Carriers are coping by shrinking the fleet, cutting costs, and forging partnerships Breakbulk and project carriers find themselves in quite a squeeze these days. Global economic conditions have worked to their detriment. And they face stiff competition, not only among themselves, but also from bulk, ro-ro, and container carriers. The upshot has been downward pressure on rates. While the global economy has largely moved past the 2009 financial crisis, project carriers are still operating in the shadow of that meltdown. The drop in oil prices—and the consequent flagging of new exploration projects—hasn’t helped. “The global, financial crisis that started in 2009 affected the project market,” said Waldemar Poulsen, president and CEO of Rickmers-Linie (America), Inc., a breakbulk and project carrier based in Houston. “Lately the strengthening of the U.S. dollar has hit U.S. exports badly. This coincided with the sharp drop in the price of oil, which has forced oil companies to reduce production and investments. The overall market is weak, which is putting pressure on freight rates.” There are currently 435 ships with a total capacity of 7.2 million tons in the worldwide fleet of multipurpose vessels of the kind that project carriers like Rickmers operates, down by around 10 percent from last year. The shrinking fleet, coupled with the fall in oil prices should have been good news for multipurpose carriers. But the flipside of lower bunker prices is a global decline in oil and gas investment projects, noted Susan Oatway, an analyst with Drewry Maritime Research. In addition, while total tonnage is slipping, the project segment of the multipurpose fleet is still growing, according to Oatway. ‘‘Our analysis is that the simple multipurpose fleet is in decline, with little investment beyond replacement tonnage,” she explained. “However the more advanced vessels, the project carriers, are seeing fleet growth of around 3.5 percent per year through 2018. It is the cargo for these vessels that is directly affected by this slowdown in the sector.’’ Rickmers-Linie, which operates round-the-world services, has seen divergent levels of performance within its various lanes. “The market from Asia to the U.S. seems to be holding up fairly well,” said Poulsen. “But exports to Asia and Europe in particularly have declined considerably. This makes it very difficult to run a profitable service.” Large liquefied natural gas projects in the U.S. Gulf, particularly in Texas and Louisiana, are driving most of the project imports that Rickmers is handling. Shipments of import commodities like iron and steel from countries like China and South Korea are also still fairly strong. “Although,” Poulsen noted, “anti-dumping legislation currently being contemplated by the U.S. government could put a damper on these commodities.” Shipments of bulk minerals are down for Rickmers together with most other export commodities. “Most project and breakbulk carriers participate in these exports in competition with pure bulk carriers,” said Poulsen. “The project carriers are also up against strong competition from container and ro-ro carriers. These carriers are ordering more specialized equipment to expand within the segment of heavy-lift and oversized cargo. Combined with the fact that container carriers offer weekly service and often better transit times, this is making the competitive environment fierce for the project carriers.” Oatway agreed that “the outlook for the multipurpose sector will be largely determined by developments within the container and bulk markets and how far they will encroach on general, breakbulk and project cargo.” Rickmers is coping with the situation by implementing cost reductions. “Our organization has been right-sized,” said Poulsen. “Expensive charter vessels have been redelivered to their owners. The service speed of our vessels was reduced to a more economical speed.” Project carriers are also pursuing partnerships with other operators, such as the one AAL announced earlier this year with Peter Döhle covering tramp and projects shipping cooperation. The two ocean carriers remain independent but the pair have deployed and jointly represent a fleet of 26 multipurpose heavy-lift vessels across a number of trade routes between Asia, Europe and the Americas, providing tailor-made tramp and project cargo solutions to major industry sectors. “Both fleets of multi-purpose heavy-lift vessels perfectly complement each other,” said Christoph Döhle, CEO of Peter Döhle Schiffahrts-KG, “and our proposed fleet mix of seven classes of large and small tonnage will deliver highly flexible, sustainable and efficient benefits for our customers and their projects.” AAL and Peter Döhle are sharing operational responsibilities, with AAL handling operations east of Suez and in the Americas while Peter Döhle oversees activity in Europe and Africa. Their combined fleet features seven modern and highly diverse classes of multipurpose heavy-lift vessels that range from 12,000 to 31,000 deadweight tonnage. Rickmers-Linie has entered into a cooperative arrangement with Swire Shipping. “Since our vessels from Europe to the Middle East and India continue to Singapore,” said Gerhard Janssen, director of global sales and marketing for Rickmers-Linie, “this cooperation offers an increased range of destinations and loading ports on offer for customers of both Swire Shipping and Rickmers-Linie.” Despite the current adverse market conditions, AAL and Peter Döhle are sanguine about the future of the global projects business. “The launch of this new operation is testament to the expansion of our customer base in Europe and their growing demand for ever more efficient and convenient project cargo solutions,” said Namir Khanbabi, managing director of AAL’s global tramp and projects division. “We are seeing that despite increased competition,” added John Jensen, General Manager of Peter Döhle, “the market still places high value on working with operators that have a genuine understanding and solid expertise in transporting extremely valuable and complex cargoes, where safety and quality cannot be compromised.” Drewry also maintains an upbeat long-range forecast for the sector, projecting that demand for the multipurpose fleet is set to rise at an average rate of five percent per year through 2019. “But, there is a caveat to this positive forecast,” said Oatway. “Because of the fall in oil prices and the competition from the container fleet in particular, the growth in demand is expected to be subdued” through 2016.