receipt of a confirmed appointment with customers. They see opportunities within logistics and deliveries related to the online market. They still expect long term damage from the crisis there because many industries have been affected and many small importers are facing substantial troubles ahead.
In Israel, logistics teams are continuing to work on existing projects but there is no prospect of new business or projects just yet. They see opportunities in storage and warehousing and expect the demand for storage to increase in the coming weeks.
In Mexico, they have experienced some delays from clients on the execution of projects. They are concerned for their economy and the long term effects of the crisis on their businesses.
In Nigeria, most coordination offices are working remotely and occasionally going to check what is happening in the ports. Projects have been immediately affected due to both the outbreak and the drop in oil price but they will have a better indication in the coming weeks.
Up until April, business was running well in Vietnam because most of their shipments were imports. Executives there see opportunities if some factories move their operations from China to Vietnam. They continue to work towards developing their economy and preventing Covid-19 at the same time. They are predicting it will be October before crisis measures are lifted.
In Canada, as with most countries the crisis has shifted the day to day operations and their logistics teams work remotely where possible.
……and in the air
In stark contrast to business slowing down, European chartering companies have informed us that capacity from China has been taken up with many PPE flights and planes are now only becoming available to book from June. Weeks ago the story was different with carriers parking aircraft due to high operating costs and low yield / rates. Now planes are fully booked and agents are making long-term flight commitments to carriers. Time will tell how long this busy period will last but for now they are working hard trying to get the in-demand PPE to where it is needed. It is more difficult to fill aircraft on the EU-APAC route due to diminished manufacturing but the Pharma market certainly leads the way on this route.
Oil prices and project cargo
The impact of the COVID-19 will continue to complicate global shipping. EPC companies are still suffering from China’s manufacturing slowdown, according to logistics executives who spoke with JOC.com. “We are going to be doing a lot more air freight to expedite cargo movement,” said one EPC executive.
The largest modules and project cargoes require specialized module or semisubmersible carriers, and these relatively rare ships are often booked for specific time slots a year or two in advance of transport. Delays in manufacturing mean that a lot of cargo will not be ready to ship during shipping windows already set for cargo ordered over the past year or two. “There will be a significant strain as the market recalibrates,” the executive said.
More troubling for the MPV/HL sector in the long term is the drop in oil prices caused by falling demand coupled with increasing supply. If sustained, this would lead to delays and cuts in capital expenditures on energy and industrial projects, slowdowns or stops in project construction, and painful cutbacks on project and breakbulk cargo shipments down the road.
Shipments of project cargoes and modules are often booked years in advance. The effects of the recession of 2008-09, for example, did not fully trickle down into MPV/HL demand levels until 2010 or 2011. Long term, if low oil prices continue it will hit project cargo. It could affect the whole energy sector, including renewables.
Most project cargo shipowners say they are continuing to transport their previously booked cargoes. These cargoes are mostly part of larger projects that are well underway and need to continue. They are experiencing some issues and delays in ports but they have not yet witnessed the knock-on effect of limited availability of cargoes.
Other shipowners have cut all capital expenditure and investments and are tightly managing cash flow. The buying and selling of vessels has also slowed due to the reluctance of some shipowners to move in an uncertain market. The carriers who are interested in selling say the process is slowed due to restrictive access to survey the ships.
The outlook for the longer term will very much depend on the duration of the crisis and the speed of economic recovery. In the meantime, all our sources are united in their belief that there are opportunities in sharing knowledge and information with each other right now for the long term survival of their businesses.