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Breakbulk July2016

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14 THE JOURNAL OF COMMERCE JULY 2016 A REPORTED 38 percent jump in global for- eign direct investment last year was not matched by growth in high-value project cargoes. However, industry officials say spending on power generation, infrastruc- ture and oilfield equipment will bolster gradual increases in cargo flow during the next few years. Global foreign direct investment in energy projects reached $1.76 trillion in 2015, according to the U.N. Conference on Trade and Development's World Invest- ment Report 2016 It's a figure that might have caused many in the project shipping sector to rub their eyes in disbelief. The increase was based entirely on a sharp increase in cross-border mergers and acquisitions, "corporate reconfigura- tions" and intra-company loans. So it was no surprise that project and breakbulk cargo volumes remained subdued and have been under even greater pressure since the second half of 2015, as industry sentiment suggests. The increased money flows did little to stimulate economic activity and "were weak in terms of productive capacity investment," said James Zhan, director of UNCTAD's divi- sion on investment and enterprise. Expectations for this year are more pessimistic, with a forecast decline of 10 to 15 percent in overall FDI — both for mergers and acquisitions and spending on plants and equipment. This reflects "the fragility of the global economy, persistent weakness of aggregate demand, sluggish growth in some commodity exporting countries, effective policy measures to curb tax inversion deals and a slump in (multinational enterprise) profits." FDI f lows are projected to resume modest growth in 2017, probably surpass- ing $1.8 trillion in 2018, UNCTAD said. The organization's data on "greenfield invest- ment projects," which include all projects announced during the year irrespective of their start date and financing status, offer a glimmer of hope. While the number of announced proj- ects worldwide dropped from 15,022 to a multiyear low of 14,381, the planned total project expenditure increased 9 percent in 2015 to $765.7 billion, closer to the higher levels of 2009-2011. An increase in announced greenfield FDI projects in the area of power gen- eration, electricity, gas and water supply, mainly in developing Asian countries but also in other regions including Africa and Latin America, is driving the recovery. Increased planned expenditure in these public infrastructure segments should bode well for project cargo demand. Large components, including turbines, gen- erators, transformers, high-voltage cables, pipes and tubes, are generally sourced globally and mainly shipped by sea. By contrast, the primary sector, made up of mining, quarrying and oil and gas pro- duction, continued its decline in greenfield project announcements. The drops were particularly sharp in Latin America (down to $1.6 billion from $11.1 billion in 2014), Africa and the least developed countries. "With commodity prices expected to remain relatively low over the next few years, multinational enterprises' capital expenditures in extractive industries are likely to remain subdued," UNCTAD warned. As far as the oil and gas industry with its huge material and equipment flows is concerned, U.K. consultant Douglas-West- wood predicts global oilfield equipment investment will continue to decline 3 per- cent annually until 2020. The overall fall is tied to further steady declines in offshore equipment expenditures. Onshore oil and gas is expected to return to growth in 2017. Tramp project carrier BBC Charter- ing reported seeing a marked increase in bookings of pipes and tubes in the last few months. "Currently, we see large amounts coming up for shipment. It is always an indicator that activity in the wider market is picking up," said Svend Andersen, BBC Chartering's CEO. Freight forwarding group Geodis also notes rising inquiries for material and hardware shipments from its oil and gas cus- tomers, said Claus Kruger, the company's director of industrial projects. Although the bookings are mostly general breakbulk and not high-value project cargo, "it is a sign that things start moving again. It can only go up from where we are today anyway," Krüger told IHS Fairplay, a sister product of The Journal of Commerce within IHS. Although opportunities for more mega- projects involving several hundreds of thousands of tons of cargo liftings look slim, given the ongoing uncertainty in the world economy, Geodis's German office posted a 30 percent increase in awarded freight tons of project business during the first five months of this year, Kruger said. One sector showing healthy activity is power By Michael Hollmann SLOW RECOVERY AHEAD FOR PROJECT CARGO Global investment stastistics boost hopes for long-term growth of energy and infrastructure shipments "Currently, we see large amounts coming up for shipment. It is always an indicator that activity in the wider market is picking up."

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