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Höegh Autoliners Eyes Middle East Growth Potential

By Carly Fields

Dubai is known for its big ideas: it is an Emirate investing heavily in magnetic levitation of cargo through hyperloop; it has already installed smart street signage where other countries are still learning about the technology; and it has even developed an innovation index to compare its level of innovation with that of other global cities.

It’s from this dynamic platform that American-born Finn Roden heads up the Middle East region for roll-on, roll-off ship operator Höegh Autoliners. Speaking on the sidelines of Breakbulk Middle East, he confessed excitement for the region’s energy and drive: “I love the dynamic and fast action in this region.”

Roden heads a team of 19 in the local Dubai-based Höegh Autoliners branch. He’s well versed on both the commercial and the operational sides of the breakbulk business, having sailed onboard ro-ro carriers and served as a port captain. Over his career at sea and onshore he has seen the best and the worst of the freight markets. “Freight levels in the Middle East region have been steadily declining for close to 10 years,” he said.

Höegh is playing its part in addressing freight rates that are “not currently at sustainable levels,” and makes it clear that selected business will be “de-selected” unless rates improve. While Roden recognizes that this will lead the company to “take some hits,” he believes that the end justifies the means. “We’re an asset player, we own the ships and have decades worth of logistics specialists working for our customers who have only seen rates going down. They have no idea of the capital costs of running a ship.”

Narrowing Demand Gap

Roden sees signs on a global scale of a narrowing supply/demand curve for vessels and signs of improvement in the freight market. However, he believes that the entry into force of the International Maritime Organization’s 2020 sulfur limit in marine fuel regulations on Jan. 1 will place new pressure on the marine transport cost equation, a cost that will have to be carried over to the customer.

“Honestly, I’m really keen to see how the final touches of IMO 2020 play out,” he says. “I think it is very positive that we, the shipping industry, are moving towards a greener future with the help of regulations such as IMO 2020. But it’s going to be a very delicate subject with cargo owners. It is going to be a cost that has to be borne by somebody and carriers’ margins are not as sustainable as they were once were.”

To comply with IMO 2020, Höegh Autoliners has committed to burning low-sulfur fuel on its vessels and will not install scrubbers. “We think that low-sulfur fuel is the long-term solution – at least for the type of vessels and trading patterns that we have,” Roden says. Höegh has six new vessels that entered into service in 2015 and 2016, known as the Horizon class. They are the world’s largest pure car and truck carriers by capacity, and because of their large intake and modern design, they produce record-low emissions per transported unit.

While he acknowledges nay-sayers that forecast another market crash after the 2020 deadline, he remains positive about the short- to medium-term breakbulk and project cargo market, contingent on budgets and revenues. In particular, he singles out pockets of positivity as the construction and infrastructure side of the business and potential reconstruction opportunities in the region in the medium to longer term.

However, this is building on a weak base: 2018 was the worst year for contract awards in the Gulf Cooperation Council, or GCC, region since 2004. Many projects are still looking for investors and have not yet been awarded to contractors, Roden says. “But,” he continues, “the Middle East is still ripe with opportunity. Government initiatives and mandates will drive the entire GCC to diversify economies with the potential for the region to be a real incubator for innovation and manufacturing. Oil revenues will still be the driver, but the desire and mandate to diversify will make the GCC a hub for project and breakbulk opportunity.”

Growth Areas

Phosphate mining in Saudi and other minerals in Oman could prove to be large growth areas as they develop and the potential growth for solar in the Middle East has not yet touched services, he adds.

“For Höegh Autoliners, we are watching infrastructure and grid development contracts. For breakbulk/project carriers the opportunity will lie in infrastructure and distribution, road infrastructure, machinery, distribution grid, transformers, distribution support, and storage,” Roden said.

There are also signs of promise in Saudi Arabia with its announced US$450 billion investment program. “The Saudi Arabian 2019 budget was the largest in its history,” he notes.

But there’s no getting away from the importance of oil revenues as the driver for many of the projects planned in the Middle East region, Roden acknowledges. “The market in the Middle East can diversify but it can’t replace, and it needs a little oil revenue to help with the diversification.”

Here, Roden draws an analogy with Elon Musk: He made his first billion on PayPal and then converted that billion into other industries. “But without that first billion, you wouldn’t have SpaceX and you wouldn’t have Tesla. I think this same thinking applies to the GCC.”

If the breakbulk and project cargo world in the Middle East wants to capitalize on this “SpaceX-effect” professionals will need to keep a weather eye on the prices for black gold for some time yet, Roden concluded.  

Carly Fields has reported on the shipping industry for the past 19 years, covering bunkers and broking and much in between.

Image credit: Höegh Autoliners