Commentary Breakbulk & Project Cargo
Falling short
By Susan Oatway
The longer demand takes to arrive , the more likely it is that shippers will face capacity shortages .
Expected demand for project cargo from the renewable energy sector in 2024 has failed to materialize , and expectations for 2025 are even weaker .
This means multipurpose and heavy-lift vessels ( MPV / HLs ) are readily available in the spot market , albeit at rates that still have not fallen to pre-pandemic levels , and project cargo shippers are not feeling any visceral urgency about a looming capacity shortage . With no pressing demand for forward capacity from shippers , owners are reluctant to make newbuilding investment decisions beyond those needed to maintain capacity and address climate issues .
Declining power prices , high interest rates and high commodity prices have stalled renewable energy projects in the near term , delaying the long-awaited boost in related project cargo demand until 2026 at the earliest . The longer it takes for this demand to arrive , the more likely it is that cargo shippers will face a shortage of capable ships when it finally does .
Some engineering , procurement and construction ( EPC ) companies are suggesting to their clients , often the developers of oil and gas , LNG , petrochemical and a range of other types of projects , that early engagement with carriers is necessary . Similarly , when building modules , building to dimensions of existing vessels would be preferable to the more
Renewable power growth to average 9.5 % through 2035
Annual power generation by technology , in terawatt-hours ( TWh )
40,000
30,000 10,000 20,000
10,000
0 2018 2021 2024 L2027 2030 2033
Coal Hydropower Natural Gas Nuclear Oil Offshore Wind Onshore Wind
Solar Others
L typical practice of building a module and then searching for a vessel to carry it , project logistics executives have told the Journal of Commerce . When chartering ahead does occur , it normally involves very scarce or very specialized vessels .
In contrast , many wind energy original equipment manufacturers ( OEMs ) are obligated to provide equipment transport for the wind energy developers they have contracts with and thus have already made long-term transport agreements with carriers , in some cases even specifying vessel designs that will suit their cargo . Industrial construction projects or power projects , for example , have more complex procurement structures , fragmented transport requirements and need flexible chartering solutions , so are generally reluctant to enter into long-term chartering agreements .
This is understandable , as wind projects are ongoing and repetitive in terms of the procurement of materials , while industrial projects , for example , have complex cargo requirements over a finite period . However , this reluctance to commit is fuelling a potential shortage of MPV / HLs crucial to the movement of many types of project cargo in the longer term .
Vessel owners and operators have told the Journal of Commerce they are more confident in the market than they have been in years , despite the softer market conditions expected due to the low number of projects currently reaching final investment decision status .
Forecasts for strong future project cargo demand clearly underpin this confidence . Power generation using clean energy technology is forecast to account for an increasingly larger percentage of power generation even as conventional power generation declines , according to S & P Global Commodity Insights . S & P Global is the parent company of the Journal of Commerce .
Project cargo shippers will continue to require modern tonnage to carry increasingly large , heavy and / or more sophisticated pieces of project cargo . Carriers are currently only building enough to keep the multipurpose and heavy-lift fleet growing at an average 4.3 % per year to 2028 , enough to replace but not increase capacity enough for future requirements , according to a Journal of Commerce analysis .
Source : Global Power and Renewables , S & P Global Commodity Insights © 2024 S & P Global email : susan . oatway @ spglobal . com
20 Journal of Commerce | November 2024 www . joc . com