Guarded optimism in uncertain times

The election of Donald Trump as the 45th president of the US has caused consternation among free traders and most executives involved in the global shipping industry. Yet his plans to invest billions of dollars in new infrastructure could provide a valuable cargo boost and particularly for the neobulk and dry bulk sectors.

 

For shipping lines trading to/from the US and for ports handling the nation’s international trade, these are very uncertain times, with sentiment generally more negative than positive.

In many respects, Mario Cordero, chairman of the Washington (DC)- based Federal Maritime Commission, summed up many people’s feelings in a keynote address at the World Shipping Summit conference held in Shanghai. “If trade is perceived by the average citizen as to be an exploitative system, we are handing over fuel and matches to those who seek to indict international commerce as the cause for economic woes,” he said.

“Free trade helps to keep inflation in check, adds to economic growth, improves economic efficiency, and spurs innovation. Perhaps most importantly, trade bridges distances and helps create meaningful relationships between nations and people.” 

 

Positive signs?

But it is not all doom and gloom. In particular, the US will need to import raw materials, steel and construction materials to support Trump’s intended massive expenditure on roads, bridges and airports. This could result in a firming in charter rates for Handymax and Supramax tonnage, and provide ports with additional cargo volumes, but how long-lived the boost might be and/or the scale of it are unknowns. 

 

Meanwhile, prospects in the US’s traditional dry bulk export sector appear encouraging. The demand for coal, particularly from countries in Asia (China, Malaysia and Thailand), has picked up since the summer, and India and Pakistan are in the midst of developing a large number of thermal power stations to support their ambitious industrial development programmes. Trump has also pledged to invest in and revitalise the US’s coal mining sector. 

 

North America’s grain trade remains robust with maize and soybean exports from the US at or close to record levels. The most recent report published by the UKbased International Grains Council, for instance, predicted that the total production of wheat and coarse grains in the 2016/17 fiscal year will be 23 Mt higher than the 2.05 Bt record posted in 2015/16. 

The report stated: “Output is now placed at an all-time high of 2,069 Mt, with the largest adjustment this month for maize, and this is nearly entirely due to a sustained improvement in crop prospects in the US. Also due to an improved outlook in the US amid favourable growing conditions, world soybean production is projected to be 4 Mt higher in 2016/17.” 

 

Demand drivers

The strong demand for protein (meat and fish) foods in Asia, especially China, is driving the demand for animal feeds while the requirements for specialised grains for use in the brewing, baking and food processing industries are also increasing. With middle class populations with disposable incomes rising rapidly in China, Indonesia, Vietnam and Indonesia, producers in both the US and Canada are well positioned to increase their share of the  market. 

 

Inevitably, whether it is coal or grain, these trading opportunities are bound to be impacted by Trump’s ultimate policies on foreign affairs and trade and the relationships he builds with the respective leaders of these Asian nations.

At this point in time, for ports handling dry bulk cargo on the Pacific seaboard of North America, such as Vancouver (Canada), Portland, Lewiston, Stockton and San Diego, considerable opportunities exist. Several port authorities and
terminal operators are in the midst of investment programmes aimed at modernising, improving and expanding their dry bulk handling facilities, and in attracting new tenants and cargoes. 

 

At the Columbia River port of Longview, the authority is seeking proposals from companies interested in its Bridgeview Terminal. The facility, which has two cargo handling berths and associated storage areas, became available earlier this year following expiration of a lease with Kinder Morgan Terminals (KMT).

Although the port authority is keen to work with a terminal operator/stevedore that wants to handle dry bulk imports/exports, a spokesperson for the port said it had not ruled out deals with companies interested in pursuing other marine-dependent uses. 

 

Laurie Nelson-Cooley, business development manager for the port, explained: “Opportunities to establish new terminal operations or terminal redevelopments are minimal on the west coast. Our intent is to maximise this terminal based on cargo throughput, job creation and return on investment to our customers and community partners.” 

 

It is hoped to have the new lease in place for operations to commence from April 2017, and for it to have an initial term of 10 years. 

 

Longview’s main advantage is its location as the first port on the deep-draught Columbia River shipping channel and, therefore, its proximity to international markets, and its expertise and traditional customer base in the grain, mineral, fertiliser and lumber sectors. 

 

At the US port of Vancouver (Washington), the port authority is seeking Statements of Interest for the design, permit, construction and operation of a high-volume mineral bulk cargo handling facility at Terminal 5. Interested parties have until 23 December 2016 to submit their plans. 

 

The 86-acre area that the port authority wants to develop is located in the southern part of T5 and is, according to Alastair Smith, chief marketing and sales officer of Vancouver, “unparalleled on the whole of the west coast of North America when it comes to access to river, road and rail”. 

 

He elaborated: “There’s a lot of possibility in this site and we look forward to hearing from firms interested in partnering with us to grow their business in our community.” 

 

T5’s design includes 4 x 8,500ft tracks that loop the facility and allow trains with multiple cargoes to be accommodated. A fifth such track can be laid if demand warrants it.

Improved access 

The port authority has invested heavily in modernising its infrastructure and, in particular, upgrading its access for customers, with US$275M committed to its West Vancouver Freight Access project alone. This will be fully completed by 2018 and should allow the port to handle 400,000 railcars a day. This compares with just over 50,000 railcars currently. 

 

Vancouver’s management sees many opportunities in several sectors of the dry bulk market, believing that demand from the emerging economies in Asia will continue. It also sees its location as being highly desirable, given that it is only 106 miles up the Columbia Snake River system, but closer to the interior than US Gulf coast ports, and can, therefore, offer its customers more effective and cost-competitive cargo supply chain options. Currently, Vancouver handles 6 Mtpa of mainly dry bulk cargoes. 

 

At the Canadian port with the same name, several improvements are also being carried out as the port plans for a bigger role in both the dry bulk and container shipping sectors. 

Despite a generally disappointing H1 2016 trading performance, which saw total cargo volumes dip by almost 6% to 66 Mt, Robin Silvester, president and CEO of Vancouver Fraser Port Authority (VFPA), expressed considerable 
optimism about the future.

“The long-term outlook for Canada’s trade is one of growth, and the port will be ready to handle increased volumes through Canada’s west coast.”

 

In the first half of the year, Vancouver’s main bulk cargoes registered contrasting fortunes. While grain exports posted another record, climbing 4.8% on the same period of 2015, the export of thermal coal dropped by over a third.

Venturing north

Perhaps it is no surprise, therefore, that one of the biggest development projects being carried out by the VFPA is the construction of a new export grain terminal at Lynnterm West Gate in northern Vancouver. The facility will be operated by G3 Global Holdings, a limited partnership established by Bunge Canada and SALIC Canada Limited, which is a wholly owned subsidiary of Saudi Agricultural and Livestock Investment Company. 

 

The development includes removing existing buildings and facilities and preparing the site to accommodate:

• ? A new berth.
• Cranes and associated grain handling conveyor belt systems.
• Grain cleaning and processing plants.
• Grain storage silos – in all, 42 concrete units, each 42m in height, are planned. ?
• A rail loop capable of handling three trains, each of which could comprise 150 rail cars a day.

It is envisaged that the G3 terminal will have the capacity to process at least 8 Mtpa of grain, with wheat, soybean, canola, peas and some maize likely to be the main crops handled.

Given that SALIC is a major investor in the project, it can be expected that a significant amount of the grain handled will be shipped to Saudi Arabia.

Naval discipline

 

Elsewhere on North America’s Pacific Coastline, the Californian port of Stockton has seen its imports of fertilisers, steel and molasses, and exports of coal, iron ore and sulphur surpass the 3 Mt level. In particular, handling capacity has expanded and productivity has been raised through the incorporation of the former Rough & Ready Island Navy Base into the port operation, and the extension of the port’s loop rail network so that six unit trains per week can be accommodated. 

 

Stockton has plenty of land available for development, and one area of future interest could be the rapidly increasing  exports of iron ore and coal to Asia from mines in the Rocky Mountains, which already accounts for about a third of total throughput. 

 

On the east and Gulf coasts, the opening of the new Panama Canal is also offering ports and stevedores new business opportunities.

Ports hoping to boost their cargo handling activities on the back of the new Panama Canal include Corpus Christi, Lake Charles, New Orleans and New Brunswick. 

 

In several cases it means having to dredge deeper access channels and draughts alongside berths. At Corpus Christi, the port’s commissioners recently agreed a Memorandum of Understanding (MoU) with the Galveston district of the US Army Corps of Engineers to test sediment in advance of their partnership in the Corpus Christi Ship Channel – Channel Improvement Project (CCSC-CIP). This involves the construction of a wider and deeper channel, along with the provision of various barge shelves across Corpus Christi Bay. 

 

Making time

The MoU allows the port authority to perform time-sensitive sampling work that will be eligible for credit towards the port’s cost-share requirement for the CCSC-CIP programme.

“The Port of Corpus Christi is one of the top 10 ports in the nation regarding tonnage, and a strategic component in strengthening regional economic development,” said Lars Zetterstrom, Galveston District commander of the US Army Corp of Engineers. “We are fortunate to have a strong partnership with the port, and look forward to continued efforts to support dredging work that will keep waterways navigable for vessels importing and exporting goods along the Texas coast.” 

 

Charles W. Zahn, chairman of the port of Corpus Christi Commissioners, believes the channel project is critical to the port’s future. “Providing a deeper and wider ship channel will create greater shipping efficiencies by allowing larger vessels with fewer trips to call on our port.”

The signed Project Partnership Agreement allows construction of the entrance channel approximately 10 months earlier than would otherwise have been possible.

At the port of Lake Charles (Louisiana), which is located 32 miles up the Calcasieu Ship Channel from the Gulf of Mexico, IFG Port Holdings is spending in excess of US$60M on modernising and expanding an existing export grain  handling facility.

In particular, new slip form concrete silos with additional storage capacity are being constructed, with systems that allow a wider range of seeds to be handled, and for free-flow of soybean meal and dried distiller grains to take place. Two-layer grain cleaners, automated weighing systems that allow continuous checks to be made, and a mobile vessel loader with telescoping and slewing systems are also among the equipment being purchased and installed.

In addition, IFG is addressing access issues and making the facility highly efficient when it comes to servicing rail, truck and/or barge transfers. In the case of the former, the new terminal will be able to accommodate 110 rail car
shuttle trains.

Sunshine State

In the state of Florida, Port Manatee is planning for a future that could see its cargo volumes more than double over the next decade. Currently, it processes 8 Mtpa of cargo, with bulk aggregates, forestry products, steel, aluminium  and perishable products the main cargoes handled. 

In June 2016, Manatee County Port Authority accepted the latest Port Manatee Master Plan Update, which provides the strategic vision and framework for continued diverse growth of the port over the next 10 years. It projects an average growth rate of 8.3% a year, resulting in a 120% lift in cargo volumes for the coming decade.

“We are encouraged by the positive opportunities presented in the master plan update,” said Betsy Benac, chairwoman of the Manatee County Port Authority. “Just as the plan was developed with extensive input from a wide range of community interests and stakeholders, we look forward to working synergistically with all parties in advancing initiatives to responsibly grow port operations, generating additional well-paying jobs and reaping further economic benefits for our region.”

The report recommends a five-year, US$126M capital improvement and maintenance programme that is supported by numerous state and federal funding sources. 

 

In addition to maintaining its role as a hub for supplying south west Florida with gasoline, Port Manatee is viewed as having a larger role to play in the aggregates and construction industries, and in acting as a gateway to Florida, should closer trading relations with Cuba evolve. 

Major upgrade

At the port of Brunswick, Georgia, Logistec Corp recently completed a major redevelopment exercise that included refurbishing existing warehouses and building new bulk storage facilities, including for the processing of wood pellet exports, at its Marine Port Terminals (MPT) complex. In addition, the MPT’s bulk handling systems have been overhauled by upgrading the conveyor belts and installing a new shiploader. 

 

“With the addition of these warehouses, we have substantially increased our throughput capacity in the port,” said Madeleine Paquin, president and CEO of Logistec. “Our modern, specialised terminal is ideally suited to handling biomass cargo, and we look forward to working with the Georgia Ports Authority and our customers to meet long-term growth demands for these products.” 

 

These improvements are part of the company’s five-year capital development programme for the facility that started in 2014 and will also result in upgrades to MPT’s electrical infrastructure, dust and traffic control systems, paving and rail network. 

 

In addition to its role in the forest products business, Logistec’s operation in Brunswick processes a wide range of bulk products, including fertilisers, urea, salt, perlite, aggregates and animal feed.

Plenty of activity is also taking place at inland river ports. This year has seen consolidation with Pittsburg (Kansas)-headquartered Watco Companies LLC – a specialist transport and terminal services group – acquiring several bulk handling facilities from KMT. 

 

Redevelopment

Keen to expand its bulk cargo operations further is Ports of Indiana (PoI), which runs the port of the same name and is located on the Ohio River. It is planning to redevelop a 725-acre site currently occupied by a decommissioned power plant as its fourth terminal, and is working closely with the Commercial Development Company (CDC) to determine the viability of the project. 

 

CDC, which is planning to demolish the power station and then carry out the necessary environmental remediation work to clean up the site before redevelopment can commence, has given PoI exclusive rights to pursue its cargo
operations plans. 

 

“It’s too early to say what could be constructed here, but we’re excited to have the exclusive right to further investigate this site with CDC,” said Rich Cooper, PoI’s CEO. “We’ve already had enquiries from companies that may have an interest in locating or shipping products at this site, which is definitely encouraging for its future development.” 

 

It was a view shared by state governor, Eric Holcomb, who stressed that “the development of a new port in southeast Indiana would help drive growth for the state’s 21st century agriculture and advanced manufacturing sectors, and attract continued business investment to the state”.

Partnering up

Meanwhile, in other developments, PoI and the Canada-based Trois-Rivières Port Authority have formed a marketing partnership that will study shipping opportunities and potential supply chain connections between the two ports. The initiative comes as a direct result of the maritime partnership formed between Indiana and Quebec in 2015. 

 

“We’re excited to partner with the Port of Trois-Rivières to explore new market opportunities for better connecting our ports and expanding economic opportunities for both Indiana and Quebec,” said Cooper. “Our ports share an entrepreneurial approach to new business development, and a determined focus to provide logistics solutions for bulk and breakbulk shipments on our waterways.” 

Gaétan Boivin, president & CEO of Trois-Rivières Port Authority, also alluded to the potential supply chain advantages that could result from the cooperation agreement. “We believe there are potential synergies in the industrial sectors surrounding each of our ports, and that the Great Lakes/St Lawrence Seaway can provide logistics solutions for developing new business connections in Indiana and Quebec,” he said. “The Port of IndianaBurns Harbor offers connections to extensive supply and demand opportunities for Quebec businesses in the Chicago marketplace, and can provide access to the US inland waterways system for us.” 

 

Trois-Rivières, which is located between Montreal and Quebec City on the St Lawrence River, is also being expanded as part of a twoyear (up to end 2017) C$40M capital investment programme to improve multipurpose cargo  handling activities at the port. 

A critical component of this plan is the extension of Dock 10 so that it joins up with Dock 9 and, in the process, raises fourfold the port’s storage capacity for non-containerised cargoes. This year will see the completion of modernisation work at Dock 13.

Management at Trois-Rivières hopes the various works will allow it to attract a more diverse range of general and neo-bulk cargoes. Currently, the port handles approximately 3 Mtpa of mainly dry bulk and general cargoes.