The Caribbean’s project logistics market is proving something of laggard, with an economic slowdown and cost inflation eroding confidence and delaying projects. A revitalised tourism industry should help to shore up government coffers, while the oil and gas sector continues to gather momentum. Ian Putzger reports.
Project logistics activity in the Caribbean has lost some steam because of cooling economic conditions and higher costs, according to Fernando Maruri, ceo of multipurpose carrier KOGA Shipping.
“We have seen delays on projects, a lot of postponements,” he said, adding that the escalation of costs due to inflation, together with economic uncertainty has sapped some of 2022’s momentum. The market for multipurpose and breakbulk vessels has softened and container volumes are down, he noted.
Governments have shelved some infrastructure projects. The buoyant wind energy sector has also been affected – some projects that were on the radar in Colombia appear to have been scrapped, for instance.
On a brighter note, the recovery in tourism has continued, prompting airlines to step up flights and open some new routes to the region, such as Virgin Atlantic starting service to Turks & Caicos. This has revived the fortunes of several countries that rely on tourism, from the Bahamas and Barbados to Aruba and Curacao, noted Andy Thorne, ceo of freight management and shipping agency Kestrel Liner Agencies, which specialises in the Caribbean. “Jamaica has had strong GDP growth. Our ships to Jamaica are full,” he said.
New airport
These developments provide a shot in the arm for infrastructure projects in the region. There is talk of building a new airport on Santa Lucia or expanding the existing one. “The Virgin Islands are one area that seems to stand out with government projects and investment in the region,” remarked Tim Quirk, director Caribbean services at maritime services group Crowley.
Thorne is bullish on St Vincent and the Grenadines, where the government has been working to attract new flights and investment in hotels. On St Vincent, Sandals is building a resort and Holiday Inn has a new hotel coming up.
Kestrel has run five charters to St Vincent to support a large expansion of the port of Kingstown. Launched last year, the USD250 million project includes the construction of a cargo port and upgrades of connecting roads.
The Virgin Islands are one area that seems to stand out with government projects and investment in the region. – Tim Quirk, Crowley
Thorne expects to organise four more charters to the city. “Now we are more or less running monthly to St Vincent,” he said. Work on the project is ahead of schedule. “I think the first ships will be there by the end of 2024 or in 2025… the government has a vision to put St Vincent and the Grenadines on the map. It built a new airport a few years ago.”
Switch to nearshoring
While tourism has been a longstanding and major economic engine for the region, governments are now looking to nearshoring as a potential catalyst for growth and economic development. Mexico has garnered much investment from this trend so far, but a number of countries in Central America and the Caribbean also harbour aspirations.
“Nearshoring has gone past talk,” commented Maruri. “We see some gains for the Dominican Republic. There is a lot more activity in Mexico. That is probably our busiest cargo centre in the Americas.” He has observed pushes in Panama, Costa Rica and Guatemala to draw in nearshoring investment, but so far nothing of substance has been constructed or quoted there, he added.
Crowley has identified Guatemala as a rising star for nearshoring opportunities, pointing to a young and highly qualified workforce, modernised port infrastructure and competitive costs, plus free trade agreements with the USA, Canada and the EU. The shipping line runs four vessels a week to Guatemala. “Nearshoring is something that Crowley is following closely,” he said, highlighting that Mexico and Central America, Puerto Rico and the Dominican Republic all show signs of potential.
To date the most spectacular gain has come for Costa Rica, where technology company and chip manufacturer Intel is planning to invest USD1.2 billion over the next two years to expand its operations in the Central American country. So far it has run a research and development centre, a processor assembly and testing unit and a global services centre in Costa Rica.
The announcement was made in August, following an agreement between the USA and Costa Rica, signed in July, that opens access to US government funding effective next year. The goal is to develop the smaller country into a regional hub for semiconductor research, manufacturing and talent development.
While tangible developments spawned by nearshoring are still thin on the ground at this stage, related cargo flows are on the rise. “We have seen a lot more intra-Americas moves this year. A lot of customers have changed sourcing and supply chains. We are moving more material from the Americas. We are seeing more nearshoring,” said Richard Seeg, president of breakbulk carrier Intermarine. “We are seeing more fabrication coming out of Mexico and Brazil and more finished products out of Colombia,” he added.
Changing trade patterns
Mexico has been head and shoulders above other countries in the Americas in terms of drawing in production, including an influx of Chinese manufacturers. At the same time, flows between Mexico and Caribbean markets like Trinidad, Guyana and Suriname have also increased.
In the future, some players are looking to offshore wind projects in the region. Presently, Crowley, which set up a dedicated division to cater to this market, is focused on projects off the US coasts but the company has the Caribbean in its sights too.
“As we work to develop the US mainland supply chain, countries like Curacao are starting to analyse offshore wind, which has strong potential for fixed and mostly floating offshore wind projects. We will continue to evaluate future opportunities as the region progresses in offshore wind development,” a spokesperson for the company said.
Onshore there are quite a few wind energy projects on the books. Seeg has seen accessories, such as fabricated steel structures, come onto the market. However, quite a few of these projects have been hit by delays – something that can disproportionately affect carriers given how much space these components take up on a vessel.
For countries in the hurricane zone, wind energy is not an option, Thorne explained. The last two hurricanes to hit the region packed winds of 175-180 mph. Instead, the potential for wind projects is in the likes of Trinidad, Barbuda, St Vincent, Guyana and Suriname.
This energy-led growth in Guyana presents opportunities for several UTC verticals in the country – heavy equipment, packaging, mining, cement and infrastructure projects. – Marco Poisler, UTC Overseas
Solar energy seems a stronger bet –Barbados for one is actively encouraging the development of solar capacity. “There are quite a few solar projects inked and going forward. They are smaller scale. A lot moves in containers, not a lot in breakbulk,” said Seeg. Maruri agreed that developments for solar energy production in the Caribbean are considerably smaller than wind farm projects in the US, adding that much of this traffic is carried in containers.
The mining sector, which has been a staple in some areas in the region, has been less active recently. “We do not see an increase for mining,” Quirk observed. Maruri believes that 2024-2025 could be when cargoes for this sector start ramping up, given an uptick in quoting activity recently.
Mixed bag
The present situation across the region is something of mixed bag and staying open to opportunities is important. “We are focusing on a diversified approach in all verticals where we see we can add value,” said Brent Patterson, global director commercial, energy ports and projects at Blue Water Shipping.
The oil and gas sector has been a major driver of project work in the Caribbean, with most of the focus on Guyana, followed by Suriname and Trinidad. These three locations have drawn in a lot of oil and gas traffic, reported Seeg, adding that he expects this to continue.
Quirk sees promise in the LNG sector, which it serves through a dedicated division, supporting the conversion of operations or facilities to LNG, in addition to shipping equipment to the region.
In May, project freight forwarder UTC strengthened its reach into the sector with a joint venture agreement with Guyana Shore Base, which has a large facility in the country and is the preferred service provider for ExxonMobil and other oil and gas operators. For UTC, this is an opportunity to provide a one-stop-shop for a broad array of services.
“This energy-led growth in Guyana presents opportunities for several UTC verticals in the country – heavy equipment, packaging, mining, cement and infrastructure projects,” commented Marco Poisler, UTC Overseas ceo, when the agreement was announced. Over 10 billion barrels of oil reserves have been identified in Guyana’s coastal regions over the past eight years. Currently about 400,000 barrels a day are produced in the country and four more projects are under development.
Oil project
Suriname is hoping for a similar boost to its fortunes. The country has struggled, with inflation reaching 57 percent in July, and GDP is projected to grow 2.3 percent this year. Oil finds in coastal waters in 2020 had sparked hopes that were dashed in 2022, when TotalEnergies and APA postponed a planned multibillion-dollar development. But now the project seems to be back on course after APA launched development studies in September. Production could start in 2028.
However, all eyes are trained on Guyana and its 800,000-stong population. The oil and gas business was the engine for a 62.3 percent growth in GDP last year, which is estimated to expand by another 37.2 percent in 2023. The country has been promoted to the energy big leagues and the revenues derived from the sector should support a wave of development across the country.
The operating environment for logisticians remains limited, though. Operators in Guyana have had to work with shallow draught vessels to serve Georgetown, the nation’s main port. Finally, after years of planning and false starts, work is in progress on a deepwater port. Seeg said that work has continued at a frantic pace with the goal of finishing the project before the end of the year.
“This will have an impact on the entire region,” added Patterson. “It is going to be a game-changer for what can be handled and the size of vessel.” Still, more needs to be done. Maruri said that “there are still a lot of infrastructure items to address beyond the port”.
Patterson is bullish on Guyana’s prospects. In the wake of Blue Water’s marriage with local firm Falcon Logistics in 2021, the company has opened a new warehouse in the country and is looking to grow its workforce in the country as well as in other key markets in the region.
Work on the deepwater port at Georgetown Guyana has continued at a frantic pace with the goal of finishing the project before the end of the year. some several relationships he of increased high a – Richard Seeg, Intermarine
Intermarine, meanwhile, is now more strongly aligned than before with the Jumbo-SAL-Alliance, having been taken over completely by the Harren Group last year (it had acquired a 50 percent stake in the Houston-based carrier in 2020).
Alliance synergies
Now, Intermarine can put customers with outsize cargo like wind energy components in touch with its partner carrier, and if Jumbo-SAL has a vessel in the Americas, Seeg’s team can book cargo for clients or for Intermarine itself on it. “We have already seen synergies like this. I think there are more opportunities like that,” Seeg noted.
Intermarine runs a weekly liner service from Houston to Colombia, Trinidad, Guyana and Suriname, twice-monthly runs from Houston to Brazil, and a one monthly service through the Panama Canal to Peru and Chile. “We are passing by just about everywhere at least once a week,” Seeg said, adding that the carrier regularly adds stops at ports in the Caribbean.
In response to slower demand in the project and breakbulk sectors, KOGA has grown its bulk shipping business to ease the wait for the recovery in multipurpose activities. In addition, Maruri is exploring some other avenues. “We are working on several partnerships. We look to leverage relationships into other areas of business,” he remarked. It is looking at the possibility of adding new vessels to its fleet, but the increased cost of ship construction and the high fuel costs are factors that weigh against a fleet expansion at this point, he added.
