Hansa Heavy Lift: global strategy for niche business

Hansa Heavy Lift (HHL,) the Hamburg, Germany based ocean carrier specializing in project cargo (both super heavy lift and heavy lift moves,) is one of a handful of global carriers working in a highly niche space in the global market. The ocean carrier with over twenty specialized heavy lift vessels all under ownership is wholly owned by Oaktree Capital Management, a Los Angeles-based [USA] investment company with over $80-billion of assets under management. The investment company, which has a reputation for patience, formed Hansa Heavy Lift in 2011. The new company resulted from the Beluga Shipping misfortune. It wasn’t the best time to enter the fray: the project sector was weak, as infrastructure funding dried up under pressure on sovereign capital markets, and the weak global economy also hit commodity markets and lowered demand for extraction sector commodities. As a consequence, the mining sector wasn’t as robust and demands for equipment fell. Political instability also took its toll on the project sector, as investors have taken a “wait and see” approach towards major capital investments in politically sensitive regions. While globally the economic issues still persist, times are measurably better, and in the nearly three ensuing years since the launch, HHL’s global strategy has begun to take shape. Like many other companies in the project cargo niche, HHL has concentrated on securing business in the oil and gas industries, alternative energy markets - wind and solar being preeminent, industrial plants and mining sectors. Because of the diversity of demand and global nature of the business, HHL has assembled a fleet with an emphasis on flexibility. The P-2 Class Because of a timely investment in modern vessels, the company’s fleet is among the most modern (averaging three years old) among its peer group, as well as among the most flexible. The ten P-2 class ships built in Hundong-Zhonghua Shipyard (China) between 2009-2012 is HHL’s workhorse. Most of the 20,000 dwt ships are equipped with two 700-mt capacity cranes and a single 180-mt crane. Some of the earlier series of P-2s were outfitted with two 400-mt capacity cranes and a single 120-mt capacity crane. The two-700-mt cranes can be worked together for a potential lift of 1400-mt. In addition, the ships are built to the highest ice-class, E3 equivalent to Russian L1, which enables them to transit polar seas. The F-Series is around 12,700 dwt and equipped with two-180-mt cranes that can be combined for a 360-mt lift. Like the P-2s the F-Series is also ice strengthened. The company also runs a P1-Series, which is around 20,000 dwt and has cargo gear of two 400-mt capacity cranes and a single 120-mt crane. This series is also built to the highest ice-class, E3 equivalent to Russian L1Global Markets for Heavy Lift Although for many years, the “project sector” was immune to the vicissitudes of the general ocean carriage market, this is no longer true. As with many sectors in the shipping industry, the heavy lift niche is pinched by other ocean carrier classes trying to fill the same space. For the most part, containership operators can’t contend, other than taking box-sized project freight. But ro-ro, break bulk and other multipurpose carriers, can cut into the project pool of freight, eroding freight rates and changing the competitive environment. Still emerging markets like ISC (Indian Sub Continent), Australia, South America and Russia hold tremendous potential. Hansa Heavy Lift’s CCO Joerg Roehl said that despite the difficult economic climate, 2013 was much better for employment of HHL’s fleet than expected. Roehl, a two-decade veteran of the business, was appointed as Hansa Heavy’s chief commercial officer in 2012. He had been adviser to Oaktree in setting up HHL and was instrumental in setting up the regional Australasia headquarters in Singapore.

In a telephone interview with AJOT, Roehl explained some of HHL’s strategy in addressing the global yet niche project cargo sector. In reference to the heavy lift sector as a whole, Roehl explained, it “was job to job,” in contrast to liner business. Roehl also noted that in the case of “sophisticated heavy lift”, it’s more than just shifting freight and this often means significant involvement with the project requiring “engineering” services quite beyond the typical freighting of cargo. The nature of the jobs also dictates how long and where vessels will be deployed, setting up a set of vessel employed dynamics very different than most ocean carriage services. When asked how HHL approaches the global deployment of their 24-ship fleet, he said, “We have a fleet of twenty four ships, twenty two owned and two on long-term charter.” “We’re pretty evenly spread between Europe and Asia and to a lesser extent the Americas,” he added. Northeast Passage HHL made a number of notable transits during 2013, particularly in the Arctic seas of Russia’s “Northeast Passage”. Roehl said of the Russian market in the interview with AJOT, “Russia’s absolutely a large part of the oil and gas market [for us]”. “We had tremendous transit savings on the ice passage [Northeast Passage].” Back in October [2013] just before the winter close of the passage, two of HHL’s P2-Class ships embarked on a voyage over the “Northern Sea Route” from the Baltic to the Far East. HHL Lagos and HHL Hong Kong, both E3 ice-class vessels (equivalent to Russian L1), delivered infrastructure cargo and large tugs from the Russian Baltic to the Far East via the North Sea Route, which reopens in June. This is the first time a P-class vessel made a journey via the Northern Sea Route. Roehl said, although weather conditions were difficult for part of the journey, the Northern Sea Route cut almost two weeks off the voyage and saved a commensurate amount of bunker fuel. HHL Hong Kong loaded four assembled cranes, each weighing 400-mt, and measuring 56-meters high at Ust Luga, Russia, on October 16th. Ten days later sister ship HHL Lagos loaded six tugboats, weighing a maximum 70-mt, at the Port of St. Petersburg, Russia. “From the very beginning of this complicated project we were aware that the HHL Hong Kong would only have two options to deliver this cargo to its final destination. The Suez Canal was not a solution because of air draft limitations. Sending the vessel around the Cape of Good Hope was possible, but not commercially viable. After careful planning and obtaining all the necessary permits from the Russian Federation, we decided to send the vessel via the Northern Sea Route, which guaranteed the timely delivery of the cargo. This voyage was undertaken under Russian cabotage waiver as the Russian fleet does not have vessels of this type,” said Roehl. The big Russian project in the north is the Yamal LNG facility located in the Kara Sea on the Yamal Peninsular, Siberia, north of the Arctic Circle. Recently Novatek, the Russian LNG provider sold a 20% stake in the Yamal project to a subsidiary of the CNPC (China National Petroleum Corporation). The sale is expected to give a much needed capital boost to further the project. Besides the Russian projects, HHL in recent months has also opened new offices (and agents) in regions like India and Australia that reflect the company’s global strategy.