Paper 360
Euroports will expand its hub and spoke system through southern China.
GRAEME RODDEN
Having established itself in China 20 years ago, Euroports is on the verge of significantly expanding its operations in the country. It will develop its hub and spoke system in central China by creating a secondary hub in Chongqing. The city is China’s largest, with 34 million people, and is located about 2,000 km inland from Shanghai by the Yangtze River.
Euroports offers a core service package including terminals, transport services, freight forwarding, and contract logistics in a number of industries, including pulp and paper. Changshu, about 100 km west of Shanghai, also on the Yangtze, is Euroports’ primary hub in the country. However, this will not be the case much longer: the company has announced plans that will see the development of another primary hub in Gaolan in southern China. (Qingdao is the main entry port in northern China, serving Shandong province.)
The hub and spoke model can be defined as a systematic supply chain for clients. With the distance the pulp is travelling from origin and the size of the shipments, the model helps reduce the number of calls a producer or carrier needs to make. “We can offload into barges or coasters for further shipment inland or along the coast,” Alan Bog, Euroports commercial director, Asia, explains.
It is a well-established business model for the company. Still, the secondary hub is something Euroports had planned for China, but is just now realizing.
FOCUS ON TISSUE
Chongqing is benefiting from China’s “Go West” policy, which was developed after the 2008-09 financial crisis to develop inland areas, moving away from coastal development as a feeder for exports to promote more local consumption.
Although China’s economy has slowed to about 7 percent a year, Chongqing’s economy is growing at a 14 percent rate annually and population is rising by about 800,000 people per year.
From Chongqing, which can accept barges carrying up to 10,000 metric tons, pulp can be delivered on smaller barges (500-1,000 tons) or by truck to inland mills within a distance of 200 km. There is not much rail freight in this area, and because most mills are located close to a river, barge is the best choice.
The city was chosen as the hub port because it is as far upriver as the larger barges can go. “It’s such a big area for growth; Chongqing was an obvious choice to become a hub. It’s our first venture on the Yangtze outside of Changshu, but it won’t be our last,” Bog adds. The distribution aspect of the business sets Euroports apart from other Chinese ports, which tend just to discharge pulp to the end customer.
Tissue is the focus. Currently, about 800,000 metric tpy is being produced in the region, and that should increase to about a million metric tons annually. “We are seeing a lot of expansion in the area—for example, Lee & Man and Hengan,” Bog adds. Other big groups such as Vinda are also active, so focusing on supplying tissue mills was a good choice for Euroports.
Euroports’ Chongqing venture started about two years ago. The objective is to get to the stage where barges will be operated in a type of shuttle system, for example, daily. It takes about two weeks to travel to Chongqing from Changshu. Euroports subcontracts the barges, which can carry up to 10,000 metric tons of pulp, though the average load will be closer to 6,000 metric tons. The warehouse at Chongqing covers 6,000 m2 and can hold up to 18,000 metric tons of pulp. There is room to build another warehouse on site. There is also an open storage area.
As river levels can vary by up to 10 m depending on the season, there is an innovative unloading system. Two floating pontoon barges move up and down according to the water level. Each pontoon holds two cranes that serve two landbound elevators. Each elevator has two lifts.
Pulp is offloaded onto a lift, up to 40 metric tons per lift, and is conveyed up a hill to the warehouse. The system was put into operation in September 2016 and Euroports expects to book 1.2-1.3 million metric tpy of barge traffic.
The terminal site is leased from Dong Gan (east port) of Chongqing. One of the most important tasks in establishing the Chongqing terminal was having it bonded. To achieve bonded certification, a local license is needed, so Euroports Chongqing (official name) was set up. Dong Gan port supplies the labor, but all operations are under Euroports’ supervision. Euroports can now offer a seamless bonded service from Changshu to Chongqing.
Euroports’ activity is not restricted to its two new hubs. The original center of its business —Changshu—continues to grow. As noted, Euroports set up in China in 1996, but it was May 1997 when the first load of pulp—3,470 metric tons—arrived. It came from the Sante Fe (now CMPC) mill in Chile and set the stage for the South American pulp avalanche that was to follow.
From 10,000 metric tons of pulp in 1997, Euroports has grown so that by the end of 2016, it handled close to four million metric tons of pulp. That represents 20 percent of all the pulp imported into China. Since 2014, Changshu has become the number one port of entry in China for breakbulk pulp and is approaching number one in the world. In 2017, traffic is well on its way to topping four million metric tons as 1.2 million metric tons was handled in Q1.
A ‘PULP SUPERMARKET’
Why so much growth? Bog says there are a few reasons:
• Consolidation among ports;
• A growing market;
• Euroports has become the central hub on the Yangtze—the main competition is containers going direct to the customer.
South American pulp accounts for 77 percent of the total, with North America supplying the rest, although some European pulp does show up at times. A trip through the Euroports’ warehouses shows market pulp from every major South American producer, most western Canadian producers, and even many US and eastern Canadian mills. All types of pulp are handled: paper grade, fluff, and dissolving. It is, as Bog puts it, a “real pulp supermarket.”
Euroports’ terminal is designed for forest products, although there may be a very small amount of other cargo handled. “That’s our mandate from the port—forest products,” Bog says.
Euroports normally handles two vessels at a time, although three are possible. There is also an adjacent barge slip where pulp can be loaded for transshipment, for example, to Chongqing.
A great majority of the cargo is breakbulk, although containers are also accepted. There is excess container capacity so rates are low. “The container carriers have been very aggressive,” Bog says. “Our container business has grown, but so has our breakbulk.”
He adds that the pulp market will remain primarily breakbulk because of the size of shipments. A 50,000-metric ton load of pulp requires almost 2,000 containers. Containers that do arrive at Changshu are offloaded by the port and Euroports empties them in its warehouses.
Currently, there are 120,000-m2 of covered warehouses (13), that can hold about 480,000 metric tons. There is another 30,000 m2 of open storage space, but this is used mostly for contingency storage—for example, when a peak number of vessels arrive at the same time. As the climate is very humid, all warehouse ceilings are insulated to prevent moisture damage.
About 50 percent of warehouse capacity is bonded. Customers may opt for bonding because of preference, or they may keep inventory they can sell from bond. Finally, vessel commitments also play a role. For example, a producer may have to fill a vessel even if the order books are not full, but the surplus may be sold en route. It takes 45-60 days to sail from Brazil to Changshu; shippers do not use the Panama Canal, but sail around the Cape of Good Hope into the Indian Ocean.
With shipments travelling so far and for so long, there is the possibility of some bales being damaged en route. No problem: Euroports has a “pulp hospital” on site. Damaged bales can be repaired, cleaned, and re-bundled as necessary. Brightness reversion tests can also be done, as many producers like to see how their pulp reacts after a long sea voyage.
Euroports is also turning its attention south. As two major hubs serve the other parts of the country, in the south there has long been a gap. With pulp imports increasing, customers want a hub port. “We were looking for the right port, the right partner, and the right business conditions,” Bog states. “We settled on Gaolan.”
The port has already received some pulp. It also does not have “contaminants,” as Bog puts it; that is, bulk cargo such as grain or coal where dust could contaminate pulp. The port has a good draft and it has easy access for transhipments.
Euroports has entered into a joint venture at Gaolan as it did at Changshu. The company started a warehouse construction program in late 2016 and the first phase will be complete in September 2017. It hopes to see volumes of at least three million metric tpy within five years. As at Changshu, the focus will be on breakbulk, but the facility is adjacent to Gaolan’s container terminal. The first vessels arrived in January and Bog notes that shippers, carriers and receivers all had a positive reaction to the new project.
Graeme Rodden is senior editor, North and South America, Paper360°, and can be reached at [email protected].
Playing it Safe
China does not have a strong safety culture when it comes to the workplace. Euroports is trying hard to change that. Safety is a strong focus within the entire Euroports group. In Changshu it means frequent safety courses and the need to “be tough” at times, says Alan Bog, Euroports commercial director, Asia. “We emphasize it every day, every minute.”
Safety walks are held every six months, focusing on a particular issue. There is an annual global safety day event. Practice emergency events are held with the local emergency services. At the end of 2015, a major evacuation exercise was held; it took only 15 minutes to evacuate 700 people.
Learn More at PPI Transport Symposium
The 2017 PPI Transport Symposium will be held September 25-27 in Savannah, GA. Organized by RISI in association with the International Forest Products Transport Association (IFPTA), this conference and exhibition dedicated to the global forest products logistics industry will focus on issues surrounding the worldwide transport, materials handling, and distribution of forest products. The Savannah conference is being held in cooperation with Georgia Ports Authority and many other port partners. Program highlights will include a panel on Global Port Infrastructure and Strategy; a session on Inland Supply Chain Challenges; panels on both Container Carriers and Breakbulk Carriers; a full exhibit floor, and a port tour hosted by the Georgia Ports Authority. Opening remarks on the second day of the event will come from Ana Paula Trilho, international logistics manager for Klabin.
As the only professional networking association for global forest products logistics professionals, the IFPTA delivers relevant, highly-focused services and activities designed to enhance and broaden the knowledge base and professional development of its members. To learn more about the IFPTA, visit ifpta.org. For program details or to register for the PPI Transport Symposium, visit http://events.risiinfo.com/transport-symposium/
At Chongqing, two floating pontoon barges adjust to the water level; each has two cranes that serve two landbound elevators. Each elevator has two lifts.
Back to back, vessels offload pulp at Changshu.
At Chongqing, pulp is conveyed up the hill by elevator to the warehouse.
Inside one of the warehouses at Changshu.
Fluff pulp awaits shipment in one of the Changshu warehouses.
The cargo vessel Halophyla, unloading pulp.
A closer view of one of the floating pontoon barges and its dual cranes.
The warehouse at Chongqing can hold up to 18,000 metric tons of pulp.
A lift truck with a clamp for lifting paper or pulp rolls.
Alan Bog directs a tour of Euroports’ Changshu facilities for delegates attending the RISI Asian Forest Products Outlook Conference in 2016.
One of the “pulp supermarket” warehouses at Changshu.