Market Overview

Port Report: Break Bulk's Existential Angst

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Port Report: Break Bulk's Existential Angst

What is break bulk cargo, exactly? It's very hard to define but, as a famous quote says, "we know it when we see it."

Expert views differ on what break bulk is exactly. There's a general consensus. It's clearly not a cargo like dry bulk, such as grain, or wet bulk, such as crude oil. And it's clearly not a cargo that goes into a container. And it's generally agreed that it's all about individual units of cargo.

What the consultants say

Susan Oatway, a break bulk analyst and expert with Drewry Shipping Consultants, says it is general cargo that must be loaded individually, such as steel plates, rubber tiles or bags of grain.

Niklas Carlen, research director for Maritime Strategies International, has a similar view. He says break bulk covers a "fairly broad range of cargo types," arguing that the key defining characters are that it is unitized (e.g. bales of pulp, metal ingots) rather than bulk like grain or ore. He goes on to argue that project cargoes fall in the category of break bulk.

Break bulk covers "a fairly broad range of cargo types", says Niklas Carlen, research director, Maritime Strategies International; Photo: Maritime Strategies International

Ship owner and operator views

Wallenius Wilhelmsen Shipping, an ocean carrier of vehicles, says that break bulk is an individual piece of cargo that does not fit in a container or a cargo bin. 

So does Rob Aarvold, general manager of Swire Bulk. Swire Bulk is a large Asia-headquartered shipping operator with a large fleet in excess of 180 vessels, including multipurpose (MPP) ships and dry bulkers in a range of sizes. Swire historically has been a significant player in the Asia and South Pacific break bulk market.

Aarvold argues that break bulk can be thought of as non-containerized commodities. He further argues that project cargo is a type of break bulk that is required for a specific project. But, he indicates, Swire Bulk is not obsessive about the definition.

"We've seen a lot of innovative ways to move these out-of-gauge cargoes. What we call break bulk is a unitized cargo that doesn't fit in a container. Project cargo is more out-of-gauge — e.g. railway wagons. Within our division we almost interchange project cargo and break bulk. Today what's happened is that cargo is king and people look at any way of carrying cargo. Our definition is anything that is carried not in containers. So we use it quite freely," he tells FreightWaves.

But what about ro-ro, project cargo and heavy lift?

And then there is the distinction, if any, between project cargo and heavy lift.

Take, for example, the superstructure of oil rigs (called "jackets" in the ocean-going trade). They are neither wet bulk nor dry bulk. They are individual units. They are projects. They are carried on specialized ships for the carriage of very out-of-dimension and out-of-gauge cargoes. But are they break bulk?

Probably not. Many experts would classify that kind of cargo as heavy lift. But what about big heavy machinery parts, such as axles for giant mining vehicles in places like Australia? They are big, they're out of gauge, they're unitized. And they're also giant bits of cargo. But are they break bulk cargoes?

In August this year, Japanese shipping giant NYK revealed an order with Nanjing Jinling Shipyard for two new ships. Both ships would have have two cranes, each able to lift up to 400 metric tonnes, giving each ship an 800 tonne lift capacity. A metric tonne is equivalent to 2,204.6 U.S. pounds.

Described as "heavy-lift" vessels by NYK, they would be used for transporting machinery, wind turbine blades and equipment — all of which is classic break bulk cargo albeit at the heavier project cargo end of the spectrum.

Aarvold says that shipping executives talk about break bulk companies having a project division but that heavy lift is "quite different" and "definitely stands apart."

And what about vehicles, cars, trucks, machinery and forklifts? They fit the definition of being "unit" cargo, that is out of gauge and is not bulk cargo like iron ore. But are they break bulk? Probably not. But that doesn't stop pure car carrier operating companies like Wallenius Wilhelmsen and others from targeting the sector.

How big is the world break bulk fleet?

Without a clear consensus definition on the nature of break bulk, it's quite hard to define the size of the world break bulk fleet. And, perhaps more ominously, a lack of clarity in what the break bulk industry actually is, and what break bulk ships are for, might just lead to a shakeout.

Swire Bulk estimates the size of the world break bulk fleet to be roughly 1,600 vessels. A spokesman for the company concedes that a "more reported statistic" is a fleet size with 100 metric tonnes crane lift capability, amounting to about 1,043 ships with a total capacity exceeding 15 million deadweight. Deadweight (dwt) is a measure of the carrying capacity of an ocean-going ship.

However, Oatway says that Drewry's assessment of the multipurpose vessel and project carrier fleet, as at the beginning of September, is about 3,188 ships totaling 29.6 million deadweight. Oatway also rightly points out that other ship types can and do carry break bulk cargo.

And if a third completely different viewpoint is wanted, Maritime Strategies International's Carlen says the size of the general cargo fleet is "very large" and estimates it as being in excess of 15,000 ships, encompassing different types of ships such as open hatch and multipurpose ships.

That's not to say any one of these executives — all of whom are absolute experts in the break bulk field — is wrong. They're all right. The divergence is a reflection of the fact that, while everyone intuitively knows what break bulk is, it's actually quite hard to define really tightly.

Nature of the world break bulk fleet is changing

Whatever the size of the world break bulk fleet, the nature of it is changing.

MSI's Carlen notes that there have been depressed freight rates in the break bulk markets, which has reduced the amount of new ship orders and slowed down demolition rates of older ships. He also notes that there has been a trend to upsize, which is similar to the situation in other shipping sectors.

Oatway, meanwhile, observes that break bulk ships generally have been delivered with larger cranes and increased safe working load limits for the purpose of handling bigger pieces of project cargo.

A spokesperson for Swire Bulk has observed a "strong preference" for eco-friendly ships with a crane lifting capacity exceeding 100 metric tonnes.

"This design reflects current market conditions in which the MPV [multipurpose vessel] owners operate and provides the ability to participate in a greater range of trading lanes," the Swire Bulk spokesman tells FreightWaves.

Swire Bulk's general manager Rob Aarvold puts some insight around the raw facts.

"We've been moving to more generic ships," he tells FreightWaves, arguing that the nature of the break bulk market has changed so much that the strategy is now "more about trying to find more innovative ways to use standard vessels."

An asset play

There's a potential asset play issue in the back of the mind here. Aarvold points out that there has been a lot of consolidation in the break bulk market over the last 15 years. Multipurpose vessels are complex and expensive — particularly in relation to mere "well-made" dry bulkers with options to put steel coils, unitized cargo and yachts on the deck. 

And that makes multipurpose ships more difficult to sell in the sale and purchase (secondhand) market, especially if there are now fewer buyers because of consolidation in the sector.

And there's always the immediate demands of the trade.

"Fifteen years ago people were all talking about crane sizes e.g. 150 tonnes — everything was bigger and heavier. But it can be difficult for crane capacity to keep up with what projects demand," Aarvold tells FreightWaves.

"Swire used to look at certain deadweights and twinlift [cranes] and so on. But we were never a heavy lift specialist. We are a liner service that can carry a variety of cargoes. There was consolidation owing to economic downturn and several projects did not come on line. That was a catalyst for consolidation in heavy lift market. We used to put ourselves forward as a big break bulk player. Now we we believe we are more aligned with what our clients require," he says.

Future view: fewer ships, a contraction and a shakeout

Looking forward, Aarvold believes that there will be fewer multipurpose ships and fewer players because break bulk is capital intensive. And that makes it difficult to deliver a return on investment on new ships unless the vessel buyer is in a high project environment.

"I can only see the fleet contracting and less investment coming in, except for fleet regeneration. … I don't know if we believe that break bulk is scalable. It's about delivering efficiencies. They'll be looking at trade flows and triangulation. You have to align your fleet with the most value. To future-proof you need vessels that are optimized to customer service and where you can earn a return. You can't just buy a fleet and deploy it. People need to shake down their business and work out what is fit for purpose."

"That might result in a restructuring of the industry," he says.

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Image Sourced from Pixabay

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