Archive for Maritime

Productivity is the key to Maersk’s growth. Railroads please take notice

Jul 9, 2015 A.P.

Moeller-Maersk A/S freight volumes will probably increase by as much as 10 percent in the East African region this year, helped by accelerating economic growth and improved efficiency at major ports.

To read the entire article, go to http://bloom.bg/1KQJV95

A few highlights

Maersk reports as many as 24 berth moves per hour at the Mombasa container terminal, which has potential to double with on-going investment and productivity gains… Productivity in the private terminal at Dar es Salaam has improved to 33 berth moves per hour.

Maersk container shipping moved 380,000 20-foot equivalent units in the region last year, — about 35 percent of the total market.

Productivity

Using HUB Ports, about 65% of Maersk freight in East Africa goes through Mombasa, while Dar es Salaam handles the bulk of the remaining 35%.

Hub ports with dense inland transport connectivity to markets is a key business model.  Not all ports can be hubs.

Technically wrong images often tease readers of marketing publications

BEAUTIFUL PICTURES send the wrong message as to what will be delivered.  The writers could change that and send a really powerful “this is possible message” if they focused on the engineering specifications.


Better news reporting can make a difference.  I urge them to improve on an otherwise good publication.

The April 2015 issue of CBTL-WATCH AFRICA is a very well laid out and professionally scoped marketing tool for the ocean carrier. It presents colorful to look at and generally well written subject themes for the various geographic sections of its Africa maritime business.

The authors put the best face forward in describing the announced railway modernization projects in this one April issue. The photo cover of the marketing document is beautiful.

Unfortunately, almost none of the modern railway operation pictured in that cover — or later in a page dedicated to Zambia –DRC modernized service — will occur under the current African rail plans.

A due diligence investigative report would quickly note that the image of the massive and highly efficient doublestacked container trains in the photos CANNOT OPERATE on the currently proposed rail lines in the story. In fact, from an engineering and economics technical view, NOT A SINGLE AFRICAN PROPOSED FREIGHT RAILWAY WILL BE ABLE TO OFFER DOUBLESTACK CONTAINER FREIGHT SERVICE using their current proposed engineering guidelines.

WHY NOT?

Because the tracks and infrastructure bridges of these new railways WITH DOUBLESTACK CAPABILITIES would have to support 1) 33 to 35 metric ton axle loads, 2) trains lengths of about 2,500 to 3,400 meters, and 3) vertical clearances above the top of the rail head in the 6.1 to 6.2 meter range (if a diesel electric locomotive operation) and in the range of 6.8+meters if an electrified line.

Neither the reporters on these stories or the ministers doing the technical planning are focused on these fundamental yet missing design standards.

The result is sort of like announcing a new international airport plan, but the runways and terminal ramps will not accommodate modern B-777 or A380 aircraft. In aviation, that would get you fired.

I am hoping that a future issue of this otherwise great news magazine will correct these mistakes. Please, at least do not tease the audience with a picture image that technically will not happen. Unless someone changes the engineering design.

If the authors can use this technical rail intelligence in future issues, perhaps they can influence modernization changes to the plans. Such engineering change would truly benefit their African customers. Because doublestack trains are about 35% to 45% more efficient than the current African rail plans will allow.

Commercial rail freight service NOT possible with almost all of current African rail plans

Commercial rail freight service NOT possible with almost all of current African rail plans

TRUCK KILLER RAIL TECHNOLOGY conintues to elude Eruope-Asia planners - Jim Blaze

Suez Canal — Quick plan execution will double its capacity in about one third of the expected project timeline

Leadership and focus can make a difference.  This is a good technical news story out of Egypt.  The project was originally expected to take 3 years and be ready by 2017.  Instead, it will be essentially completed in just one years time and dedicated in August this year.

The New Suez Canal (actually an expansion project) is more than 80% complete according to multiple sources. The project is intended to increase the capacity of the channel from the current 49 ships a day to 97 ships a day.  The market target of almost 100 daily ships (half in each direction) will be likely reached by year 2023

The result will be a POSSIBLE 1 DAY SHORTER journey on a 21 to 24 day containership passage between Asia & Northern Europe

Waiting time for entering the canal will be reduced to 3 hours from the current 8 to 11 hours. The actual canal transit times could drop from 18 hours to 11 hours.

COMMERCIAL REVENUE IMPACT

The investment could increase canal revenue from the $5.3-billion generated from the payment of tolls by 16,744 vessels in the 2013/14 financial year to $13.2-billion by year 2023.

The Suez Canal route competes with railways trying to offer price competitive and time competitive blends of container transport between Asia and Europe.  The water route via Suez has ~ a 99% share. Now the Suez sailing times will improve.  The maritime route has a huge price advantage in terms of the price per container moved. versus the railway prices.Suex Canal Asia - Europe route map

http://www.engineeringnews.co.za/article/egypt-eyes-opening-of-new-suez-canal-on-aug-6-2015-06-15 Sent from my iPad

Botswana

“Botswana government defers royalties to help hard-pressed mining companies” says news headline

9TH June 2015   Published by  MARTIN CREAMER   (miningweekly.com) –

The government of Botswana is bringing relief to profit-squeezed mining companies in its nation by allowing them to defer the payment of mineral royalties.

Speaking at the thirteenth Botswana Resource Sector conference, Minerals, Energy and Water Resources Minister Onkokame Kitso Mokaila said the government was applying this short-term relief and would continue to assist the mining industry on a case-by-case basis for mutual benefit.

“What keeps me awake at night is how we enable business to earn a return on their investment and at the same time have national benefit,” Mokaila told the conference

Emphasized at the conference was the importance of working collaboratively.

Leaders from Mongolia to Mali and South Africa to India need to understand his message.

Stop looking for a hand out and get into the global competitive struggle for the long term.

Sovereign position means little in a global battle for markets when the so called super cycle is in retreat for the next few years. Only those that figure this out and form true partnerships for the shared investment risks can take the high ground and likely succeed.

The others?  They will struggle. History has shown us this pattern repeatedly.

Mines, ports, and rail infrastructure are all part of the logistics package for those that want to be world class providers.

The Botswana Minister made himself available for prolonged questioning from the floor.

For more details, see: http://www.miningweekly.com/article/botswana-government-defers-royalties-to-help-hard-pressed-mining-companies-2015-06-09

Map identifies regional location of Botswana

More than 60% of megaprojects mines face cost overruns –. LIKELY for rail also

WHERE IS THE DUE DILIGENCE on these ambitious project feasibility cost estimates?

This was a timely report on the internet business news

A 60% rate of large project cost over runs reported from a after the fact due diligence review.

What executives were “watching out for the investors’ interests”?

Where was the pre-project due diligence review?

As exuberance over China “go-go” growth cools down now to more realistic levels, some formerly free wheeling mine executives are probably going to be reassigned or worse.

Likely a similar fate awaits many project rail planners.

The cited EY study below is not focused on the supporting railway projects. But this significant mining failure implies similar rail project cost over run impacts from Mongolia to South Africa and from Mali to India.

Mongolia’s rail plan execution failure out of the Gobi Desert TT fields is probably a close parallel to this report’s conclusions. Almost now a decade in only partial construction, the Mongolian project is a similar “failure to execute” on time and on budget. But here, the blames rests on government rather than executives.

MASSIVE MISS IN ESTIMATING THE TRUE PROJECT COSTS

How can so many screw up so badly?

COSTS as identified in the EY evidence were on average 60% or more over the initial predictions.

Who did the original diligence checking?

Where was the investor/banking over sight?

60% is what most of us who are economist refer to as the conceptual level accuracy of costs. That is terrible for an actual post project delivery audit..

60% is a flunking grade if judged logically.

60% suggests that there was never a serious project feasibility assessment of the market and economics.

Will this lesson learned be used by project leaders going forward now that feasibility may be even more difficult if the resources super cycle is behind us?

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The report title is: ‘Opportunities to Enhance Capital Productivity’

Here are a few highlights.

1) EY found that “an average budget overrun of 62% was reported on the 108 megaprojects investigated.”

2) “The projects considered were at various stages across the investment and project delivery life-cycle.”

3) “The projects were geographically diverse and related to the development of copper, iron-ore, gold, coal, nickel and other commodities.”

4) Cumulatively, “the projects represented global investment of $367-billion.”

5) “An estimated 50% of projects were reporting schedule delays even after remedial acceleration initiatives had been applied.”

The study spokesperson at EY is its global mining and metals advisory leader Paul Mitchell.

Mine company leaders now admit to their shareholders that with the good old high growth China days behind them… … the project managers need to be much more precise with their due diligence in order to achieve the promised investment margins. There is now a lot less room for error.

The report cites that total capital expenditure for the subject projects examined “have dropped from $142-billion in 2012 to an estimated $96-billion this year”.

For more details, please go to the Mining Weekly report from an Earnst Young special study at: http://www.miningweekly.com/article/more-than-two-thirds-of-megaprojects-face-cost-overruns-ey-report-2015-05-21

How would you score the report card based on the E&Y report?

Sent from Jim’s iPad

Bloomberg alert as Goldman Commodity Rout Snares Ships

Duluth Trip - May 2014 - MV Paul R. Tregurtha arrives in Duluth, by Pete Markham, on Flickr

Interesting transport economics in Bloomberg maritime news published on May 6, 2015.

The collapse in global rates for shipping commodities from the world’s mines to mills and utilities will persist until at least 2020 on a glut of vessels and stalling cargo growth, according to Goldman Sachs Group Inc.

Read “The World Shrinks for Goldman as Commodity Rout Snares Ships,” By Jasmine Ng at http://bloom.bg/1PpSTI5

A Few KEY POINTS.

1) The shipping lines have missed out on transferable economic lessons learned by North American railroads these past three decades.

2) Strategic planners need to balance capacity they add to their Balance Sheet to the likely downside of market demand

3) TOO MANY SHIPS “From the iron ore pits of Western Australia and Brazil’s Sudeste to the coal pits of Indonesia and South Africa, mining companies have experienced the end of the bull market in commodities,” Lelong and Cai wrote in the report dated May 6. “Now the shipping industry is feeling the impact.”

The daily charter rate for a Capesize vessel slumped below $10,000 from a peak of more than $100,000 in 2008, according to Goldman. “There’s still this structural overcapacity in dry-bulk shipping”… Goldman cited slumping rates for hauling iron ore from Western Australia to China, described as the busiest dry-bulk trade route in the world. The estimated cost of shipping one ton sank from $44 at the peak in early 2008 to $4.40, it said. Global demand for seaborne iron ore, thermal and coking coal may expand only 2 percent this year

4) HOW LONG The slows growth will likely last into 2018. That compares with an average of 7 percent between 2005 and 2014, Goldman said.

Summary Observation

The impact of too much ocean shipping capacity has direct implications as well for many global pending rail freight projects. Too much rail capacity is not a smart business plan. Emerging nations have to adapt to the new commercial realities.

What do you think?