Heavylift / Breakbulk
«The heavylift cargo industry urgently requires consolidation»
The young Hamburg-based company Hansa Heavy Lift entered the market approximately two years ago, at a time when the oversupply of tonnage and low rates were already the order of the day. Since then there has been no significant change in these conditions. However, the heavylift specialist is still optimistic about the future, as the company’s managing director Tomas Dyrbye explained in an interview with the ITJ.
Mr Dyrbye, your firm is just about two years and therefore a relatively young player in the heavylift industry. In which areas do you primarily operate?
For us, a total of five segments are particularly important: first and foremost, the oil and gas industry, and within that predominantly the off-shore sector. This is by far the largest and most important market for us.
In addition, shipments connected to wind energy activities account for a high percentage of our bookings. We also transport a lot of cargo for the mining industry, the power plant and electricity generation environment, as well as in connection with general infrastructure projects.
Which geographic regions are of particular interest in this context?
In terms of mining, these are still mainly Australia, South Africa and South America. Asia is also an extremely important region for us, which is why we have also been operating an office there since the end of 2011. On the one hand, this region offers a growing local market, whilst on the other it produces large volumes of cargo – a great deal of which originates in China in particular – destined for overseas projects. Following the oil-leak catastrophe in 2010, off-shore projects in the Gulf of Mexico are also now on the increase again. The nature of heavylift cargo is constantly changing, however.
What does that mean exactly?
As you would expect in our business, we are dealing with relatively complicated cargo supply chains, which are consolidated from all over the world for a project and then loaded onto one of our ships, for example. These shipments are now becoming increasingly heavy and also more complex, however. Which is a good thing for us, because the more complicated the transport operation, the more exciting it is.
What has caused these developments?
For industrial companies, particularly in the energy, power plant construction and civil engineering industries, the option of transporting even heavier and larger shipments can be very worthwhile. In certain circumstances, this enables production facilities to be combined and operated from fewer locations. This development obviously has lots of potential for cost reductions.
What weights are we talking about in this context?
Until recently, there were very few ships on the market which were able to lift cargo with a weight of up to 1,400 t using on-board cranes. There are now 18 such ships in operation around the world, including seven units in our fleet alone. Right from the outset, we focused on transporting extremely heavy loads.
Why this area in particular?
From the beginning, we wanted to occupy a «niche within a niche», because whilst this is a particularly challenging area, it is also relatively lucrative. There are currently only a few companies in the world which are actually able to transport extremely heavy loads by sea. This will change, however. We are assuming that demand in this area will increase significantly over the next two to three years. Then again, this is a business with very long lead times.
Can you give an example please?
If a new LNG plant is planned, in Australia for instance, then there can be a good three to five years between project design, the awarding of contracts and the actual carrying out of the transportation jobs. It takes a long time to obtain the necessary approval and finalise plans. Only then will the transport contract be awarded.
However, shipping extremely heavy loads containing individual components of more than 1,000 t is still new and the market itself must first adjust to this development. Whilst the trend is very clearly heading in this direction, there have until now been hardly any ships capable of taking these loads on board. Engineers are now starting to take account of this availability in their plans.
Your specialist area may indeed be relatively lucrative. Even here the rates are currently not adequate though. How serious is the situation?
Very serious! At the moment, the rate level is definitely far too low to operate profitably and sustainably. We are experiencing a historic low, and the crisis has already lasted longer than anyone would have thought. We are actually facing two different key issues. On the one hand there is less total cargo on the market as a result of the economic crisis. And the situation is further exacerbated, on the other hand, by an oversupply of tonnage. Our industry should really scrap some more ships.
Will this option soon provide relief, in your opinion?
In our industry in particular, we are dealing with a large number of old ships, some of which will certainly be scrapped in the foreseeable future, which will help matters. In addition, the heavylift industry’s order book looks relatively modest, in comparison to other industries. I really hope it stays that way. But in some ways, this problem is regulating itself.
Do you mean because the financing of ships is currently rather difficult?
Precisely. But I also believe there is another problem: in my opinion, our industry is much too fragmented. The heavylift cargo industry urgently requires consolidation, as has already happened in other shipping segments. Only a small number of shipowners manage a large fleet, with most operating just two to three ships. As a result of this situation, it is difficult to increase the rate level. We will inevitably see companies going bankrupt. Something will have to be done soon.
Hansa Heavy Lift is backed by a strong sponsor in the form of US investor Oaktree Capital.
This is a huge advantage for us. Oaktree has a strong capital base, and understands the cyclical nature of our industry. There are simply good and bad times. Given the current rate level, our biggest challenge over the next two years is probably to simply survive.
Many shipowners have to keep extremely tight reins on their cash flow. This situation has already lasted longer than anyone could have predicted. But I am optimistic. The upturn is coming!
But the main question concerns when things will pick up again. What do you think?
I believe we will be in a better position towards the end of the year than we are now. Over the coming year, the situation will start to ease somewhat. We are already increasingly hearing from customers that there are more requests for shipments in the market.
What does this mean for you?
We currently have 20 ships on our books. But in the medium term we envisage having a fleet of 30 to 40 ships, which would be a good size for us. We have very clear plans for expansion.
What do these involve exactly?
We would like to increase our fleet by approximately 15 new ships, and are currently evaluating the options. As things stand, we have still not ordered any newbuilds. But I am hoping that we will be ready to do so within six to eight months. Another option is to buy second-hand ships. In addition, we can also well imagine an acquisition, or a merger with another company.
So you are optimistic about the industry’s longer-term development?
Absolutely. But ultimately, doing business in our industry is like being on a roller-coaster ride.
When it goes down, we can only see the abyss. And when it is on the way up, we are looking straight at the blue sky and all the promises that the future holds. I think we need to look at the situation in a more balanced way. Then we will be even better prepared for the future.
Mr Dyrbye, thank you for taking the time to talk to us.
Background on Hansa Heavy Lift
Hansa Heavy Lift specialises in the transportation of heavylift and project cargo. The company owns and operates 20 specialised heavylift ships, which each have a combined crane capacity of up to 1,400 t.
The tramp shipping line specialises in shipments in niche markets outside of established routes. Hansa Heavy Lift is backed by the US financial investor Oaktree Capital Management, which is the 100% owner of both the company and its ships.
Hansa Heavy Lift was founded around two years ago, and employs approximately 100 staff on land and about 400 at sea.
As well as its headquarters in Hamburg (Germany), the company also has offices in Houston (USA) and Singapore. Hansa Heavy Lift is also represented by a network of agencies in Brazil, Spain, the United Kingdom, China, South Korea, Japan, India and the United Arab Emirates.