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Breakbulk April 2019

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18 The Journal of Commerce | April 2019 Breakbulk & Project Cargo date, we have not seen a strong appetite for new orders by existing operators or stakeholders in the sec- tor. I do not expect significant change in the orderbook unless the scrapping of older tonnage takes place first, driven by the need of further capital investment to comply with IMO reg- ulations. Once this takes place, then demand will outpace supply, justify- ing the investment in newbuildings." The sector seems poised to exploit a modestly improving project market as oil prices stabilize, energy and petrochemical projects move forward, and IMO 2020 seems likely to further streamline the fleet. The segment is also positioning itself for the IMO's Jan. 1, 2020, dead- line, when most of the world's fleet shifts from using fuel containering 3.5 sulfur to 0.5 sulfur. This new reg- ulation will further shrink or restrict the use of the current MPV/HL fleet, 2018 WAS A decent year for capital project growth, but doubts are increasing about the sustainability of that growth, according to Phyllis Kulkarni, regional director, North America, at Independent Project Analysis (IPA). The downside uncertainties that affect long-term engineering, procure- ment, and construction (EPC) invest- ment decisions include slowing global growth and the US-China tariffs. Although she is seeing only limit- ed examples of companies canceling already-planned investment in the US, "tariffs are affecting longer-term investment decisions," Kulkarni told The Journal of Commerce. Capital is shifting toward emerg- ing markets. Over the past couple of years, investment in the US Gulf Coast region has been a "hot topic" for the chemical sector as investors took advantage of inexpensive shale feedstock, but "that wave has largely been implemented," she said during a recent webinar for The Journal of Project-ing a shi US project construction cools slightly, turning investment focus overseas By Janet Nodar a large percentage of which consists of older, inefficient, single-owner vessels unlikely to adapt well to the new low-sulfur era. Bunker costs will increase because of the higher cost of low-sulfur fuel, while charter rates are expected to rise because of increasing demand in the face of a smaller, more consolidated fleet. "I firmly believe that we must all play our part in actively contributing to a cleaner environment. AAL wel- comes this measure, and we will be fully complying with this regulation, even before its enforcement date," Panayides said. AAL has concluded that scrub- bers do not make financial sense for their vessels, so they will switch to consuming low-sulfur marine fuel. AAL hopes to share the additional cost but expects this to be a chal- lenge "in the absence of a reliable freight index in our sector. On a positive note, we do not see any in- tention yet from our rivals that they would opt for scrubbers, hence we will all compete on similar operating costs and breakeven levels." AAL, headquartered in Singa- pore, is a tramp, project, and liner/ semi-liner carrier operating an owned fleet of 14 MPV/HL vessels of 31,000 deadweight tons and 19,000 deadweight tons, with com- bined lift capacities of up to 700 metric tons. l email: twitter: @janet_nodar Commerce. Many IPA clients are in early- to mid-construction for major US investments — but when it comes to planning future investments, they are turning their attention overseas. IPA focuses on capital project benchmarking and research, using real-world project data to develop metrics, benchmarks and forecasts. The consultancy has evaluated more than 20,000 capital projects, looking at hundreds of new projects annually. Resource constraints are affecting mega-projects (i.e., projects with budgets over $1 billion), Kulkarni said, with cost overruns and schedule slip- pages that can be traced back to staff shortages and a lack of competency across engineering and construction functions. These issues "give compa- nies pause as they think about the size of investments they want to make," she said. Earlier collaboration and better alignment on design, transpor- tation, and execution would improve the situation. Investment in training, staffing, and organization, for both owner and EPC, could help overcome the gap, she said. When it comes to planning future investments, (IPA clients) are turning their attention overseas. Kyriacos Panayides managing director, AAL

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