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Q&A: Canada’s multi-purpose vessel market

By BCShippingNews 26 October 2018
Photo above: The AAL Singapore docked at Ogden Point to deliver the Johnson Street Bridge in 2017. (Inset: Marc Schutzbier, Commercial Manager for Canada, AAL.)
AAL's Commercial Manager for Canada, Marc Schutzbier, provides some invaluable insights...

Given the current climate of trade tarriffs, BC Shipping News turned to AAL’s Commercial Manager for Canada, Marc Schutzbier, to get an understanding of the impact on the multi-purpose vessel market specifically related to Canada’s West Coast. As readers will quickly realize, Schutzbier’s knowledge and expertise on the market provides for a very informative interview.

Photo above: The AAL Singapore docked at Ogden Point to deliver the Johnson Street Bridge in 2017. (Inset: Marc Schutzbier, Commercial Manager for Canada, AAL.)

BCSN: What are the main disruptors or challenges currently for the Canadian MPV market?

MS: The main challenge we see in the Canadian MPV market is a combination of a weak cargo inbound/outbound stream and shippers who have become used to a very low rate environment because of overcapacity of vessels — rates which are unsustainable for MPV carriers. The market is not yet ready to support higher rate levels despite the timid increase in general/project cargoes on the inbound trade.

In our segment, MPV carriers seek to achieve a good result on both the front and back haul, but it has become more and more challenging to maintain the profitability on the front haul (i.e., inbound voyage) which is traditionally the stronger voyage.

BCSN: How is AAL dealing with these challenges?

MS: AAL has been serving the Canadian market for years with the well-established and successful Pacific Liner Service. In light of the above challenges and current market situation, AAL made the decision to transform the Pacific Liner Service from a regular liner service into a Semi-Liner Service, hence creating the environment to deploy the allocated vessels in stronger trades while at the same time serving the Canadian trade with the right ship for the right demand at the right time.

The Pacific Liner Service was mainly supported by our A-Class types while now, during the transition from Liner Service into Semi Liner Service, AAL is deploying the entire variety from A-Class over the G-Class and M-Class to the W-Class which again allows AAL to target different cargo commodities on the return voyage and with increasing success as we have monitored the developments for the first six months.

BCSN: How will the escalation in trade sanctions between the U.S. and Canada affect the local MPV market and by how much?

MS: It’s quite difficult to make a prediction but in general, we support the trending opinion that the Trade Sanctions between the U.S. and Canada will not affect so much the trade volume performed water/water but rather heavily affect the overland transport industry (rail/road).

On the other hand, we see some of the Canadian bulk segments suffering from the trade dispute between China and the U.S. China is not targeting Canada directly with the hefty tariffs imposed by Beijing on American imports, but due to the tight cross-border market, Canadian producers are starting to suffer since prices are driven south of the border.

In 2018, the U.S. President brushed aside repeated warnings on the consequences of a trade war by officially imposing tariffs on imported goods and this has been met by retaliation from other countries. Among the U.S. multi-purpose project carrier trades (MPP), steel and project cargo are the ones likely to be affected by the trade conflicts.

Ever since the implementation of steel tariffs, steel prices in the U.S. have increased by 40 per cent in the short run. In the medium term, we are likely to witness a reshuffling of the global steel trade. Steel movement in/out of the U.S. will be lowered as domestic supply ramps up. This will impact MPP carriers who are using steel as base cargo for U.S. trade. For countries which are on the U.S. exemption list, more steel movement to the U.S. may originate out from them as compared to those on the list. In return, their steel import may increase too to make up for the export amount.

This impact on steel is likely to be felt by the oil and gas vertical due to the amount of steel required. A reduction or delay in new projects are expected for the oil and gas industry unless supported by higher oil prices. As for the wind sector, it is likely to be business as usual other than the bottom line of wind turbines manufacturers taking a hit.

Yet, if this trade war escalates further or persists over the long term, global GDP might fall by 2.5 per cent over the next three years. This will reduce project investments overall and have a huge impact on the MPP trade which ironically, the new tariffs will result in the exact opposite outcome that they are intended to produce: higher prices, less production, and fewer jobs.

In terms of how this new era of strict U.S. import tariffs (and resulting import tariffs on U.S. goods in retaliation) will impact MPP carriers, certainly an alternative to steel cargo needs to be found — as the market shrinks and freight rates for this cargo fall. Lastly, with rising costs, there may be an opportunity for larger tonnage ships as steel shippers consolidate shipments for greater economies of scale.

BCSN: When is the project cargo market expected re-emerge in B.C. and Canada?

MS: 2018 is already a better year than previous years but still away from a booming region. With few projects being undertaken this year and next in Alberta and B.C., and two larger projects gaining some real momentum as well as a handful of smaller projects lined up across the Provinces, from B.C. through Alberta to Saskatchewan, we expect a better year in 2019 and finally a breakthrough in 2020.

BCSN: What services is AAL currently offering in the region?

MS: At the moment AAL provides a tramp based Semi-Liner Service originating from the Far East into the West Coast of Canada and the U.S. and the voyages continue into the U.S. Gulf and/or U.S. East Coast as well as Canada’s St. Lawrence Seaway.

Despite the transition from a regular Liner Service, to a more flexible semi-liner service, AAL has been able to keep up its presence on the West Coast / U.S. Gulf and even increase the number of calls on the U.S. East Coast / Canadian St. Lawrence Seaway due to the use of different vessel types.

BCSN: What are AAL’s plans in the market longer-term?

MS: To become the preferred carrier in the provision of global ocean transportation solutions through sustainable growth in our fleet size and an unparalleled reputation. We are following the ebbs and flows of the Canadian market very carefully and, when the timing is right, will consider re-launching a Pacific Liner Service served by our A-Class (31,000dwt / 700mt max lift), giving us and the market the only heavy-lift capacity in this particular trade-lane.

BCSN: With a number of other MPV carriers and non-MPV carriers in the market, what are the unique selling points of AAL that make it an appealing option for local shippers — for both commodity and heavy-lift project cargo?

MS: AAL is the only project and heavy lift carrier operating in the Canadian marketplace. We not only know all the customers but have excellent experience and relationships with the terminals, stevedores and other project cargo stakeholders in the region. Our local team is happy to support our customers in the very early stages of their own bidding processes — helping them to optimize their logistics plans with input and plans that can deliver real time and cost efficiencies. This team comprises engineering, commercial, port captains and operations personnel with solid project logistics backgrounds.

Unequalled expertise: With a renowned maritime heritage and over two decades of experience, AAL has grown into one of the breakbulk and heavy-lift project sector’s most awarded and respected global carriers with the capability to transport our customers’ cargo to any compass point with the upmost efficiency, frequency and safety.

AAL is not just a leading multi-purpose operator, but a ship owner and sector innovator with an unparalleled maritime pedigree. We have over two decades of experience in operating liner and tramp services that have served the world’s most dynamic industries and provided trusted solutions for their biggest and most demanding billion-dollar projects around the world. Whether on short, or long-term employment — with dedicated vessels, personnel and other resources — we understand the importance to all stakeholders of time and cost efficiency and can be trusted to deliver.

Around the world coverage: Focusing firmly on customer service we offer unique ‘total’ multi-purpose shipping solutions, comprising three distinct and complementary service models that can be combined as required to provide seamless solutions: Tramp Global Solutions; Semi-Liner Services; and Liner Services.

Fleet capacity, cargo intake and flexibility: We have invested hundreds of millions of dollars to painstakingly design and build MPV ships that are perfect for the demands of the heavy-lift project sector, both in terms of their individual cargo mix and intake capability and combined lifting capacity.

AAL’s fleet is the sector’s youngest and comprises multiple MPV vessel classes. With the flexibility in design, configuration and equipment specifications, our vessels can carry any cargo type, from general cargo to breakbulk, project heavy lift and dry bulk cargo commodities and all at the same time. The fleet combines market-leading intake for unitized cargo, with extreme heavy-lift capability (max 700mt).

Today, our growing fleet puts AAL in pole position within the Mega-Size MPV vessel segment (30,000+dwt), offering shippers the best economies of scale on every sailing and for any parcel size.

24/7 account management: Our customers enjoy a unique key account management service, with 24/7 multilingual support and transparency throughout their shipment lifecycles. Our operations, management systems and procedures are accredited to the latest and highest ISO standards possible and we employ the finest personnel and real-time maritime software solutions to ensure that every cargo entrusted to us is dealt with as efficiently as possible.

AAL’s office and network infrastructure is spread across the world, with well-established local language offices strategically located in all primary MPV shipping hubs. These, in turn, are supported by a comprehensive network of top agencies — offering additional local market expertise and commercial support.

Sector’s finest engineers: We have in-house Naval Architects and Marine Engineers working alongside our commercial, operations and customer service teams to design, plan and execute even the most difficult operations with numerous ‘firsts’ and award-winning MPV solutions to their credit. Their extensive expertise in transporting all cargo types, combined with their unparalleled knowledge of our fleets’ stowage and lifting capabilities, allows them to push boundaries and explore opportunities for time and cost efficiencies within the confines of optimum crew and cargo safety.

End-to-end operational control: AAL’s cargo transportation operations are monitored around-the-clock by a team of dedicated and fully resourced shipping professionals, spread across our regional offices around the world. It is their communication, problem solving, financial and project management skills that are essential to collecting and analysing all vessel, cargo and operational data, to help optimise sailing efficiencies. They are a primary conduit between our sea and land-based teams and cargo superintendents (CSIs) — themselves appointed to attend and oversee all aspects of our loading and discharge operations.

Highly skilled and experienced crew: Our crews are hand-picked by the world’s top crew managers (including the associated company, Columbia Marlow) from leading academies around the world and given vigorous on-the-job training and ongoing support. Our officers and Masters comprise some of the most highly qualified and experienced seafarers in the MPV sector and are committed to meeting their voyage instructions, whilst strictly adhering to AAL’s ‘zero harm, zero damage’ philosophy.