Leap of faith
Bulk ports have hard decisions to make when it comes to supply chain equipment investment: gung-ho go-for-it, or an incremental approach?
Jan Hiltermann of Royal Haskoning DHV explains that “cautious start-up strategies are attractive but they are flawed for increasing throughput”.
“Going in slowly with simple truck operations rather than building a high investment solution may well give a port a safer bet because it’s possible to pull the plug on truck solutions at any time," he says.
“However, although ports and hinterland will usually benefit from ongoing incremental improvements which follow their increase in mining output, if it grows you could be looking at a lot of trucks on the road and at some point it’s simply going to stop being viable.” So, resource projects that take the ‘slow’ development pathway could be locked into what amounts to a stranglehold for a long time to come.
He points out that coal and ore trade make up around 60% of world dry bulk volumes, and these commodities especially have a lot of potential for return combined with an equally large potential for tangling up. To get an idea of scale he points out that around 2m tonnes per year is the feed needed by a medium-sized coal fired power plant - dependent on coal grade - and even this could create issues around a congested city facility as its equivalent to 67,000 30-tonne truck cycles.
So the question for many is, start slowly, and risk choking yourself later, or gather investment for an initial leap of faith?
There are some facilities where jumping in with both feet seems the obvious option. Dr Mark Yong of BMT Asia Pacific points to the greenfield Samalaju port development in Sarawak, Malaysia, where an abundance of cheap power has enticed a large number of metal industry specialists to get together with the port for processing development.
One option that’s being considered is a large ‘sushi’ type conveyor system. “The port will load the belt with material for the various partners to pick off, process, and put back on again for the next stage till ingots are finally returned for loading again,” he explains.
Although it sounds simple enough in principle, Dr Yong adds: “There are going to be some challenges to overcome." Firstly with segregation between the different processes or minerals around the belt, the issue of incompletely processed material being fed into the next stage and last but not least, about who pays for what.
And this is the heart of the matter for many. “These conveyor systems are sexy but expensive to install,” says Dr Yong, “For example, a 2km conveyor will probably cost between $4m-$6m,” and he freely admits he has told some clients 'think again' about the investment. “While conveyors' running costs are fairly low, there needs to be a threshold of cargo and distance – both of which you have to be pretty certain of,” he says.
Certainty, unfortunately, is far from common with energy strategies. Adani Group ran into issues with its import facility at Dahej; it commissioned comparatively sophisticated handling technology with fully mechanised deep draft berths and two curved, high-speed elevated conveyors capable of transporting 6,000 tonnes per hour of coal from the quay to a loading silo. But beyond this the plan was to use an extra conveyor to feed a power plant 11km away – a plant which, along with others, the company says has not made progress because of a lack of sure coal supply.
Dr Yong also points out that the swing can go in any direction: a power generating company in North Asia went as far as shutting down its coal handling facility because they were expecting cheap gas; but then coal became cheaper still and this area has once again been restarted.
Sitting at the other end of the scale, India’s east coast has a large number of ports that see over 10m tonnes of coal import with minimal handling equipment and which is loaded directly on to trucks. As Mr Hiltermann explains: “There are a lot of common user facilities serviced, not by big ships but by small handysized vessels that can use their own cranes to unload instead of waiting around for offloading equipment.” He adds these ports are generally draught restricted so it is not always possible to switch to larger vessels even if proper handling equipment is installed.
It’s definitely the simplest solution but there is often only short term storage in ports not designed for these cargo volumes, so bulk has to get driven out pretty quickly: “After all, if one handysize has 40,000 tonnes of capacity, there’s more than a 1,000 trucks for each vessel,” points out Mr Hiltermann. This means ports like Chennai and Paradip are so congested on both land and sea side that they just shut down, with resulting truck queues tailing back an incredible 20 miles outside the gates. Dr Yong adds that it’s a perennial issue and some bulk facilities in Vietnam have had to reduce their opening times to mitigate congestion around the port.
These examples would seem to load the case for what can happen if the handling ‘development pathway’ isn’t squared from the outset. So, would port operations be doing the best thing by biting the bullet, installing their own cranes and conveyors to get the bulk off the quay and straight into the stockyard?
“Certainly, if you get the trucks out of that last mile, the handling capacity at the berth can go up tenfold,” says Mr Hiltermann, adding the key is replacing direct transfers between vessel and truck with an intermediate stockyard and high capacity equipment. Although it makes the multimillion dollar price-tag on equipment seem less breathtaking “it is still a risk”.
This is true even of big, established ports. Rotterdam’s vast EMO facility, a single stevedore catering for multiple clients, has its bulk pinned there by deep water and its location plus the best connections that Western Europe has to offer. However, although it’s heavily invested in huge grabs, automated stacker-reclaimers and a floating crane plus a variety of other automated loading equipment, size is no insurance policy and even EMO’s fortunes have lurched; a record breaking 37m tonnes shipped in 2008 was closely followed by a huge crash as the industry contracted by 70%. However, EMO’s now recovered and is looking to an ongoing pull from coal-fired power plants which will be conveyor fed from the terminal.
Despite this change of fortunes for EMO, it remains that bulk can be a dynamically unstable industry and choices need to be thought through.
Maputo, which caters to South and East Africa’s bulk export trade, is weighing up its options very carefully. Some of the considerations are contractual; Kristina Abudo of Maputo Port says “unlike most port authorities in Mozambique we are a private entity with a concession agreement so we can’t rely on continuing in the port beyond 2033”. This means that everything has to be paid for by then.
However, there are a number of benefits for Maputo if the investment goes ahead says Ms Abudo. “Your handling cycle time is the biggest driver for export facilities,” she says, adding that two other bulk terminals in the group already have conveyor systems and experience has shown that the usual three or four loading equipment stationed at the vessel’s hatches do gain substantially in terms of productivity. “You can go from around 200 tonnes per group hour to 800 tonnes or even 1,200 tonnes depending on equipment. This releases the berth, it’s less expensive for the vessel and economies of scale build up very fast.”
As always, it’s a balance. “You still don’t want a very heavy investment to run the charges up too high; Maputo is competing directly with ports like nearby Richards Bay and at the moment they come to us because overall we are cheaper.”
While still at the feasibility stage, Maputo also has another balance to find. Ms Abudo points out that it is necessary to be clever about avoiding unproductive housework: “If you use a multipurpose conveyor for cargos of different natures it is necessary to clean the system to avoid contamination and you can lose time.”
So it seems the investment at Maputo rests partly on finding one or two types of cargo that will remain congenial, “such as iron ore and magnetite” rather than four or five types that could create cross-contamination problems.
The Turkish facility of Rotaport, acquired by Yilport Holding last year, is also considering a “very significant” upgrade. According to Efe Hatay, chief operating officer of Yilport Holding this will help it make the most of its potential and grow present throughput from around 3m tonnes to 5m tonnes. However he explains that rather than being a side issue, cleaning has become one of the central drivers.
The port’s two main commodities, alongside other general cargo and liquid bulk, are grain and cement. However, these two are proving uneasy bedfellows and Mr Hatay admits “it’s especially difficult to handle these two kinds of bulk at the same time”. He adds that the necessary precautions are taking their toll: “At the moment we estimate we are losing quite a high percentage of our efficiency on cleaning, around 10% of our time.”
So Rotaport is looking at renewing – and just as importantly – completely separating the loading, unloading and conveyor systems along with new rail links and silos. “We are still playing with both the layout and alternative investment scenarios,” he says: “Exactly how expensive it will be is difficult to estimate and it will take some time to balance costs and value for money, but we do have to keep our customers satisfied with both service quality and operational performance.”
Mr Hiltermann points out that dedicated operations for a single product are always going to be more efficient with regards to housekeeping than common user facilities and he adds that these have some “stiff challenges” to deal with, especially as they will probably have a number of different kinds of client with various types of bulk passing through.
He says: “Cleaning up is always an issue for common-user facilities; for example you have to spray down the equipment thoroughly after unloading iron ore before you can handle thermal coal for a power plant as the ore can damage the plant’s mills and burners,” he says, pointing out that who’s responsible, plus issues over ownership and delays due to damaged equipment all adds to the possibilities for contention.
On a final note, housekeeping has another angle that is affecting bulk ports volumes: for example there’s evidence to suggest that some ports in Malaysia are gaining cargo because other ports are being squeezed by stricter controls on dirty, dusty industries.
However, this kind of shift could be temporary as there appears to be a general swing toward cleaning up operations. As Dr Mark Yong points out: “Ports are getting more sensitive to the local community... Dust suppression is becoming more and more of an issue.”
So it looks like housework will sooner or later catch up with everybody - one way or another.
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