There is reason for renewed optimism in the project logistics sector. The predicted end of the global recession, combined with the apparent stability of the global financial system, bodes well for the major projects that have been under economic feasibility review, or otherwise delayed. Our optimism, however, is tempered by the reality of project lead times that will likely result in an upturn in breakbulk cargo volume being delayed into 2011, and possibly beyond.
Project owners are well-positioned to take advantage of increased competition among engineering, procurement and construction contractors and major equipment suppliers, as well as the intense competitive pressure in the transport sector. We believe there will be continued weakness in container rates through 2010. While the major container carriers have reduced capacity and implemented slow-steaming programs, the expected rate improvements from these efforts have been elusive.
On the breakbulk side, specialized project carriers were somewhat insulated last year because of existing and ongoing project cargo backlogs already in the global network. Based on discussions with clients and carriers, we expect rate weakness in the sector as new breakbulk and heavy-lift project vessels are delivered during a year in which many believe will yield the lowest project cargo volume in a generation. Project owners and developers with the capability and financial resources to fast-track new developments can benefit greatly from this downturn.
We are optimistic for the long term, but anticipate a difficult project market during 2010.