PPI TS19 Session Roundups - Part II
A worldwide audience travelled to Amsterdam to hear about the latest developments in logistics/transportation
Published: December 4, 2011
SESSION 1: CHALLENGES AND OPPORTUNITIES FACING THE FOREST PRODUCTS TRANSPORTATION INDUSTRY
Following the Keynote presentation by Paradijs and Young’s outlook for the global forest products industry, delegates were right into it with an overview of the challenges and opportunities they face. Jaap Blok, recently retired from VCK, said he did not see an improved economy worldwide and was pessimistic about Europe’s economy in particular.
In terms of logistics, he saw more opportunities outside of forest products. Threats include the SECA regulations and higher fuel costs. Of the two, he said high fuel costs were a bigger threat than regulations.
Consolidation is both a threat and an opportunity for the logistics providers; it just depends who is buying in. Producers want more flexible arrangements with the logistics providers. Barge and rail trans-shipments work well for pulp. For paper, most goes by truck and that can be very expensive.
Stig Wiklund is vice president, Stora Enso Logistics. He addressed the SECA regulation, that is, the mandated use of 0.1% sulfur content fuels by 2015. In terms of effects on Nordic industries, Wiklund said implementation would mean a modal shift back to road. It would have a serious effect on competitiveness. And, it would mean non-harmonized riles within the inner EU market.
Stora Enso charters a number of vessels and it has been studying the issue since 2008. There are four ways to deal with the new rule.
Install new technology, but it still in the trial stages and availability is questionable. Wiklund said this is not feasible.
- Move to LNG, but this is only an option fornew vessels; retrofitting is impossible.
- Switch to the low-sulfur fuel. It is available but much more expensive than regular fuel and if everyone switches, Wiklund said prices will soar because of the lack of supply.

- Cease operating in the SECA region, but this is not an option.
He wants a postponement of the new regulation for at least five years to allow industry to catch up.
Nicolette van der Jagt, European Shippers’ Council (ESC) which represents about 100,000 companies throughout Europe that are users of freight transport services, the majority of which, either imports or exports, go by sea, echoed Wiklund’s concerns about the SECA regulation. The ESC is afraid it will distort competition within northern Europe, vis-à-vis the Mediterranean.
Trends she cited are globalization and regionalization, that is, there is a bigger push to regionalize supply chains because of the price of oil and access to markets. There is a consolidation of supply chains. Carbon intensity/ sustainability will be major criteria in selecting logistics service providers, the rise of the “green tender”.
She noted that the EU aim to take freight loads of longer than 300 km off the roads and out them on rail or water is not feasible and that the 300 km mark is an arbitrary figure. Many road freight challenges still exist: increasing fuel prices, lack of drivers, increased road congestion and stricter EU emission targets.
In rail, there has been a shift from wagon loads to block trains and if a block train can’t be formed, then shippers go back to road. A new model is needed such as the one created in Sweden with the papermakers.
Ann-Christin Eggum, Westfal-Larsen Shipping, spoke from the transporters’ side of things. Issues of concern include bunker prices, new ship buildings and the rise of piracy and as well as dry bulk, where shipments are at a six-year low. As well, port congestion has a direct effect on the market and time charter rates. Congestion is a real problem in Brazilian ports.
To conclude, Marc Leblanc, Tembec, focused on the opportunities that will be available. Post 2015, with the expansion of the Panama Canal, much larger vessels will be able to traverse the canal, leaping from 4,800 TEU to 12,600 TEU capacity. Leblanc said with congestion increasing in US West Coast ports, more cargo will shift to the East Coast.
In the question and answer session that followed, SECA was foremost in delegates’ minds. Although the legislation has been passed, the feeling is that opposition questions are being listed to by some countries: Finland, Sweden and now Germany.
Eggum said that containers are a “threat” to Westfal-Larsen. With the advent of larger ships, container carriers will become even tougher competition for the dry bulk sector. Container carriers see a better opportunity in the forest products industry. Before, it was mostly a spot market, e.g., recovered paper.
However, in South America, breakbulk should continue to dominate because of the infrastructure issues raised earlier.
SESSION 2: PAPER & PACKAGING PANEL
Starting off the first full day of panel discussions, Mike Collins, who recently retired as the Owner’s Representative for Grieg Star Shipping, opened the panel discussion on the factors impacting the world of paper and packaging suppliers.
The forest products world is changing in products, volumes and flows and that has had a direct impact on the transport side, he said. The decrease in graphic paper demand and the increase need for pulp are well know, but “packaging has changed, and not just with one item.” There now all different applications of packaging and that also affects transport.
Uwe Bartmann, global director of forest products for Kuehne + Nagel, began the discussion with a review of the competition. Gutenberg’s invention has not had a worthy competitor for 550 years. Now, we have the internet, smart phones and tablets.
Beyond 2015, all the components will be in place for people to receive information in a much different way. “It would be a danger to underestimate the challenges to conventional pulp and paper,” he said. Demand for printing and writing paper in Western Europe alone is projected to drop 3.8% by 2020.
Following up on the trends in packaging, Dirk Mommaerts, supply chain manager with SCA, noted the increased focus on sustainability and certification, and their direct impact on transport. For volumes requiring a certification, supplier choices are more restricted and that may lead to changes in transportation flows.
Consolidation and vertical integration are playing their role as the “fragmented market is slowly making way for fewer and larger players,” he said. The impact here may be a reallocation of volumes between production units to optimize costs. It may also lead to more possibilities of trade between vertically integrated companies, “making use of geographical and product complementarity.”
There is a “bright future for our industry,” said Géry Lesaffre, supply chain director with Sappi Fine Paper Europe. Although the industry is in the ongoing process of consolidation, some things aren’t as bad as they seem. The myth of the paperless office is one example, where more paper is consumed in today’s offices than ever before.
Digital media is a real threat, however. New applications are coming out without any direct link to paper, and often looking to replace paper. The right answer is a mix of digital and print. Remarking how he is “amazed at the number of titles on the magazine stand,” newspaper and magazines still have a significant share of the market and should take advantage of that fact.
The key is to find a balance with relation to paper, “between the tactile and the sensory.” And too much competition will hurt in the long run. “Each price increase only gives the consumer an excuse to shop around.”
Speaking as a trader and how he approaches the market to transport forest products, Jeff Ryalls, manager of transportation and logistics with International Forest Products Corp., said the choice between container and breakbulk plays a pivotal fact in everyday decisions.
Moving more than 2.1 million tons per year, this North American shipper sees opportunity in container rates for forest products exports. Many of the continent’s largest ports are focused on containers, offering favorable back haul rates for forest products. In fact, more products are starting to be packaged different to take advantage of containers. Don’t look now, said Ryalls, but the coming super heavy container could help gain a 10% improvement in utilization, making breakbulk less and less attractive.
Grethe Hoyvik, vice president of Grieg Star Shipping, followed next with her question, “Will breakbulk shipments be a part of the future supply chain?” The demand for paper is declining, but ocean transport is still preferred for virgin paper. Too many breakbulk vessels are purpose built for certain trades and markets. And the pulp mills are not always situated near the container ports, allowing them to take advantage of cheaper shipping costs.
But, in the end, said Hoyvik, breakbulk still holds too many advantages; specific vessels with specialized service, sophisticated handing to prevent damage, customer service, and the ability to move larger shipments. These will keep breakbulk at the front for now. But for how long?
