U.S.-Middle East ro-ro trade struggling for traction
Source: Breakbulk.com, July 14, 2009 – Automobile and roll-on, roll-off traffic between the U.S. and the Middle East is in slow recovery mode after falling hard and fast last year.
Exports of new vehicles from the U.S. to the Middle East had been growing at a stunning pace for four years, said Ingar Skiaker, president of Hoegh Autoliners. Capacity was so tight ro-ro carriers ceded exports of privately owned vehicles to the Middle East to container carriers. That way they had room to satisfy the long-term needs of their original equipment manufacturing customers.
But last year’s oil price collapse caused an immediate deep downturn in light vehicle exports to the Middle East. BMW Group Middle East, which has 14 importers in the region, announced first-quarter sales were down 9 percent compared to the same period last year.
Ro-ro carriers responded by dropping contract liner and charter rates; seeking more breakbulk and project cargo; expanding into new regions and idling older vessels. “We need to run at capacity and adjust operating costs, all the things that any operator has to do,” Skiaker said.
Like Hoegh, Norwegian-Swedish car carrier Wallenius Wilhelmsen Logistics is actively seeking heavy and oversize cargo to fill empty space.
“We’re looking even closer at heavy lift now to see if there are other openings where we can participate given the contraction of the auto market,” said Christopher Connor, WWL’s president for the Americas region.
WWL, the world’s largest ro-ro carrier, reported its first-quarter operating profit fell 39 percent from the same period last year, to $36.4 million. The company plans to idle as many as 12 vessels this year, about 20 percent of its fleet. Japanese carriers “K” Line, MOL and NYK Line also plan to lay up ships or sell older vessels for scrap.
WWL entered the Middle East ro-ro trade a few years ago and had been increasing its shipments of vehicles and ro-ro cargo since, said John Fellito, the carrier’s executive vice president and deputy head of the Americas region.
Services
However, as volumes dropped in the first quarter, WWL reduced its U.S.-Middle East monthly sailings to the region from three to two vessels. The direct service originates at the Port of Galveston. Port rotation is Galveston; Jacksonville; Savannah; Baltimore; Wilmington, Del.; Beirut; Aqaba; Jeddah; Dammam; Jebel Ali and Kuwait, with transshipment available to Galveston from WWL’s South American hub at Manzanillo, Panama.
Hoegh, which operates 70 pure car and truck carriers, recently expanded its Middle East service by adding the Port of Galveston as a load port. Galveston already served the carrier as a discharge port. The expansion makes sense because the Middle East oil sector depends on suppliers in the U.S. Gulf. Port rotation is Providence, R.I.; New York; Wilmington, Del.; Baltimore; Savannah; Jacksonville; Galveston; Valencia; Misurata, Libya; Beirut; Aqaba; Jeddah; Hodeidah, Yemen; Muscat; Jebel Ali; Kuwait; Dammam; Bahrain; Doha; Abu Dhabi; Mumbai.
Bright spots
In one bright spot, now that oil prices are rising again orders for U.S.-made drilling equipment are also increasing, said Virendra Sehgal, Dubai-based regional director for BDP Project Logistics. Infrastructure and energy projects in Dubai, Kuwait and Qatar are mostly ongoing, though some have been scaled back.
Most energy and infrastructure projects in Saudi Arabia are ongoing as well, although several have been put on hold as their costs are re-evaluated, said Colin Clarke, executive general manager of Kanoo Freight, a Dubai-based forwarder. Kanoo works with several ro-ro carriers that transport rolling stock from North America.
From the shippers’ point of view, another bright spot is that the financial meltdown has resulted in widespread availability of once-scarce equipment and an abundance of formerly nonexistent vessel capacity. “When the project boom was in full swing, you couldn’t get engineers, let alone a piece of steel,” Clarke said.
With future oil price increases all but assured and steady regional population growth the Middle East is poised for a recovery, even if a return to the boom times of the past few years is unlikely, Hoegh’s Skiaker said. “The market is gradually coming back.”
By: David Biederman