US ro-ro imports surge at top ports

US ro-ro imports surge at top ports

Private helicopter landing on Mafi trailers at WW Solutions’ Terminal in Brunswick, Georgia. Photo credit: Wallenius Wilhelmsen Ocean.

Roll-on/roll-off (ro-ro) cargo imports are on a roll. Volumes through the top US ports handling this cargo saw a decided bounce in the first five months of this year, according to an analysis of data from PIERS, a sister product of JOC.com within IHS Markit.

Ro-ro cargo includes high and heavy machinery, such as tractors, harvesters, mining equipment, bulldozers, trams, other rolling stock, and over-dimensional project or non-containerized breakbulk cargo strapped or lashed to trailers and transported on conventional ro-ro, vehicle, and combined ro-ro/vehicle ships. Passenger vehicles are not included in the ro-ro cargo analysis.

Topping the list, the Port of Baltimore handled 206,638 metric tons (mt) of ro-ro imports through May, a 7.5 percent increase from the first five months of 2018, followed by Savannah, which saw volume rise 13.4 percent to 134,688 mt. Third-place Galveston saw an even more significant jump of 40.7 percent, albeit from a smaller base, to 109,642 mt during the same period. Those ports were also the top three for annual ro-ro import volumes and growth in 2018, with volumes jumping 14.6 percent, 38.9 percent, and 41.1 percent, respectively.

On the export side, Baltimore handled 53,102 mt of ro-ro cargo in the first five months of 2019, up 16.9 percent from the same 2018 period; Savannah exported 26,635 mt, up 89.7 percent; while a 40.3 percent year-over-year upswing at Port Houston, to 14,793 mt, pushed it ahead of Galveston in the rankings.

Conventional ro-ro operators are a shrinking segment that will eventually be replaced by "pure" car and truck carriers (PCTCs) that can also handle over-dimensional cargo, according to Netherlands-based shipping consultant and analyst Dynamar. The top five conventional ro-ro carriers by deadweight tonnage, according to Dynamar, are dominant Grimaldi, with 34 ships; Wallenius Wilhelmsen Ocean (WWO) with eight ro-ro ships; NYK Bulk & Projects Carriers with 15 ships; Messina Line with 7 ships; and Bahri, owned by the National Shipping Company of Saudi Arabia, which operates six ships (note that these ships are just a fraction of WWO's and NYK's fleets). 

In addition to passenger cars and trucks, PCTCs carry all manner of high and heavy, breakbulk, and project cargo. The top seven PCTC carriers account for approximately 78 percent of the global fleet as measured by vehicle carrying capacity, according to IHS Markit. Japanese carriers NYK, MOL, and “K” Line operate more than 260 ships combined, accounting for 40 percent of the fleet, followed by two South Korean operators, EUKOR Car Carriers and Hyundai Glovis, which account for 20 percent of the fleet, and European car carriers Hoegh and WWO with 18 percent.

The order book for new vehicle carriers is “low to zero,” Shane Warren, head of sales, Americas, with Hoegh, said in an interview with JOC.com, due in large part to widespread — and increasing — trade imbalances.

That there are so few newbuildings on order in the segment should concern customers, according to Flavio Batista, WWO’s vice president of sales, North America, as it’s a sign of rates being too low. “The return on investment is not there. ... Carriers won’t invest in new ships,” he told JOC.com.

And with the global requirement for all ships to switch to burning low-sulfur fuel oil as of Jan. 1, 2020, fast approaching, carriers have to make even more careful choices about ship investments.

The auto factor

Economic uncertainty makes consumers nervous. Nervous consumers buy fewer cars. When the car trade tightens, as it has in the early part of 2019, vehicle and ro-ro carriers look for more high and heavy and breakbulk cargo to fill their ships.

Global car sales slumped 6.5 percent year over year to 44.6 million units in the first half of 2019, with North American sales slipping 2.6 percent to 10.06 million units, according to IHS Markit. IHS Markit expects global demand to rebound slightly, forecasting a 3.4 percent decline for the full year, and predicts North American sales also will continue to decline.

Batista said he sees this slowdown cutting into the number of cars produced in the US, rather than impacting trade lane volumes, although he’s seen reduced volume in trade from China to the US, with some production shifted to Europe and the US.

Patrick Cooper, Houston-based area manager for NYK Line’s ro-ro unit, said all carriers in the sector are seeing growing uncertainty in the global market for new cars. However, he doesn’t expect to see any ro-ro or car carriers taken out of service, and certainly not those carrying new vehicles, as they are contracted to keep certain capacity levels.

“We are sorting out next steps, watching to see how the end of the year closes out,” Cooper said. “A lot of ro-ros partner in the carriage of new cars. We’ll see what happens in the partnering of high and heavy. If global consumption slows, if new car volumes are negative ... if we get a slowdown in trade, we might see more rationalization in the future.” 

The automotive trade drives the ro-ro sector, noted one cargo owner. “We tag along with the auto sector from a routing, availability, and frequency standpoint.”

Another cargo owner said that interest in ro-ro and over-dimensional, or simply “non-auto,” cargo has increased in the last five years. “Not from all [of the carriers], but several have made strides in reaching out to us,” they said. If the auto trade weakens, that may work in favor of ro-ro shippers. 

Trade lane variance

Hoegh has seen a boom in inbound US high and heavy cargoes coming from Asia, according to Warren, who attributed the increase primarily to demand for construction machinery and a US housing boom, which is now seeing some slowing. Batista said WWO is also seeing strong high/heavy and ro-ro imports, particularly into Georgia, with some inbound cargo from Europe shifting there from the US Gulf to take advantage of shorter shipping times.

Warren said Hoegh has seen volumes slowing in the outbound US-Middle East and US-Oceania trades due to the uncertain business and geopolitical climate, as well as sourcing changes. He noted that such changes are not necessarily driven by the current US trade wars, however, as regional tensions have also had an effect on vehicle and high/heavy volumes. Breakbulk oil and gas cargo, meanwhile, appears to be rebounding, Warren said.

“In the Middle East, there’s a lot of saber rattling going on,” Cooper added. Spot business for construction equipment and trailers is also down in the region, he said, perhaps discouraged by higher insurance rates and war risk charges. Instead, already-in-place inventory is being shuffled around the Gulf.

Hoegh’s primary market for agricultural high and heavy cargo is Australia, where demand has weakened by a lengthy drought, Warren said. Mining activity has also been flat, tamping down imports of equipment for new projects. The few shipments still moving are likely intended to replace or refurbish equipment for existing projects. For WWO, Oceania has weakened and is “steady, on the low side,” Batista said. While commodity prices have risen a bit, Batista thinks that mining companies have adapted to a slower market by becoming more efficient and, as a result, don’t need new equipment at the same levels they used to.

In South America, cargo bound for Peru and Chile is mostly commodity related, Cooper said. As in Australia, mining cargo imports seem to be aimed at replacing old or damaged equipment, rather than intended for new projects. Cargo bound for Argentina and Brazil is oil and gas related, he said, with the majority of Brazil’s projects taking place off shore and Argentina’s on shore.

Due to limited ro-ro service between some regions, particularly South America to Southeast Asia and Asia to Africa, one ro-ro shipper who spoke with JOC.com is experimenting with using containers for cargo that would normally ship as ro-ro, breaking down large machines to ship on flat racks — boxes with open tops and sides to allow for oversized and/or awkwardly shaped freight — with ancillary components in traditional containers. The regularity of container ship schedules makes it a more convenient mode, but it is not without complications for ro-ro cargo. Machinery has to be broken down, wrapped, and shipped underdeck, all the pieces and components must stay together, and the machines must be reassembled once they reach their destination. “We’re studying this,” the shipper said.

Another cargo owner said lack of services meant they’d also been pushed into looking at container flat racks for cargo they would prefer to ship ro-ro, noting that shipping breakbulk on a container ship eats up slots and can be costly. The shipper also uses MPV/HL carriers in certain trade lanes on a “case-by-case” basis.

On the flip side, a ro-ro carrier said that some US West Coast container ports are so congested that shippers are enquiring about shifting time-sensitive manufacturing-related cargo from containers to ro-ro.

WWO's sister company, WW Solutions, is developing a 90-acre dockside ro-ro facility at the Port of Tacoma in the US Pacific Northwest that would serve cargo directly from Asia and might also see vehicles coming up directly from Mexico, Batista said. “These are cars that end up in the Pacific Northwest anyway,” he said. The facility would also serve high and heavy cargo.

On the East Coast, the Port of Virginia is expanding ro-ro capacity at its Portsmouth Marine Terminal (PMT), which had been used for construction overflow and as a container relief valve during the recent expansion of the Norfolk container terminal, Tom Capozzi, chief sales officer at the port, told JOC.com.

PMT now has about 287 acres of laydown and marshaling space available. There are three berths at PMT and four at Newport News, which has long served as Virginia’s ro-ro and breakbulk terminal, with a 200 ton-capacity static crane and barge cranes with lift capacities of up to 700 mt. Port officials expect PMT and Newport News to be multi-use, including growing military use, which tends to be specialized ro-ro and high and heavy. Capozzi said the port has held planning sessions with the US Army’s Surface Deployment and District Command (SDDC), which is seeing renewed redeployment activity.

Compliance costs

Carrier preparations for the International Maritime Organization’s (IMO’s) 2020 low-sulfur fuel rules are already under way. While their customers understand IMO 2020 and its global impact, there is still much to be negotiated around levels of compensation, implementation methods, and premiums.

“We will burn compliant fuel,” Warren said, adding that Hoegh is already flushing its vessels’ fuel tanks in preparation for the fuel switch. “Now it’s [a matter of] negotiating BAF clauses and implementing the rates.”

About 20 WWO vessels will have scrubbers installed to allow them to continue to use existing fuels and the rest will burn low-sulfur bunker fuels, Batista said.

The ro-ro shippers that spoke with JOC.com said they are pushing to standardize contracting with ro-ro carriers. However, this is challenging because ro-ro is so specialized and there are no standard indices as with container shipping.

One shipper said that they are negotiating separately with each carrier regarding the added costs of complying with the IMO 2020 rules, adding that there are “true differences” in transparency amongst the carriers.

Another shipper said they expect to be in the driver’s seat. They’ve previously used an IFO380-based index and will shift to a low-sulfur fuel oil (LSFO)-based alternative when that becomes available. There’s been a lot of IMO 2020-driven “sky-is-falling” dialogue, the shipper said, but they expect to stick with their existing methods and simply point to an updated index.

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