Breakbulk sector mulls long-term fallout from COVID-19

Breakbulk sector mulls long-term fallout from COVID-19

Cargo owners will be reassessing their global service agreements in the wake of the pandemic, according to an industry executive with experience as both a cargo owner and project forwarder. Photo credit: Shutterstock.com.

News that an effective vaccine for the coronavirus disease 2019 (COVID-19) is now in clinical trials at drug maker Pfizer broke on Nov. 9, sending the US stock market soaring.

Pfizer’s version of the vaccine is one of 11 in late-stage trials, and another 52 are in clinical trials, according to The New York Times. Analysis of trial results and final regulatory approvals for these contenders are still pending, and distribution will be a huge logistical challenge, particularly as several of the potential vaccines must be kept at –112°F (–80°C) from the beginning of their supply chain journey to the end.

In other words, COVID-19 vaccines are pending but hurdles remain, and it could be months before they are widely available. 

What does this mean for project and breakbulk cargo logistics? What will the long-term fallout from COVID-19 look like?

The pandemic’s oil demand destruction, coupled with a larger shift toward decarbonization, laid bare the vulnerability of the oil and gas industry. After the oil price swings of 2014-16, a long-time project forwarder told JOC.com continued investment in oil was still “taken for granted.” Now, only five years later, the long-term relevance of oil and gas is in question, he said, as the world pivots toward a new energy system that The Economist describes as anchored by “electro-states” rather than “petro-states.”

In the short term, engineering, procurement, and construction companies (EPCs) see a painful gap growing in the oil and gas “project pipeline” because capital projects worth billions of dollars were delayed, with a few canceled or downsized, thanks to the oil price crash triggered by the COVID-19 pandemic. Cargo bound for these projects will not move until 12 to 18 months after final investment decision (FID) is reached, and as one cargo owner noted, “Was anyone making FID decisions in 2020? Probably not.” That means projects that reach FID in early to mid-2021 will not see cargo moving until 2022 or 2023, he said. 

Reassessing service agreements

Cargo owners will be reassessing their global service agreements in the wake of the pandemic, according to another industry executive with experience as both a cargo owner and project forwarder.

“They will ask themselves if the service provider is the same business that [it was] a year ago,” he said. Owners will look at service providers’ financial soundness, sustainable solutions, business continuity plans, as well as at “how they behaved during the pandemic,” he said. Although most service providers acted professionally, “there was a lot of cargo abandoned around the world during COVID-19,” he said. 

For now, the pandemic continues to shape demand and reward adaptability. “We are stepping out of our lane a bit and expanding into other major demands,” said Katherine Koppe, global director of business development for industrial projects with Geodis Capital Projects. In addition to the usual capital projects, Geodis is handling offshore wind cargoes, and “there’s been a huge call for support on relief,” including emergency medical supplies and food aid, she said.

As the effects of the pandemic quickly spread throughout global supply chains, Koppe, who said she’s “more of an ocean chartering person,” suddenly found herself looking for cargo aircraft, including converted passenger planes, and handling full and partial plane charters. “It’s been very dynamic,” she said.

Given the sheer magnitude of the task of transporting billions of vaccine doses, not to mention the related cold chain challenges, the global supply chain will continue to be made dynamic by COVID-19 for many months. Meanwhile, an unfolding electricity-based global energy system will change the project cargo supply chain profoundly, but this might take a generation or two.

Contact Janet Nodar at janet.nodar@ihsmarkit.com and follow her on Twitter: @janet_nodar.