Carriers Ride China’s Wave of Africa Projects

By Eric Johnson

Legendary Chinese navigator Zheng He sailed fleets of wooden ships across the Indian Ocean in the 15th century, blazing intercontinental sea trails for modern vessels now hauling breakbulk of all sorts between China and Africa. But today’s breakbulk-carrying liners and tramps, many serving Chinese engineering, procurement and construction companies, or EPCs, with projects in Africa and working closely with Chinese logistics partners, are traveling farther and accomplishing far more than Admiral Zheng ever imagined. Breakbulk is at the heart of a boom for China-Africa trade relations as well as major, Chinese-led infrastructure construction projects that are having an enormous impact on emerging economies from Angola to Zimbabwe.

The boom began in 2013 when the Chinese government directed its diplomats, state-owned companies and policy banks to start building stronger economic ties with African countries through a campaign that’s undergone several title changes and is now called “Belt and Road.” The government’s initiative got fresh impetus in December when Chinese President Xi Jinping promised a staggering US$60 billion in future loans, export credits and grants to countries across the continent. Keeping breakbulk carriers busy are Belt and Road-supporting contractors building a railroad in Kenya, a port in Tanzania and hydropower plants Sudan. Africa-bound ships are also hauling China-made cargo for highway construction, mines, power transmission lines and factories, as well as wind farm equipment, locomotives for newly built railroads, and cement plants for various urban projects. Natural resources from whole logs to stone granite are key goods riding the carriers’ return voyages to China.

China’s latest financing plan, which Xi announced at a South African summit he co-chaired with South African President Jacob Zuma, suggests Belt and Road activities will accelerate, at least in the near term, and should lay a foundation for China-Africa project cargo shipments for years to come. China’s state-run media said Xi’s address marked “a new era of win-win cooperation and common development.”

ENTHUSIASM ABOUNDS

No wonder breakbulk carriers, logistics firms and Chinese EPCs are more enthusiastic than ever about following Admiral Zheng’s trail.

“Implementing these plans will lead to a huge amount of logistics business, since large quantities of Chinese engineering machinery and equipment will be transported to Africa,” explained Hu Yi Yang, deputy general manager of COSCO Shipping’s Joint African Line and Logs Carrier Department.

Xi’s announcement “will stimulate and strengthen China-Africa economic cooperation and development,” said Ma Shumei, regional director of the Africa Overseas Business Department at SEPCOIII Electric Power Construction Corp., a Qingdao-based EPC.

“These are long-term targets to promote trade between China and Africa,” said Brandy Bee, managing director of Ming Qi Yuan International Freight Forwarding in Tianjin. “President Xi has now put a huge amount money into Africa for construction. So I expect a lot more opportunities for project cargo businesses.”

And while Chinese companies are poised to benefit the most from the Belt and Road initiative – through which the government is also promoting commercial ties to emerging markets in Asia, the Middle East and East Europe – non-Chinese carriers and logistics firms are also benefiting from breakbulk demand tied to African projects. For example, last year tramp project cargo specialist BBC Chartering saw “a significant increase for direct bookings between China and Africa compared to 2014,” said David Lloreda Calero, the German carrier’s Shanghai-based commercial manager. He added that Xi’s announcement of future investment bodes well for the project shipping sector as a whole. “Africa is huge,” he said. “And if realized, this might trigger good demand for specialized carriers calling at remote areas with shallow-draft ports and limited-to-no-infrastructure ports.”

CARGO DIVERSITY

The variety of cargo is staggering. In addition to construction machinery, cement plants and steel for railway construction and other building projects, Hu said COSCO’s multipurpose vessels have proved ideal for shipping railcars and locomotives.

Lloreda Calero noted that Chinese companies’ projects in power generation and infrastructure, including ongoing port expansions in places such as Mombasa, Douala and Walvis Bay, “most certainly require project carriers and heavy-lift capabilities.” Last year, China Railway Construction Co. and Ethiopia Railway Corp. finished work on 770 kilometers of new track connecting landlocked Addis Ababa and the port of Djibouti. China was expected to supply more than 1,100 freight cars and locomotives for the railroad, which took three years to build. Most Asia-to-Africa cargo transported via BBC’s apac, or “any port, any cargo,” service is tied to mining equipment, oil and gas pipes, and power plant or other energy projects, such as wind farms, Lloreda Calero said.

Bee said her company handles Africa-bound machinery, asphalt, prefabricated buildings and rolled steel. EPCs, such as power plant builder SEPCOIII and hydroelectric dam builder China International Water and Electric Corp. (CWE), are taking deliveries on a variety of energy modules and equipment for their projects. SEPCOIII is focused on projects in Tanzania, South Africa, Mozambique and Botswana, while CWE finished work last year on a hydropower plant in the Republic of Guinea, and has two more under construction in Sudan. Mining conglomerate China Minmetals and state-owned oil majors Sinopec and PetroChina are also active in Africa.

Yet the perspectives of non-Chinese and Chinese companies are not entirely alike, especially in terms of forecasting future China-Africa business; it’s hard for a Chinese company to be anything but upbeat. Despite the fact that falling oil prices have affected Africa’s economic development, COSCO’s Hu said that “more Chinese companies are ready to participate in Africa’s development. Thus for 2016 and 2017, we forecast more project implementation in Africa, and these projects will result in more cargo transportation.” Last year, COSCO ships carried “large amounts of equipment for building projects,” Hu said, including cement plants made in China by Sinoma International Engineering and delivered to building sites in the Republic of the Congo. The carrier also supplied wind power projects in South Africa and delivered cargo for the 500-kilometer Mombasa-Nairobi railroad under construction since 2014 in Kenya.

Lloreda Calero, though, struck a more cautious tone. Strong demand for BBC services over the past two years “has much to do with the allocated capacity to the trade and does not imply a specific trend,” he said. “From what we can tell today, we do not expect any developments that forebode any short-term boost of project cargo activity in Africa, as we think we have good knowledge of the projects and developments that are underway and those that are pending. “We can appreciate the Chinese decision to boost investments in Africa,” Lloreda Calero said. “But we apply a realistic view with regards to the speed of implementation and expansion.”

Fueling much of this caution is the slowdown for oil exploration and related projects in countries such as Angola, where the Chinese have been actively pumping from offshore wells for years. “The price of oil, as a lead indicator for future investments in the sector and a major commodity driver, is expected to stay at low levels for a while, which will also put much of the sector’s anticipated investments in Africa on hold during 2016 and 2017,” Lloreda Calero said.

And as BBC and similar companies with Africa business are well aware, Chinese projects are not the only game in town. Lloreda Calero noted that his company was the dedicated project carrier for wind power units selected by the German wind power concern Nordex. Some 56 turbines made in Europe, 168 wind blades made in Turkey and 50 tower segments manufactured in Indonesia were hauled aboard six of BBC’s heavy-lift vessels between March and August to the Amakhala Emoyeni wind farm in South Africa.

BUILDING RELATIONS

Since Belt and Road got underway, Chinese companies have been careful to cultivate friendly relations with African governments as well as the communities where they’re building infrastructure or mining minerals. They hope to avoid the “colonialist” stigma that many European companies have had to bear, while at the same time strengthening commercial ties and turning profits.

SEPCOIII is working to strengthen the market development of the African region, said Ma, as stronger China-Africa relations will be “more conducive” to its market development in Africa, and help more African businesses understand its company.

Breakbulk shippers and carriers are equally interested in how closely Chinese and Africans will be able to follow the blueprint for “win-win” promoted by Xi and spelled out through the Belt and Road program. It’s a blueprint that Xi, when he first introduced the overseas commercial push in fall 2013, said reflects the cooperative and seafaring spirit of Zheng He.

Ma said Chinese companies want to help African countries improve their infrastructure, expand local employment and train local workers, while at the same time promoting local economic development and building on Africa’s own abilities.

In Africa and China, Hu sees a perfect match for healthy business relations – especially the breakbulk sector. “China has the technology, equipment, personnel and funds, while Africa is rich in natural and human resources,” Hu said. “Both sides have the need and desire to strengthen cooperation.”

Eric Johnson is an American journalist based in Beijing. A graduate of the University of Missouri School of Journalism, he has more than 30 years of writing experience.

Photo: A COSCO tweendecker moved seven rubber-tired gantry cranes from Japan to Mombasa.  /  Credit: COSCO Shipping