Shipping is not a business for widows and orphans. Seldom has that adage been truer than in today’s breakbulk and project cargo market.
Risks always have been part and parcel of cargo transportation. Unpredictable economic conditions and sluggish global demand will make 2016 especially dicey.
During and after the Great Recession, the breakbulk/project industry fared better than container shipping (admittedly, not so difficult). But now the extended slump in oil and other commodities is starting to pinch shippers and carriers alike.
Companies are pulling back on big-ticket construction jobs that drive project cargo volume. Such decisions aren’t made lightly. Once a company has reached a certain point on a new refinery or chemical plant, it usually makes more sense to finish the job than to leave it incomplete. For new projects, it can be a different story.
As Peter Leach reports the January 2016 JOC Breakbulk & Project Cargo supplement, cargo demand is softening just as operators of multipurpose vessels are struggling to fill ships they ordered when times were good.
MPV operators’ traditional breakbulk and project markets, meanwhile, are being nibbled by bulk and container operators seeking to solve their own overcapacity problems. The result, says Susan Oatway of Drewry Maritime Research, is expected to be “reduced market share for the multipurpose shipping fleet.”
Recovery of the multipurpose sector will have to await a rebound in demand. When that will happen is unclear.
China no longer has the insatiable demand for commodities it showed during more than a decade of pell-mell growth. That’s having a knock-on effect on shipments of project cargoes, and of commodities such as steel.
Low oil prices continue to weigh on project cargo shipments, although softness in this particular market has been muted by work on multiyear, multibillion-dollar projects already under way along the western U.S. Gulf Coast.
Suppliers of wind energy equipment, long a mainstay of project and heavy-lift cargoes, are near-sourcing more of their production in order to reduce costs and to comply with local-content regulations.
These and other developments, some cyclical and some permanent, will make 2016 a challenging year in the breakbulk/project field. It’s not a business for widows and orphans.
Longtime Journal of Commerce readers recall that the JOC covered the breakbulk industry’s ups and downs closely until a few years ago, when we narrowed our focus to container shipping supply chains.
Now, since the JOC became part of IHS last year, we’re expanding again and renewing our coverage of the breakbulk, project and heavy-lift sector. It’s good to be back in an industry where The Journal of Commerce has deep roots.