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Breakbulk November 2022

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November 2022 | The Journal of Commerce 7 Project Pipeline Breakbulk & Project Cargo www.joc.com PROJECT LOGISTICS SERVICE provid- ers report strong demand for their services into 2023 and beyond, despite the unwinding container "spillover" market and heightened awareness that an economic recession, the Russia– Ukraine war, fresh COVID-19 out- breaks, or some other as-yet-unknown threat could derail all assumptions. Market optimism is bolstered by several factors, including an oil and gas project cargo pipeline filled with pent-up cargo as project owners and their contractors look to catch up after two years of pandemic-related delays. Owners "have to get a lot of projects back on track," William Cunningham, research analyst with IHS Markit's upstream costs and technology team, told The Journal of Commerce. IHS Markit, now part of S&P Global, is the parent company of The Journal of Commerce. "You have to continue and main - tain existing assets and build spare capacity," Cunningham said. These activities normally take place annually, but because of the pandemic, "there's a lot of catching up to do," he said. In addition, projects that in a normal mar- ket would have been approved during 2020 and 2021 only began moving forward in 2022, he said. There have been some hurdles, however. Russia's ongoing invasion of Ukraine triggered "all sorts of uncer- tainties in the market, especially around project costs," Cunningham said. At the same time, COVID-19 flared again in China, triggering lock- downs, supply chain blockages, and even more uncertainty, he said. Despite these speed bumps, Cunningham expects another round of project approvals in 2023. Moving the breakbulk and project cargo that engineering, procurement, and construction (EPC) firms will require to build these projects will keep their logistics teams and ser - vices providers busy at least through next year, and likely through 2024. Near-term opportunities Cunningham said spending on upstream production facilities alone is expected to grow 21 percent in 2023 and 33 percent in 2024, but this near- term bump in project activity should not be confused with a longer-term "reshušing" of oil, gas, and refined products as Western nations distance themselves from Russia. The Russia–Ukraine war has exposed an over-reliance of the West, particularly Europe, on Russian gas, leading to a European energy security crisis and a rapid pivot toward other sources, such as liquefied natural gas (LNG) from the United States, Cun- ningham said. That shift comes on top of a market already in transition away from coal and oil and toward natural gas, he noted. Lindsay Newman, executive director and head of geopolitical thought leadership for the economics and country risk team at S&P Global Market Intelligence, warned that the short-term focus on disengaging from Russia could hamper some countries' attempts to transition away from carbon-based energy sources. "As part of the push to secure energy supply, we have seen, for instance, countries reconsidering coal," Newman told The Journal of Commerce. IHS Markit Commodities at Sea data shows that from February through October, global coal volumes and ship - ments increased 5 percent compared to the same period in 2021, she said. Even without the e¡ects of Russia's invasion of Ukraine, demand for natural gas would be substantial, according to Kelli Krasity, associate director with IHS Markit's Global LNG team. Although a fossil fuel, LNG is seen as an interim step in the green buildout because it's cleaner than coal and oil and is displacing them, she said. "This is about [LNG being] better than [other fossil fuels], not that it's inherently good," she explained. "Converting to LNG is often faster and cheaper than building up the renewables grid." Pent-up demand to fuel project logistics volumes into 2024 By Janet Nodar William Cunningham Research Analyst, Upstream Costs & Technology, IHS Markit Kelli Krasity Associate Director, Global LNG Team, IHS Markit Lindsay Newman Executive Director and Head of Geopolitical Thought Leadership, S&P Global "There's a lot of catching up to do."

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