EPCA logistics

19 October 2009 00:00 [Source: ICB]

EPCA Special: logistics firms are expanding in readiness for new trade flows, but the economic crisis leaves the sector facing many headwinds

BERTSCHI PLANS to set up five hubs across Europe in the next six to eight months to handle and distribute plastics from the Middle East, the Swiss logistics company said at the European Petrochemical Association (EPCA) meeting in Berlin, Germany earlier this month.

Hubs are being established in Middlesbrough, UK; Walhamn, Sweden; Duisburg, Germany; Rotterdam, the Netherlands; and Bologna, Italy, said Bertschi CEO Hans-Jorg Bertschi.

Work on the Middlesbrough facility, which includes a 20,000m² (215,000ft²) warehouse for storing and handling bulk plastics, started in September and is due to be completed in the first quarter (Q1) of 2010, Bertschi said.

Expansion work on the Rotterdam terminal is also underway, with completion scheduled for the middle of next year. The hub in Italy is being operated with long-term local partner Cogefrin.

Bertschi said about 2m tonnes/year of European plastics production capacity will disappear over the next three years as new plants start up in the Middle East.

The company is also in the process of establishing a logistics joint venture in Saudi Arabia with a local partner and Bertschi said a formal announcement was expected in early 2010.

The group is investing in a third subsidiary in Russia. "We will start regular train shipments from Nizhny Novgorod, east of Moscow, from November," said Bertschi.

The service to Western Europe would mostly transport polyurethane (PU) products, as well as supplying products and services to local producers in the Nizhny Novgorod area, which is the second-largest chemical cluster in Russia.

Bertschi has invested about €12m ($17m) to date in the Russian market, and plans to open two more subsidiaries in the next two years. Discussions are underway with customers, but Bertschi said one would be located in the Urals region and one in southern Russia.

"Companies must anticipate and understand changes in global supply chains"

Edouard Croufer, director, global chemicals practice leader Arthur D. Little
Bertschi's two other distribution centers in Russia are in St. Petersburg and Istra.

He said that the company's long-term goal was to expand its intermodal capabilities to Siberia and then to China. "We want to form a bridge into China for intermodal transport," he said.

The company is also investing €15m in a new rail terminal at Duisburg, Germany, which will be operational in January 2010.

LOOKING FOR GROWTH
German transport and logistics company Hoyer is planning acquisitions in Russia in 2010 and also to enter the Indian market after next year.

Thomas Hoyer, chairman, said the family-owned company was seeking to expand through a program of organic growth and selected merger and acquisition opportunities.

The European logistics market faces several challenges over the next five years, Hoyer said. These include consolidation of the bulk transport sector, difficulties for transport companies in financing growth, port congestion, rising logistics costs, driver shortages and new driving regulations, among others.

He added that greenhouse gas balances would become mandatory for logistics companies, which may influence interest rates and insurance premiums. Hoyer is targeting a 20% reduction in carbon dioxide emissions by 2020, he said.

Separately, Albert Jansen, managing director of bulk for Netherlands-based Vos Logistics, said despite showing a slight recovery in Q3, Europe's chemical haulage sector continues to suffer from overcapacity, low freight rates and weak demand from petrochemical firms hit by the economic downturn. "September was up, because of plants restarting after the holidays. But in November and December, we will see it go down again," he said.

The sector began a slow recovery in May, but the volume of dry bulk chemicals remains sharply down from 2008 levels, he said.

"We see that automotive products especially dropped a lot. In Q1, it was dramatic - something like 35% down year on year. Now it's something like 15-20% down," he said.

Jansen estimated that 50% of the increased demand represented companies that were restocking. He added that while the automotive industry had seen some recovery, the construction industry had continued to decline.

"Construction was okay in the first half of the year, but you now see this slowing down since the end of July. I expect it's going to keep going down. You see a lot of government assistance with starting projects, but that takes some time," said Jansen.

He added that much of the recovery has been confined to Northern Europe, and that the markets of Spain, Italy and the South of France remain weak.

Jansen said that with freight rates still down by 10-15% from 2008 levels, Vos Logistics, which manages a fleet of more than 2,000 trucks in Europe, will wait for rates to recover before it considers investing in new capacity.

NEED FOR OPTIMIZATION
The chemical industry should put as much effort into optimizing its logistics and supply chains as it does into production, said Edouard Croufer, director, global chemicals practice leader at global consultancy Arthur D. Little.

The industry should apply skills attained in optimizing production to activities "outside the fence," such as transport, he said. "Companies must anticipate and understand changes in global supply chains and create a system which is transparent to their customers."

Herve Montjotin, CEO of French transport company Norbert Dentressangle, added that the chemical industry needs to create key partnerships with logistic service providers to unlock value in the supply chain.

"There is an enormous amount of optimization we have not tapped," he said.

Montjotin said that Norbert Dentressangle had sought to collaborate closely with the petrochemical industry, but success had so far been limited because of the industry's opportunistic approach to transport procurement.

BERLIN VIEWPOINT
Delegates at the 43rd European Petrochemical Association (EPCA) meeting in Berlin, Germany, earlier this month were fairly optimistic about the future.

The consensus was that the industry had reached the bottom but everyone was cautious about when a real recovery would manifest itself. Most expected more closures and further merger and acquisition activity.

Certainly, the logistics providers are expanding for the future with the growing markets of China and Russia the primary targets, as well as the Middle East where vast quantities of polymers will flow out of the region.

A move to ship plastics in bulk is being looked at (most is still shipped in bags) as a way of coping with the huge volumes, but this gives rise to many issues such as storage, handling and grade separation, that are yet to be overcome.

Concern was voiced too about the effect of the cost-cutting measures taken in the past year to combat the financial crisis. The view was expressed that these cost efficiencies will cause problems after the crisis, for example a shortage of equipment, drivers, and ships, as well as a loss of expertise.

Indeed, the shortage of chemical tanker drivers is becoming even more serious across Europe and this shortfall will inevitably lead to higher costs in the future and pressure service levels unless action is taken.

Logistics firms continue to urge chemical companies for more collaboration. Industry experts agree that there is much that the industry needs to do to unlock value down the chain and a lot of money is still being wasted.

Transport companies say there remains a big gap between them and the chemical industry and the two sides need to work closer together to maximize savings and reduce carbon footprints.

By: Elaine Burridge
+44 20 8652 3214

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