After 24 consecutive quarters of cargo import declines, there are positive signs of economic improvement on the horizon for one of the most broadly held Bermudian shipping companies.
Bermuda Container Line (BCL), run by Neptune Group Management Limited, oversees the weekly shipment of imported goods across the Mid-Atlantic on board the MV Oleander. Soft import levels have begun to be improved in recent months by the America’s Cup, and the mood regarding future opportunities by importers may be changing.
BCL President and CEO, Barry Brewer believes America’s Cup events may turn out to be the needed catalyst that serves to encourage business reinvestment, and bolster Bermuda’s ailing economy. Now heading into the third fiscal quarter of 2015, he’s cautiously optimistic that the current economic climate is about to change.
Formed by a group of local importers in 1979, the company experienced continued growth since 1980. In 2008 imports peaked and have since continued to decline annually.
Despite dips over the years, prior to 2008 there was always enough cargo volume to support the three shipping lines that service Bermuda. But since 2008, investment in Bermuda through major projects slowed down with the downturn of the global economy; and office space overcapacity.
“Bermuda is often a microcosm of the world, there is usually a cyclicality with business investment opportunities and we are awaiting a recovery,” said Mr Brewer.
“With ongoing overcapacity in Hamilton’s buildings office space and few tourism property investments, there hasn’t been much cargo to move. Really when the hospital was finished that was the last major construction project where steel, windows, rebar – all the bits like tiles and fittings arrived.”
“By the first quarter of 2014 it was still looking pretty quiet – the volumes had fallen by estimate to 1988 levels. That’s a big drop for each of the three ships coming in here.”
For BCL, declining imports coupled with ever increasing operating costs to run and maintain a cargo ship from New York presented major challenges.
“Bermuda’s shipping services these days appear to be operating at less than 50 percent of load capacity coming into the island, and run back to the US virtually empty every week.
“Fixed costs are hard costs. As such, each week you’re going to burn a similar amount of fuel, you need to pay the cost of running the ship, maintaining it, and paying your staff, etc. Volume is very important.
“Without major projects going on, recovery for the shipping industry is difficult. The America’s Cup event represents an important signal to investors that Bermuda is in the game. So recent first imports by AC defending champions Oracle Team USA, Ben Anslie Racing and Artemis represent a reason for promise.
“They’re going to bring in their families and rent homes, all of that will help with confidence, and confidence helps investing – investing means building,” he said.
“Our business is consumption driven, the more people on the island the more that is consumed, and the more cargo that needs to be shipped.”
Local shipping lines have been affected by the declining number of residents who have left Bermuda.
“The number of people living in Bermuda declined substantially since 2008. I don’t know that we have the exact numbers although you and I are both aware of people [locals and international residents] that we’ve known who have moved away,” Mr Brewer said.
“Very talented people have left because the opportunites weren’t here. We may have an idea of the numbers on the non-Bermudian population but on the Bermudian population I still don’t think we have all those numbers.
“It would be nice to think that over the next couple of years we will see the beginning of a recovery with locals and international residents returning.
“Like nearly every company in Bermuda, we’ve had to restructure our company to lower our operating costs. We restructured our team, all of our equipment expenses, our documntation systems – every aspect of what we do we’ve had to revisit to lower the cost of running the business.”
Although the first two quarters of the year for BCL looked “more encouraging”, he said it’s still a bit too early to tell how future volumes will pan out due to annual fluctuations. In 2014, those fluctuations included six brutal winter storms and port uncertainties that are now resolved.
“New York got pummeled by snow storms in 2014, with resulting delays. So we lost business to our competitor which operates out of Southern New Jersey; those types of occurrences would skew the annual numbers.
But he said: “While overall imports remain flat, the America’s Cup numbers for BCL are trending in the right direction. Overall, AC teams have already imported steel, race and support boats from the US, base camp materials, equipment, etc.
“The big eye opener potentially is the scale the huge AC event. We are hearing from non-Bermda sources tha that the number of mega yachts that accompany this event could be in the hundreds.”
The anticipated influx of spectators will be a major boost for tourism related businesses in his view and an increase in consumption.
“They will want to go out for dinner, taxi tours, fishing, and golfing, there will be cash injected into the economy – especially with people actually staying here for several days. They will be spending, consuming, enjoying Bermuda.
“I believe that we’re going to have a very pleasant surprise as to the actual number of people that will come here and the duration of their stays through the many weeks leading up to the event. These guests will enjoy Bermuda at its best.”
Asked whether a small country like Bermuda has the capacity to handle such a large event, he replied: “One thing about Bermudians we’re resilient. I think that’s who we are as a people so I’m confident it’ll get done.”
But he said: “There’s some big logistical challenges to tackle to make this work, like building an 11 acre island in Dockyard in the time that it needs to be done. Do I believe that when the America’s Cup is over that there will be additional residual value out of that? I absolutely do as well!”
As for BCLs role in transporting the required equipment, gear and building supplies from San Francisco to Bermuda he’s pleased with the company’s track record.
“We helped the defending champions Oracle Team USA move their camp from San Francisco and set up in Dockyard, enabling the champions to get bact on the water sailing within weeks,” Mr Brewer said.
“We did the shipping for them on time, on schedule and on budget and even delivered their cargo into Dockyard. Taking care of all of the teams and the event’s shipping needs is of course critical to the overall success of Bermuda’s hosting role.”
And in the lead up to the AC35 event this October he concluded: “BCL and the other local carriers will remain focused on meeting the shipping needs of all six syndicates and the AC Event Authority and services contractors that will be needed for the AC to race in Bermuda.”
By Ceola Wilson