The Port Problem

South Africa is among the most mature markets in Africa, with relatively efficient infrastructure. However, the lack of development over the past decade to meet demands for increased throughput and trade has caused choke points that will need to be redressed sooner rather than later.

With eight commercial ports and one leased port, South Africas bulk liquid storage infrastructure and container terminal facilities are under significant strain. Whats more, the operations run without government subsidies and suffer from underinvestment.

Problems at the ports are worsened by inefficient transport links to and from the sea. Therefore, most ports are operating at near full capacity, which creates a domino effect that is reflected in delays and lack of storage space. This affects landlocked countries in particular, which require efficient transport links to enable them to benefit from competitive prices for landed goods and provide a means to export products to global markets. Besides the capacity issue, most ports in sub-Saharan Africa suffer from poor integration with other transport modes and slow clearance processes.

Examining throughput volumes at South African ports, it becomes evident that the ports represent bottlenecks for the lubricants industry and the wider economy as a whole that will drive up the cost of goods. For example, Durban currently handles 74 million tons of cargo and 4,500 commercial vessels per year, which represents 65 percent of South Africas container traffic. The port is ranked among the top 100 busiest in the world. In addition, total dry bulk throughput at Richards Bay, South Africa, in 2013 was 89 million tons, ranking it among the worlds top ten largest bulk exporting ports. Throughputs at other South African ports are:

East London – 2.2 million t/y

Ngqura – just over 6 million t/y

Port Elizabeth – over 11 million t/y

Mossel Bay – almost 1.9 million t/y

Cape Town – 13 million t/y

Saldanha Bay – 67 million t/y

Impressive plans are underway to expand the current infrastructure; however, experts predict that even with the current expansion plans and re-engineering taking place, Durban port will still run out of capacity by 2019. Furthermore, the vast majority of bulk liquid storage available at the port of Durban is reserved for fuel and molasses, not base oils. The failure to address the demand for bulk tankage at ports will ultimately drive up product costs.

The choking effect has multiple dimensions, including berthing delays, inefficiencies in container handling, slow customs procedures, road traffic congestion, inadequate rail services, a lack of reliable electronic data transfer facilities and interruptions in power and water supplies. All of these conditions place a strain on the supply chain.

Delays at the port are very expensive. In 2008, one extra day in port cost more than U.S. $35,000 for a 20-foot equivalent unit vessel and proportionately more for larger ships. Delays are often caused by long processing and administration times and by poor handling in congested port areas, as opposed to lack of quay space.

Making ports more efficient could overcome many of the capacity constraints. However, about 75 percent of the freight is transported by road and about 25 percent by rail, so the ports are not the only problem.

The Flexible Solution

The lubricants industry has started an initiative to help overcome constraints in the supply chain caused by bulk tanker shortages by turning to the flexitank or flexibag solution. First developed in the 1870s for the military, flexitanks have been used to solve the shipping problems of bulk, nondangerous liquid goods for some time.

In simple terms a flexitank is a large polyethylene container or bag that transforms a conventional 20-foot container into a safe and efficient transportation system for bulk liquids. The flexitank was adopted by the wine industry more than 30 years ago and can hold approximately 30,000 bottles of wine in one flexibag. The most common size of flexitank holds 20 metric tons or 24,000 liters.

The first flexitanks marketed were reusable and, therefore, needed to be cleaned prior to further use. This requirement caused a lot of inconvenience; however, with the advent of new technology and improved practices, the flexitank has evolved into a single-use product.

The flexitank is a simple concept in which a large, thick plastic or rubber bladder is unfurled inside a standard 20-TEU container, the floor and walls of which have been padded with heavy corrugated paper. The bag is braced with a plastic or metal bulkhead to hold it in place. Finally, it is filled with the liquid product through a gate, ball or butterfly valve.

The entire unit travels by truck, container ship or rail to its final destination, like any intermodal container. Once delivered, the material is drained or pumped out of the bladder.

The market for this bulk liquid packaging option has more than quadrupled in the past 10 years. Sources say that much of the momentum came from the lubricants industry, which is moving away from drums, totes and ISO tanks because of cost.

For finished lubricants, a big advantage of flexitanks is that most of the weight conveyed is actual product, not bottles, jugs, cartons, drums, etc. Those packages can be easily filled at the destination, closer to the final consumer.

Most importers of flexitanks have established their own minibulk liquid storage facilities, allowing for 20 tons of product to be decanted swiftly into dedicated tanks, with minimal manpower and zero-risk of contamination. The benefits of importing 3,000 tons of base oil by flexitank (150 flexitanks) over the course of a year compared with a single 3,000-ton parcel, based on the standard 30-day distributor payment terms provided to clients, include:

No rental charge for bulk liquid storage tanks at the port.

Greatly reduced holding costs for stock because the product can be released as soon as it arrives based on a cyclical replenishment program.

Savings in storage and costs because containers can be routed directly to customers that have dedicated on-site tankage facilities, operating on a top-up basis.

Significantly lower capital outlay.

Market price and exchange rate hedging possible.

Quicker cash flow.

Plusses & Minuses

The different methods of transporting liquids have various advantages and disadvantages. The primary advantages for the parcel tanker and deep-tank cargo vessels method is the low cost of sea freight. Clearing and disbursements for flexitanks are significantly more expensive than for bulk parcels. The main disadvantage of bulk parcel transportation is that it offers only port-to-port options, whereas flexitanks can be routed directly to a clients location, provided they have the required handling and storage facilities.

Contamination or loss of product is also an issue. For both flexitank and bulk parcel shipments, the worst case scenario is the loss of the entire parcel. However, the entire parcel in a flexitank is only 20 tons vs. upwards of 1,000 tons for bulk deliveries. In addition, most flexitanks are covered by a factory warranty and product liability insurance, which is not possible with bulk parcels due to the cost.

The following 10 elements summarize the benefits of flexitanks:

1. Total cost reduction and higher profit margin.

2.Market price and exchange rate fluctuation hedge.

3. Cash flow optimization.

4. Prompt door-to-door delivery.

5. Shipping containers can be transferred to trucks; therefore, flexitanks can serve as a cost effective door-to-door package to or from deep inland and difficult to reach destinations.

6. Low environmental impact: the flexitank is made of 100 percent recyclable materials.

7. Oils can be loaded while still hot (up to 45 to 60 degrees C).

8.Cargo remains sealed with no risk of contamination.

9. Most flexitanks are covered by a factory warranty and product liability insurance.

10.Flexitank capacities range from 10,000 to 36,000 liters.

The downside of flexitanks is their inability to carry products classified as dangerous goods under the International Maritime Dangerous Goods Code. Flexitanks also require in-house storage tanks, a pump to decant the fluid, 6- to 8-week delivery time or direct delivery program timeline. Fundamentally, if a flexitank replenishment program is to be considered, efficient processes for offloading and a solid knowledge of the replenishment cycle program are critical.

Until there is a determined and marked shift toward a landlord port system, which attracts container line operators and major international terminal operators, infrastructure facilities at ports within developing or developed countries will stay at capacity. And the potential for disruption and delays will be ever present. As these conditions persist, the case for alternative concepts such as the flexitank become viable and accessible for importers, manufacturers and service providers.