The world of logistics is changing in front of our eyes in many and varied ways, mostly driven by new technologies that have transformed how the needs of the world’s growing number of middle class consumers are met. Healthcare, automotive, FMCG [Fast Moving Consumer Goods] chemical, perishables and a whole range of sectors have seen huge change. Supply chains were already complex and global, but the needs of today’s consumers have put even more focus on last-mile delivery as e- commerce becomes a common feature of many lives.

All of which may seem rather disconnected from the dry bulk trades. However, that is not entirely the case. Rather, the two worlds are increasingly coming together as the foremost companies in the logistics sector seek out new markets, and those with an already strong presence in commodities take steps to guard their own supply chains and create new profit centres from cargo origin to destination, often through processing, but also by adding value and turning a profit from transport and distribution activities as well as asset plays.

“Not only are there a host of economic, security, legal, political and societal pressures on the logistics industry but bubbling up from underneath are a plethora of disruptive forces, many of which are a result of new technologies,” said John Manners-Bell, chief executive of UK-based Transport Intelligence. “The full implications of this collision of top-down and bottom up developments has yet to be fully realized, and the timescale in which this will play out is still unknown. However it is clear to me that the industry is facing a revolution and in ten years’ time will resemble little of what we see today.”

In the bulk trades there has been something of a revolution already. Cement and agricultural companies were among the first to see the benefits of investing in their supply chains as those sectors consolidated. But most major bulk producers and traders have also gradually adopted the strategy and started investing in their own ships, ports and railways.

Hong Kong-based Noble group has been a prominent exponent. Back in the first half of the last decade the company was primarily a commodities trader with few fixed assets of its own. Since then it has built up a global logistics network which has helped it increase turnover from US$12bn in 2006 to more than $85bn in FY 2014. Noble reported record operating income from supply chains at US$1.6 billion in FY2014 as tonnage moving through its commodities pipelines increased 19% to 278mt (million tonnes). Yusus Alireza, Noble Group Limited CEO, said Noble’s strategy was to be the “best company in the world at moving a physical commodity from the producer to the consumer and managing the market, credit and operational risk associated with that.”

While Noble’s approach has involved major investments in supply chains assets, the company considers its strategy to be largely asset-light to reduce its operational risks. Vale has, by c

ontrast, invested heavily in assets to improve its competitiveness in Asian markets against producers with a geographic advantage. As DCI went to press, speculation was growing that the Brazilian commodities giant was set to order a further 50 ‘Valemax’ 400,000dwt bulk carriers, a move with the potential to put immense downward pressure on global ocean freight rates for years to come.

The company launched its first tranche of 35 owned and chartered in Valemaxes back in 2011 in a bid to reduce its freight disadvantage into Chinese ports against rival iron ore suppliers in Australia. However, until earlier this year the company has been forced to transship iron ore onto smaller ships at ports in South East Asia due to a ban on the vessels calling at China ports. Signals that more orders could be on the way suggest a final, lasting deal may have been struck with China’s authorities.

Vale is also a leading operator of logistics services in Brazil and other regions of the world with a growing network of railroads, maritime terminals, distribution centres and ports. Two of its four iron ore systems include an integrated railroad network linked to port and terminal facilities.

“We have been expanding the capacity of our railroads and ports primarily to meet the needs of our iron ore business,” said a company statement. “To support our commercial strategy for our iron ore business, we have developed a distribution centre in Malaysia. We also operate a distribution centre in Oman and two floating transfer stations in the Philippines.

“In order to position ourselves for the future expansion of our coal production in Mozambique and leverage our presence in Africa, we are currently expanding the local railroad capacity by rehabilitating the existing network and building new railroad tracks to develop the logistics corridor from our mine to a new port under construction at Nacala-a`-Velha, in Mozambique.”

In the second half of 2014,Vale completed the construction of a maritime terminal located in Teluk Rubiah, Malaysia. The terminal has a private jetty with enough depth to receive Valemax vessels with capacity of 400,000dwt and a storage yard with capacity of 3mt. The centre has throughput capacity of 30mt per annum of iron ore products.

Many of the major commodities groups also rely on third parties to undertake some of their logistics needs. And the logistics industry is itself undergoing major changes which are increasingly impacting on the dry bulk transport industry and creating new opportunities for those involved.

As economic growth has driven demand and supply chains have gone global, the industry has seen consolidation through acquisition, but also major forwarders and logistics companies expanding across verticals and geographies organically. Companies such as DHL, UPS FedEx, DB Schenker, Damco, Japan Post, Expeditors, GAC Kuehne & Nagel and Panalpina have become global giants in the process.

Many of these majors originally focussed on a specific segments such as postal or express services, or ocean shipping and forwarding. But increasingly they offer a full portfolio of multi-modal and specialist services covering everything from complicated project contracts to full management of manufacturing and raw materials producers’ global supply chains. All are involved in the ‘dry bulk’ industry at one level or another. For some this means handling the movements of major pieces of mining equipment to a new site. Others handle breakbulk and containerized grains. Most offer services that keep offshore or remote commodity product sites supplied with parts, food and, in some cases, IT services. Some take this further and offer a wide portfolio with multiple options including full door-to-door cargo delivery with various value-added options.

At present DHL is perhaps the most notable example of a traditional light asset logistics supplier moving into territories it is not usually associated with. Best known by many for its door- to-door express services, the company in fact also has major forwarding and contract logistics divisions with tentacles stretching around the world and across all sectors, including commodities and energy. This has seen DHL get heavily involved in ‘Industrial Projects’ and commodities over the last 15 years, a strategic move largely prompted by Li Jiang, Global Head of Bulk Chartering at DHL Global Forwarding.

“I first saw the possibilities of combining the two business sectors to best serve our clients as well as to enhance our competitiveness,” Jiang told DCI. “Now we are a leading player in the commodities business in the Pacific. In the meantime, the business serves our Industrial Projects clients quite well especially in the sectors of mining, power and infrastructure where we not only provide logistics solutions for site construction, we also serve our clients when the sites are put into operation. For example, we transport ores for the mines and supply coal for the power plant. It proves to be an excellent combination.”

As a light-asset operator in the chartering sector and a forwarder in the Industrial Projects sector, DHL does not own any vessels or assets. Instead it uses a global vendor and project management system to establish strategic co-operation with vendors to offer clients competitive prices and first-class service. “We also have people as our valuable assets,” said Jiang. “Our professionals from the chartering, engineering, HSSE, operation, commercial, research and other teams work very closely to make us the obvious choice for our customers.”

As part of its combined role in the sector, DHL has developed into a major bulk carrier charterer. “Our role in the market is a ship operator,” said Jiang. “We have a professional chartering team and the team has an average of over 14 years of experience in the market. We are equipped with in-depth understanding of the market dynamics and know when to hire the vessels at the best time with the best price.We also have a comprehensive risk control and credit check system to ensure that we work with reliable and reputable owners. Above all, we also make sure that the vessels are environment-friendly and consume less energy.”

DHL mostly ships coal and iron ore, but also grain, bauxite, coke, steel and other ores and minerals. “Intra-Asia has been our focus for the last decade and each year large quantities of coal are transported from Indonesia, Australia, South Africa, Canada and Russia to China and India by our commodities team,” he explained. “We have been a leading player in the Pacific area especially in the Far East market.”

The GAC Group is another major logistics player involved in dry bulk transport. But the company approaches the market from a different angle than DHL due to its origins as a ship agent which also offers forwarding services. “We have a proven track record of more than 50 years in serving large dry bulk players globally,” said Eric Barnard, GAC Group Sales Director – Shipping. “GAC serves the bulk business as ship agent. Today, we deliver ship agency services for a wide range of dry bulk markets. Backed by our global coverage, we can handle vessels at both origin and destination ports. That is, we can act as load port and disport agent for the same vessel, thereby ensuring a smooth and seamless operation in full compliance with local regulations.”

GAC uses custom-built port operations and shipping software GACagent to keep customers up to date on shipment progress and to monitor the needs of vessels. Barnard said that despite the downturn in the shipping industry, GAC had managed a stable 2013 and 2014 and port call volumes had increased slightly last year. “In both Australia and Indonesia, the growth in coal exports has added to higher demands for our port agency in major Australian and Indonesian ports.”

However, he admitted competition in the bulk market was tough. “Unfortunately everything nowadays revolves around costs and no longer the actual quality of service being rendered,” he added.“At GAC we pride ourselves on delivering high-quality service to our customers. This high quality may appear to come at a slightly higher cost than some of the extremely low fees being offered by our competitors. However, as the fees drop, so will their service levels as they will spend less time driving to the port to supervise the vessel/cargo operations, less time using their mobile phones etc. So the lower fees will most definitely have an impact on the service provided and ultimately the turnaround time of the vessel compared with a proactive GAC agent that is on board and offering a quality service.”

DHL for one expects its role in the dry bulk markets to continue grow. Jiang told DCI the company aims to become a global player in the commodities business irrespective of the downturn in prices that have affected many. “There is no doubt that we will continue to grow in the sector,” he said. “As a light- asset operator, we are less affected by the downturn of the freight market.

“There is a market for us as long as there is international trade. We have already witnessed growing demand in many places of the world other than China and we will continue to expand and embrace the opportunities. Another reason why we will continue to grow in the sector is that it is mutually beneficial with our Industrial Projects business, which I believe is our core competitive advantage.”

As with most of the non-traditional companies that are looking at the bulk market with envious eyes and big plans, offering a global network and high service quality is where the logistics companies hope to use their leverage and find their own place in the heavier end of the shipping world.