Greenfield Ports Drive Project Cargo Opportunities

By Malcolm Ramsay

Breakbulk magazine Issue 1 cover thumbnailWhile investment uncertainty has subdued growth across nearly every segment of the transport industry, project cargo firms supplying the greenfield port sector are hopeful for a relatively positive outlook in 2016. Heavy-lift and breakbulk operators stand to benefit from the development of infrastructure for greenfield port projects around the world in 2016 and beyond, as developers will be prepared to pay a premium for experience in handling outsized and overweight cargoes. Increased competition for access to prime port locations is also expected to drive growth among developers.

Thomas Mikkelsen, CEO and partner of Thorco Shipping, saw opportunities for those carriers and forwarders that are quick off the mark. “The early stages of greenfield port development are often where we see strong demand, as the technical requirements of lifting cargo to the site are very different from those associated with standard cargoes,” Mikkelsen told Breakbulk.

Major greenfield ports today are broadly split among four project categories: container; energy; breakbulk; and roll-on, roll-off ports. Of these, the container sector is the most visible with the unprecedented rise of container shipping having changed the face of global trade over the last 50 years. Standardization provided by containers has streamlined costs and transformed the port sector. As a result, building the latest container hubs involves huge construction budgets and significant amounts of project cargo. Likewise, the latest energy ports – handling fuel such as oil, coal and gas – are also large-scale projects with an increasing number of developments encompassing vast greenfield sites focused on a single fuel. This has led to an increase in sophistication, with the latest energy ports matching or exceeding the size of container developments and replacing traditional import or export routes via mixed breakbulk ports.

“In contrast to container and energy ports the requirement for breakbulk ports hasn’t changed dramatically,” said Neil Davidson, senior analyst with Drewry’s Ports & Terminals. “In particular, there hasn’t been the explosion in ship sizes that has been seen in the container sector, nor the concentration of activity into shipping line alliances.”

This divergence between container, energy, breakbulk and ro-ro ports has created very differing outlooks for future growth, with the container and energy port sectors presenting the largest opportunities for project cargo operators.

 

DRIVING PORT DEMAND

Felix Schoeller, general manager of AAL’s Pacific service, said in a world with ever-changing trade routes, ports regularly need upgrading, while new trading hubs are being developed at a fast rate. These projects require components that are mostly manufactured in China, Korea, Japan or Europe and then shipped to projects worldwide. “Port infrastructure is an investment in the future of international trade. As we speak, AAL is involved in several port related projects and believes that there is great future potential,” he said.

AAL Managing Director Christophe Grammare said the ship owner had been involved in a number of recent port infrastructure projects in Australia including the carriage of pilings from Asia to Melbourne’s Webb Dock Terminal Expansion Project in Victoria.

The vast investment in China’s Silk Road initiative will see the Chinese government invest an estimated US$42 billion to construct a string of container ports connecting Asia, the Middle East and Europe. These include major new greenfield projects such as the port of Gwadar in Pakistan and Colombo in Sri Lanka. These huge container ports will not only require project cargo to supply components for their own construction but are set to spur the development of extensive inland infrastructure as well.

New road and rail links are already planned to connect ports in Myanmar, Pakistan, Kenya and Sri Lanka to the interior, and these will all require project cargo. However, while many of these mega-container projects are approved, investment uncertainty continues to plague the sector. “The current marked slowdown in Chinese economic activity, and the strategy to change the nature of the Chinese economy from an export focused one to more domestic production and consumption is a key judgement call right now,” Davidson said.

Estimates of growth for shipping lines, and by extension the ports serving them, confirm tough operating conditions in 2016. As a result, many of the largest container port projects are greenfield expansions of existing sites, dredging and building new capacity next to proven locations. This includes up to 5 million 20-foot equivalent units, or TEUs, of new capacity at the port of Mundra in India, 2.5 million TEUs at Khalifa Port Container Terminal in Abu Dhabi, and 2.5 million TEUs at the Red Sea Gateway Terminal at the port of Jeddah in Saudi Arabia.

“The key challenge for any greenfield port developments is to choose the right degree of sophistication and specialization versus the attractiveness of flexibility,” Davidson said.

 

PROJECT CARGO NEEDS

Although all of these projects involve extensive construction budgets and represent significant opportunities for project cargo carriers, it is the energy port sector that is expected to drive the greatest growth for project cargo operators in 2016. Projects such as the massive expansion of Australia’s Abbot Point Coal Terminal, and a raft of new greenfield ports in Africa and North America designed to deal with exports of liquefied natural gas, or LNG, are driving unprecedented demand for outsized and custom cargoes.

“The major opportunity for the MPP and heavy-lift sector when it comes to greenfield port development at the moment is with new energy ports. While there is some demand from new container ports, the growth in oil, gas and coal ports is a key driver. The mass development of oil and gas reserves off the east coast of Africa is one important area, as is Australia where plans for the largest coal port in the world were recently announced,” Mikkelsen said.

LNG demand in particular is driving growth of new ports, as the cost to transport liquid methane continues to fall and the potential to extract gas improves. Huge greenfield projects include the port of Prince Rupert in Canada, the port of Yamal in Russia and Anadarko’s new LNG port in Mozambique, and the next five years are set to see many more come online.

Behind this growth in greenfield energy ports is an unprecedented demand for fuel from Asia. The International Energy Agency suggests that Asian countries are expected to import two out of every three barrels of crude traded internationally by 2040. As a result, the greenfield energy ports under construction are now among the largest infrastructure projects on the planet.

 

UNIQUE HANDLING REQUIREMENTS

As such, these projects frequently face unique construction demands that not only require the heavy-lift capacity of breakbulk operators, but also the skills and experience in moving outsized and overweight items. By their nature, greenfield port projects often have unique requirements when handling cargoes as the unloading site is only partially built. This can mean that the developer must rely on detailed planning and careful consideration of both costs and schedule to ensure that equipment is in place at the right time and location.

“Delivery of cranes, such as ship-to-shore cranes for container terminals or stacker/reclaimers for bulk export terminals, are generally among the most important cargo for greenfield ports to consider, as they enable operations to commence. Therefore, loss or damage to them during shipment can result in a delay to the operation of the project,” said Andrew Webster, a partner with Jardine Lloyd Thompson, or JLT, a specialist insurance provider, serving the transportation industry, among others.

Lack of availability of cranes at remote locations is one factor which often favors specialist cargo firms. Firms with the skills and experience to provide customized heavy-lift services using deck-mounted cranes, as opposed to shore-mounted cranes, are often in high demand for greenfield port projects.

“We were involved in a recent project developing the port of Gwadar in Pakistan that required the ability for vessels to accommodate and deliver outsized steel sheet piles,” Mikkelsen said, describing Thorco’s involvement in the greenfield project. “These steel piles are used to form the foundation of the port, and need to be delivered at an early stage before other heavy-lift equipment is in place. Our ability to maneuver vessels closer to the site to deliver these piles was a key differentiator for the port developers,” Mikkelsen added.

The issue of cost is always paramount in any construction project, and given the level of complexity involved in modern greenfield ports the chance of overrun is high. For this reason, the major decision-making factor when hiring project cargo contractors is normally not the transportation cost, but the possibility of delays. “We hear again and again from project owners that their No. 1 risk is the project being delivered on time, followed closely by the project being delivered on budget,” JLT’s Webster said. A delay of as little as a few days can easily end up costing millions of dollars, and more extensive delays can even threaten whether the project is completed or not. As such the project cargo carrier plays a key role for investors in ensuring the schedule is maintained.

 

SAFETY CONCERNS

It is not only risks to the timing of greenfield port projects that is a key consideration, however; safety concerns for project cargo carriers also need to be considered. As most large greenfield projects are in remote locations and often in developing nations there can be relatively few resources already in place. When handling difficult and potentially hazardous cargoes this can become a serious concern for both property and crew.

“Often with greenfield port projects safety at the port itself can be an issue,” Mikkelsen said. “Often we may require a site visit, particularly if the new port is in a remote or undeveloped region, to determine the safety and potential for the vessel to approach the site prior to signing contracts.”

Project cargo carriers will normally add value at both the planning and risk management level, and as such the transportation of outsized, overweight or custom cargoes is often the least of the skills that heavy-lift and project cargo carriers bring to greenfield port construction. The mix of skills, experience and technology present in the modern project cargo sector is vital to the success of nearly every greenfield port project and in support of the growth of roads, railways and ancillary infrastructure. These vital infrastructure and trade arteries all depend on the ability to ensure project cargo is delivered securely and on schedule. As such, the project cargo sector looks set for a busy 2016 delivering to these port projects.

 

Based in the UK, Malcolm Ramsay has a background in business analysis and technology writing, with an emphasis on transportation and ports.

Photo: Greenfield ports in remote locations lean on the expertise of specialists.  /  Credit: Woodfibre LNG