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US project forwarders and carriers prepare for another surge of activity

Capital expenditure in projects of all varieties is surging in the USA. David Kershaw speaks with carriers and forwarders to determine how they are managing capacity and planning for another surge in activity.

US Ocean’s Ocean Freedom. US Ocean maintains a fleet of six multipurpose vessels with lifting capacities in excess of 700 tonnes, plus one with flo-flo, ro- ro and lo-lo capabilities. The fleet is well utilised, even if the market is not quite as hot as it was in 2022, according to Will Terrill, president and ceo. “Business has certainly changed from last year, but it is good. While the general cargo market has come off the historic highs experienced in the middle of last year, we expect that business is good for many carriers that operate in specialised markets or maintain specialised capacities,” said Terrill. The carrier provides services to both US government and commercial customers, moving a mix of military, aid, US government-financed equipment and commercial cargoes around the world.“While we have worked on projects that are not US-flag impelled, particularly when demand outstripped tonnage supply in 2021 and 2022, our area of focus remains US government impelled cargoes. “[This] market has been strong in 2023 and our activities have ranged from US government charters to Antarctica for the re-supply of the McMurdo Station to the carriage of cargoes that are financed by US government loans and grants for alternative energy projects.” Nevertheless, the sector’s swift shift downwards was something of a shock. “From September to December 2022, the Toepfer Multipurpose Index (TMI) was dropping at an average rate of about 6 percent on a month-over-month basis. What was surprising to us was when we started this year and the TMI index decline increased to more than 10 percent in January. Since January, the decline has continued, albeit at a slower pace. We are optimistic that the slowed pace is an indicator that we are close to the bottom,” said Terrill. If we have reached, or are approaching, the bottom of the market for multipurpose tonnage charter rates, the sector should be relatively content. The market is still significantly above where it was pre-covid when rates were to all intents and purposes, completely unsustainable.

And there is optimism about a potential uptick, with capacity projected to tighten towards the end of the year. For instance, in the USA, conventional and renewable energy projects are taking off at a rapid rate of knots – including LNG export terminals, offshore wind energy developments, battery storage plants and hydrogen production facilities, to name a few. Chips Act Funding from infrastructure relief packages signed in 2022 is being released and creating work in the power transmission and civil infrastructure sectors, in particular. Moreover, the Chips Act has seen the country try to take back control of its microchip industry and factory developments are being fast- tracked. Speaking at the JOC breakbulk and project cargo conference in New Orleans in April, Dea Chincuanco, vice president strategy and commercial management at dship Carriers, said that as a project carrier it is vital to strike a balance between servicing long- term clients and potential new customers. “It is important to retain the potential or current client base, which is in oil and gas. But we have to prepare for these new projects that are going online.” She said three inputs need to be considered: visibility and understanding when the developments are scheduled to come online; what types of cargo can be expected; and understanding how freight forwarders select their carriers. To do this, she said there must be more dialogue between parties in the supply chain and a greater understanding of the different scopes in the business. She added that dship would prefer to have some level of security and lock-in shipments ahead of time, but with the degree of fast-tracking seen in the market, it has to be able to respond quickly. Managing expectations of both existing and new clients was described as a challenge. Speed of change Katherine Koppe, global director, business development at freight forwarder Geodis, highlighted the speed at which projects are kicking off in the USA. “Even with some of the larger capex projects that have the experienced companies involved, they are also saying things are happening at a really fast pace; we did not expect them to take off quite as quickly as they did.” She too cited the Chips Act, and the Inflation Reduction Act (IRA), as catalysts for a flurry of activity. “Everybody is moving as fast as they can to participate,” she said. “It is happening so quickly that sometimes we have to struggle to catch up and work with a lack of detail.” Offshore wind projects are expected to be a positive driver for US Ocean. “There has been a lot of anticipation and excitement about US offshore wind for many years, but now we are finally getting to the point where it is really happening,”Terrill stated. “With our mix of experience with the carriage of wind equipment and providing transportation services to customers receiving US government financing for projects, we do expect to be involved in the carriage of equipment and components for US offshore wind projects in the near future.”

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Oil and gas remains part of the overall energy portfolio and there are certainly cargoes moving to support these activities as well, he added. Nevertheless, Terrill exercised some caution about forward-looking prospects. “The negative outlook of the

container sector is concerning. At least as far as general cargoes are concerned, we learned over the past couple of years that the container sector is an important leading indicator for the multipurpose sector.”

Moreover, “owners and operators are not only dealing with government regulations, but also with increasing customer and investor demands regarding sustainability. “For the multipurpose sector, we see that there will be material changes and major strategic decisions for those in the sec

tor, largely around fuel, over the next three to 10 years.” In 2019, there was considerable excitement about the restoration of the US Export-Import (EXIM) Bank’s board quorum, which enabled it to write larger loans for projects that require export credit agency support. This has not quite materialized as planned but Terrill remains sanguine on the prospects –

and US Ocean’s fleet is well placed to capitalize on any uptick. “The bank is working hard and making progress, but the cargoes have been limited. We are hopeful that there is now a

better understanding by our political leaders about the importance of EXIM, the role that the bank plays in supporting US jobs, manufacturing capacity and US exports, and that there will not be a repeat of prior mistakes that hurt the bank.”

This article was taken from HLPFI’s May/June2023 edition.

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