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Unusual Times for Breakbulk

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Airbus, the European aerospace giant, had a problem: moving airplane components to its new $600 million manufacturing plant in Alabama. DB Schenker, a global 3PL., dug in, literally, building a new aircraft hangar and refurbishing a World War II-era pier in Mobile.

The solution: using inland waterways rather than overland transport.

The result: Streamlined logistics to improve Airbus production.

Breakbulk: transporting Airbus in Mobile, AL

A side benefit: “sign of strong European-U.S. trade relations,” DB Schenker says, perhaps with a hint that supply chain collaboration could mitigate geopolitical strains.

The Airbus/Schenker initiative, announced in July, offers in an anecdotal glimpse at how 3PLs are maneuvering through the break bulk sectors uncertainty, whose volatility includes: US led tariffs, shipping lines ongoing capacity, consolidation and competition issues, and workforce problems, namely truck driver shortages.

“Current volatility makes it difficult to forecast what the markets might look like five years from now,” says Frank Guzman, director, project logistics for CH Robinson. “The current trade words and global political environment have added a new level of uncertainty that makes planning even more difficult than normal.”

He goes on to say: “Steel tariffs are already impacting the decisions our customers are making, not only for projects in the pipeline, but also those that are already in motion. The business cycle of capital projects is years in the making, yet sudden trade wars can immediately impact projects that are already in motion.”

“These are unusual times,” says Heather Burke, Director, Regulatory Compliance Customs Services at DB Schenker, noting that new US tariffs and subsequent retaliatory levies now “require importers and exports to determine which of their products are impacted and who must pay the additional amounts.”

Gary Dale Cearley just saw that firsthand.

“An agent colleague who is based in Florida told me that one of his clients is affected to the point of around $11,000 per shipment. I thought to myself, “how many salaries per month does not equal to?”” Says Cearley, Managing Director of three logistics networks, AerOceaNetwork, All-in-One-Logistics Network, and XLProjects.

Interestingly, Guzman also sees a flipside to the tariffs, “a potential impact on domestic steel and heavy fabrication in North America. Any increase in this category would add additional pressure two and already strained domestic capacity market.”

In a word: trucking.

“Trucks and equipment availability, especially in North America (but also in Europe), is a headache for the logistic suppliers and their market, as well.”

Cearley says, “Thus far, most logistics people have been able to scramble and hustle to get goods moved to their destinations, bud situations overtime is taking its toll. Especially in the United States, this is a people issue, and not a mechanical one.”

Another issue, he says: “how the container liners have gotten into the break bulk game with both feet. This adds pressure on the traditional break bulk liners as it is competition coming out of left field. And traditionally, due to the ubiquity of feeder vessels and ports, the container lines cover far more ports then break-bulk liners.”

Moreover, container lines have invested in more multipurpose vessels, he says.

“Though it might sound counterintuitive I wouldn’t doubt that this will lead to the container lines investing into the break bulk lines at some point in order to reach the part of the market that they can’t touch right now.”

As for bright spots, DB Schenker’s Chris Meister, Director, Global Projects and Government USA, echoes others who see energy projects rising.

“The visible upswing in oil and gas related activity will definitely help to keep cargo volumes moving and break-bulk cargo vessels busy, starting in late 2018 and, more so, from 2019 going forward.” he says. “We expect this to continue for the next few years. It is indeed good news that the market for project logistics and subsequence demand for global shipping solutions continue to develop at a steady pace.”

He refers to “a few mega projects currently in different phases of development” in Asia, the Middle East and the US Gulf coast,” then adds: “These projects may translate into very interesting business, creating a positive impact to demand for break bulk shipping solutions in the very near future. The landscape we live in today is full of surprises and change, and embracing change increases the chance of successful growth.”

This article originally appeared in Breakbulk – you can read the original article here.

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