HICK-UPS IN PRODUCTION AND LOGISTICS
The breakbulk sector is also showing signs of recovery, according to Johan-Paul Verschuure. As Project
OPPORTUNITIES AND
THREATS FOR
BREAKBULK SECTOR
EXPERTS DISCUSS IMPACT OF COVID-19 AND THE FUTURE FOR
BREAKBULK
Covid-19 changed the world. The breakbulk sector was not spared. However, all signs for
economic recovery now seem to be back on track. The most optimistic ones even speak
of a rebirth of the roaring twenties, or of a new commodities super cycle.
In this article, experts Johan-Paul Verschuure and Hugo du Mez discuss the impact,
threats, and opportunities for the various breakbulk markets.
After the Covid-19 outbreak, end of 2019, predictions for the world economy were gloomy. The virus would
strike hard and recovery would take years. Numbers fell sharply, but since the low point in May last year, world
trade has grown solidly. In November, world trade was even back at pre-corona levels. This is shown in the
CPB World Trade Monitor, which is published monthly on behalf of the European Commission.
Director of the Ports & Logistics Team at consulting company Rebel, he closely monitors market developments,
supply chains and shipping structures. Verschuure attributes the recovery partly to the good government
intervention and the generous policy of the ECB: “Partly thanks to financial support programmes, the damage
has been limited and we are seeing a strong recovery. That gives a positive vibe, which in turn acts as a driver
for the demand that has been stimulated.” Nevertheless, he believes it is too short-sighted to speak of a new
commodities super cycle, or a revival of the roaring twenties. “Growing demands are healthy. But both
production and logistics are facing hick-ups worldwide. These are the logical consequence of lagging
supplies of raw materials and stocks, delayed projects, or the late start-up of factories. A good example is the
steel industry. China may have remained remarkably stable in terms of production capacity, the US and
Europe are struggling with an after-effect, due to a delayed upscaling.”
PRICE PUSH
Increased demand is pushing up prices, especially in Europe. More
expensive raw materials are also contributing to the higher prices.
“On top of that, a number of parties on the demand side have
anticipated the scarcity by building up large stocks. This hoarding
has created additional demand in some parts of the breakbulk
market. The effect is noticeable throughout the supply chain and
may eventually slow down the economic recovery,” adds Hugo du
Mez, Advisor Business Intelligence at the Strategy & Analysis
department of the Port of Rotterdam Authority.
A growing concern for the climate also contributes to scarcity. And thus to the price push. China, for example,
seems to be restricting extremely polluting production facilities. They are allowed to scale up less, which
removes overcapacity from the market and reduces supply volumes. According to Verschuure, the growing
focus on more sustainable production could become a trend in the years to come, which would further push
up prices.
TRADE RELATIONS AND POLITICS
Both experts are convinced that factories and producers will be able to pass on the extra costs to end users.
“This is and will remain a question of supply and demand and will certainly remain that way this year, but
probably also in the first half of 2022,” Du Mez predicts. “Moreover, everybody is sharing the same
predicament. The whole market is affected by higher prices. Nobody will lose market share or harm their
competitive position by passing on higher prices,” Verschuure adds. “That is quite a difference from previous
years, when price differences could result in a loss of market share.”
Partly because everybody is sharing the same predicament and supply chains are changing
only gradually, the developments mentioned do not have an immediate profound impact on
global trade relations, according to both. Structural growth is still in Asia, while the European
market is more mature. Any growth there will mainly be cyclical.

Obviously, political developments continue to play a role here. During the Trump years,
sanctions on both sides were rather rule than exception. “When we have a look at trade
between the EU and the US, this will not change any time soon,” Du Mez predicts. “As long as
the domestic steel industry is satisfied and there are no major complaints, there is no reason
for Biden to normalise trade with Europe. Moreover, there are still sectors that have not yet
fully recovered. So the luxury of just opening up everything is not yet an option as well.”

STRATEGIC THINKING

“We did learn from Covid-19 that it is important to think strategically on how to allocate
production capacities. By leaving multiple options open and not being dependent on just one
production location, risks remain limited. I therefore expect that we will move more towards
diversified supply chains,” Verschuure continues. “That does not necessarily imply that
everything will be produced in the backyard. Global supply chains will continue to be driven by
the cost differences that existed before Corona. As long as those cost differences are
substantial, the focus will remain on Asia. But certainly more and better thoughts will be given
to minimising risk.”

SPECIFIC DEVELOPMENTS IN THE STEEL MARKET

The various breakbulk markets are affected by specific developments. For example, the steel market is subject to several trade
restrictions. Du Mez: “Especially now that the EU has extended safeguards on steel imports for a number of years, markets remain
protected and a part of the scarcity is created.” According to Du Mez and Verschuure, the scarcity and the strong price increase, as
a result of this protection, are at the expense of trade and end users. “They will be presented with the bill,” Verschuure says. “For
trading, that might be negative. On the other hand, (local) employment benefits from these developments.” ” Global supply chains will continue
to be driven by the cost differences
”
“Particularly with the energy transition on the horizon, steel producers will not be sorry about this development either. After all, this
transition requires a lot of funding. It is a matter of billions in investments,” Du Mez adds. It is true that the European Commission has
that existed before Corona.
promised support to the steel industry for making the transition to hydrogen. Polluting products from abroad will be charged extra Johan-Paul Verschuure
at the border, so prices will be at a comparable level. On the other hand, the exemption for ETS emission rights for the steel industry
will end. “The upside of this is that steel producers will be directed more towards cleaner production,” Verschuure says. He believes
that European steel producers will focus even more on the production of high-quality steel products. “There are definitely
opportunities to make production more efficient and sustainable. ‘Green’ steel is a logical step and will certainly have value in the
future.” In this respect, Du Mez feels that Europe is leading the way, but ultimately, worldwide, everybody has to comply with the
climate agreements: “So we are definitely going to see measures elsewhere too. That is inevitable. Even China, for example, is taking
the first careful steps towards phasing out the most polluting links in the supply chain.”
ENERGY TRANSITION MAJOR GAME CHANGER

Without a doubt, both experts consider the energy transition to be one of the major game
changers for the breakbulk sector. The demand for non-ferrous metals such as copper, nickel,
lithium, and aluminium is expected to grow substantially as a result of the growing number of
(offshore) wind farms, amongst others. The question remains as to what impact this will have on
” There are definitely opportunities to make
the breakbulk market, or whether the container sector will benefit. Nevertheless, the sky-high
production more efficient and sustainable.
container rates that we are presently facing certainly offer opportunities for the breakbulk sector. ‘Green’ steel is a logical step and will certainly
For Heavy Lift and Project Cargo, HLPC in short, the impact is definitely stronger. Production
facilities worldwide that run on coal or other fossil fuels will switch to cleaner energy sources. The
have value in the future. ”
Hugo du Mez
handling and shipping of components for electrolysers, hydrogen storage tanks, compressors and
battery stations will boost breakbulk supply chains.

The same applies to offshore wind. Verschuure: “The number of offshore wind farms, for example,
has increased considerably over recent years. In the future, that growth will continue
exponentially. Moreover, the wind farms and the turbines themselves are getting bigger and
bigger. Ships and facilities will have to keep up. This clearly offers opportunities and is one of the
main drivers for the HLPC and steel markets.”

It can be interesting for individual breakbulk parties to team up. By joining forces and making use
of each other’s knowledge, they can strengthen their position and deliver an even better product
to the offshore wind sector. “Opportunities also arise for providing services, for example in the
field of maintenance,” Du Mez thinks. “Strong clusters have a bright future ahead of them.”
Verschuure too is positive about the future: “There are plenty of opportunities for the breakbulk
sector; with offshore wind and the energy transition as main drivers.”

Johan-Paul Verschuure Hugo du Mez

Project Director of the Ports & Logistics Team, Advisor - Strategy & Analysis,

Rebel Port of Rotterdam Authority

Contact: breakbulk@portofrotterdam.com