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Summary for January 2 - December 6, 2012:
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Wednesday, January 4, 2011

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Canadian ports respond

In a joint response to the Federal Maritime Commission's inquiry into alleged cargo diversions away from U.S. ports, Canadian port authorities cited Harry Truman, their role in U.S. commerce, and the need for North American seaport competition.

"Competition between North American ports is healthy and drives down costs of goods for consumers," the ports of Vancouver-Fraser, Prince Rupert, Montreal and Halifax said in their submission to the FMC, which extended the comment period over its Notice to January 9 to accommodate responses from various public and private factions in Canada.

The FMC announced its Notice of Inquiry on November 8 at the behest of, primarily, Western U.S. lawmakers and ports, to investigate whether shippers were routing cargo through Canada in order to avoid paying a per-container Harbor Maintenance Tax fee that is ostensibly to be used towards deepening U.S. harbors.

"We count Canada in the forefront of those who share these objectives and ideals. With such a friend, we face the future unafraid," was a quote by U.S. President Harry Truman from 1947 the Canadian ports excerpted into their letter to the FMC.

Concerned over proposals made by some U.S. lawmakers and ports to "level the playing the field" by levying the HMT at the border between Canada and its big neighbor to the south, the Canadian ports said "U.S. and Canadian economies are highly integrated and the largest bilateral relationship in the world, valued at $527 billion in 2010."

The ports also pointed to what they claimed to be a two-way street of cargo diversion when supply chain disruptions occur.

"For example, in early 2011, a major Canadian retailer re-routed some of its Canadian-bound container traffic via U.S. ports, as labor negotiations in Canada were causing uncertainty. Canadian Tire did the same during this period and continue to move a portion of their Canadian-destined containers through Southern California as one of their supply chain risk mitigation strategies."

"Contrary to claims of cargo diversion by some Members of Congress, the Canadian share of U.S. containerized imports via Canadian ports as a share of total U.S. port traffic averaged less than 2.5 percent in 2010, which is a decrease from 3.2 percent in 2000. At the same time, U.S. market share of Canadian containerized cargo imports and exports is three times Canada's market share of U.S. containerized cargo. Specifically, U.S. ports handled more than 8 percent of Canadian containerized imports and exports," the letter said.

The ports' FMC submission goes on to outline the recent Beyond the Border Action Plan that was jointly released by President Obama and Prime Minister Harper that covers deeper engagement between the two countries over trade, infrastructure and security.

In addition, the Canadian ports referenced President Obama's goal to double U.S. exports.

"President Obama correctly identified trade barriers as an obstacle to increasing U.S. exports. The possible imposition of an HMT on U.S. -bound cargo routed through Canadian ports is not only unproductive from an international trade policy perspective, but it could also undermine the President's goal of doubling U.S. exports by the end of 2014," the ports' letter said.

Are companies like GE leading migration back to U.S. manufacturing?

General Electric might be one of the leaders of a shift of increased U.S. -based manufacturing, albeit at a lower average hourly wage scale for new-hire labor, according to a New York Times report.

"Some companies want to keep work here, or bring it back from Asia," said Gordon Pavy, president of the Labor and Employment Relations Association.

"But in order to do that they have to be competitive in the final prices of their products, and one way to be competitive is to lower the compensation of their American workers," he said.

New-hire wages are reportedly $10 to $15 less per hour compared to existing, longtime employees at some U.S. manufacturing firms.

Labor unions are starting to endorse the approach of job creation over new-hire wage battles with employers, according to the Times article.

In Louisville, Kentucky, GE employs 2,000 hourly workers at its expanding Appliance Park facility, while Ford Motor Co employs 2,900, and both manufacturers are reportedly not getting pushback on the lower-than-usual new-hire wage levels.

"The trade-off is absolutely worth it; the alternatives are $15 an hour or zero dollars an hour,"" said Louisville Mayor Greg Fischer. "You must have a globally competitive wage to create jobs," he said.

In addition to subsidies from the City, GE has reportedly pledged to invest $800 million investment in Appliance Park over the next two years.

In China, labor costs have been rising as companies like GE look more to "lean manufacturing" best practices in order to find more efficiencies in production lines, including in the U.S., according to the article.

"We are at an inflection point in manufacturing in terms of relative cost structures," said Mark M. Zandi, chief economist for Moody's Analytics. "Ten years ago, it was a no-brainer to locate in China, and now it isn't so clear whether China is the low-cost place to produce."

For the full New York Times story:

LNG shipping could earn record rate levels in 2012

Vessels carrying liquefied natural gas will reportedly earn record rates in 2012, as the cleaner fuel beats out rates for coal and oil, according to Hong Kong-based shipping hedge fund Oceanic Ltd.

The LNG tankers will bring is as much as $200K per day, up from the $140K a day average in 2011, according to Oceanic.

LNG demand is reportedly increasing amid emissions reduction efforts by nations like Japan, North Korea and the United Kingdom, as the gas emits approximately half the carbon dioxide of coal.

For the full Bloomberg story:

Whirlpool files anti-dumping petition

Whirlpool Corp. announced it has filed an anti-dumping petition with the U.S. Department of Commerce and U.S. International Trade Commission that alleges washing machines manufactured by Samsung Electronics and LG Electronics in Mexico and South Korea are entering the U.S. at a substantially lower price level.

Maersk to pay $31.9 mil to settle cargo over-charge dispute with Pentagon

The U.S. Justice Department announced that Maersk Line Limited has agreed to pay $31.9 million to settle a dispute that the shipping line allegedly overcharged the Pentagon for shipping containers destined for military base locations in Afghanistan and Iran.

Maersk allegedly inflated refrigerated unit fees in at least one case, in addition to alleged improper billing to the U.S. Pentagon for container delivery late fees, as well as purportedly invoicing for GPS-tracking and security services that were either not provided or only partially provided.

For the Businessweek story source:


Thursday, January 5, 2012

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Ten logistics resolutions

New Year's resolutions tend to be a spotty proposition, however, Edgar Blanco, a research director at the MIT Center for Transportation & Logistics, provides his top ten logistics themes for the supply chain to consider as 2012 unfolds.

The following excerpted content is courtesy of Forbes Magazine:

  1. Get off oil. The year has just started and oil prices already above $100! I know you have pledged to use less fossil fuel based transportation in the past, you even enrolled in several "oil-watchers" programs (e.g. SmartWay), but the oil use keeps coming back. Don't give up. Shift to rail. Try some hybrid trucks, maybe even some electric vehicles.
  2. Go mobile. Your smartphone is not just for checking e-mail and reading blogs. It's a powerful device. And most people in your company already know how to use it (i.e. easy training). Do you really need to hand deliver that invoice? Will your customer be happier if you simply e-mail it to him/her on the spot from your phone? How about some nice pictures as proof of delivery? Be creative but make it truly a mobile phone application not a patched together website nobody would like to use.
  3. Use less packaging. All those "peanuts" inside the box not only cost money but are unnecessary waste. Get rid of them! Use boxes of multiple sizes so you are not just shipping air and design them so you can stack more. Any improvements in packaging will also help you with resolution # 1.
  4. Postpone more. In most areas of life, waiting to the last minute is never good advise. However, in logistics "postponing" adding value to your product provides more flexibility to respond to uncertainty (see resolution # 6). Read the story of Benetton sweaters or Hewlett-Packard printers for inspiration [check these slides if you are ready for a lecture on the topic].
  5. Fill some holes. All supply chains have "blind" information spots. All those fancy systems to forecast, plan inventory and track your product as it moves through your network rely on accurate and up-to-date data. Find areas of your business with poor visibility and patch them up. If the hole is big and messy, consider Resolution #2 as an option.
  6. Embrace uncertainty. In the ideal world, everything works as planned. But customers change their minds, suppliers stop answering calls or nature strikes just before that urgent shipment leaves dock. Make sure you develop plans, build resilience in your operations and set up the right protocols to respond. And those risk management retreats? Don't skip them.
  7. Show up on time. World-class logistics is all about impeccable execution. If you promise to deliver the product on Tuesday, show up on Tuesday. If you set up an appointment for 2pm, is for 2pm not 2:15 pm. No excuses. Even if you have a great product, the customer experience includes order fulfillment and delivery. Thrive for operational excellence.
  8. Don't let them get under your skin. All supply chain functions, including logistics and transportation, live in the "middle" of other areas. Your sales group will complain. Your procurement organization will complain. Your finance group will push even harder. Breath deeply, remain calm, maintain your focus and try to work with them. Use facts and work on your interpersonal skills to navigate
  9. Build long-term relationships. Your logistics function is a source of tremendous competitive advantage. But you need partners that share your vision and are willing to invest as you go. You may be tempted to keep slashing costs and look for the very low cost providers (specially in the current economic environment). Don't do it across the board. Identify some key partners and work with them, especially in the tough times. You will reap the benefits later.
  10. Go to a big city, a really big one. You probably already know that most of humanity lives in urban areas. Well, if you've never been to one of the emerging market "megacities", it's time to book that trip. It will not only be an enriching cultural experience, it will open your eyes to the complexity of logistics and transportation of the future. If you are going global, there is a very high chance your products will be consumed at one of those megacities. Even if global is not your thing yet, there are tremendous innovations happening in those areas. Look around and soak it in.

For the Forbes Magazine story source:

Kansas City Southern benefits from rising U.S. -Mexico trade

Kansas City Southern's revenue could reportedly grow swiftly thanks to a booming U.S. -Mexico trade, as freight rail becomes a more serious competitor to cross-border trucking.

Cross-border freight was valued at $341 million at the end of September, up 18 percent over the same period in 2010, according to U.S. Bureau of Transportation statistics.

The KC Southern is the only U.S. railroad that has a wholly owned subsidiary in Mexico.

"This is the best organic growth story in the U.S. rail network," said Matt Troy, an analyst at Susquehanna Financial Group in New York in an interview with Bloomberg BusinessWeek.

Troy said KC Southern's revenue could up to three times faster than competing regional railroads.

"The combination of bringing manufacturing capacity back from Asia and the potential for highway share conversion creates a very strong one-two punch," he said.

According to the Bloomberg Businessweek report, a "manufacturing renaissance" due in part to a slower upward trend of labor wage growth in Mexico compared to heavyweight China, expanding foreign direct investment there, and KC Southern's unique direct rail connection over the border, could aid the fifth-largest U.S. railroad's continued growth.

"Mexico is eclipsing China as a very attractive source of imports into the U.S. and what we're seeing is that labor costs between Mexico and China are converging," said Kansas City Southern Treasurer Michael Cline at a recent industry conference in Orlando, Florida.

For the full Bloomberg Businessweek story:

DP World Vancouver signs three-year agreement to operate Nanaimo port's terminals

DP World Vancouver announced it has signed a three-year agreement to operate the Vancouver Island, B.C. -based Nanaimo Port Authority's terminal facilities that include general cargo handling at Duke Point and Assembly Wharf.

In a joint statement, the two parties said they "are looking at diversifying and pursuing commodities along with short sea shipping of containers to and from Vancouver Island."

Cargoes currently handled at Port of Nanaimo's three berths include forest products, salt and kaolin. The Western Canadian port also handles cruiseship passengers at a new berth opened for the cruise season 2011.

Ryder releases corporate sustainability report

Ryder System, Inc announced it has published a corporate sustainability report that the transportation services provider said highlights its "progress towards improving the communities and environments where the company does business."

The sustainability report includes: information on Ryder's efforts to complete more than 12,000 online compliance-training lessons with employees around the world; implementing a first-of-its-kind heavy duty natural gas vehicle project for commercial rental and lease fleets in Southern California; reducing energy and water consumption in U.S. and Canada operations; launching a sleep apnea wellness program to reduce the effects of fatigue among affected professional truck drivers at Ryder; and making a $1 million commitment to become a member of the American Red Cross Annual Disaster Giving Program.

Man living in container in Vancouver, BC dies in fire

A 53-year-old man from North Vancouver, BC, who had been living in a shipping container there on the grounds of an electric power construction company, reportedly died in a fire within the steel box on Tuesday.

Local law enforcement said the fire was due to a candle that was left burning on the man's sofa chair.

"Part of the tragedy of this is these containers are not designed for people to live in. Once the door is closed there's no ventilation and in this case he succumbed to smoke inhalation," said Cpl. Richard De Jong. "We've heard of people spending short periods of time [in a sea container] but never setting up a home," he said.

For the full Vancouver Sun story:


Friday, January 6, 2012

Top Story

Britain threatens Iran with military action over shipping lane

British Defense Secretary Phillip Hammond warned Thursday that Britain is ready for military intervention if Iran makes good on its threat to blockade a key shipping lane. Tehran has threatened to close the Strait of Hormuz because of Western sanctions on its nuclear power program. The Strait of Hormuz is a vital shipping lane for international trade. In a speech to the Atlantic Council in Washington D.C., Hammond said, "disruption to the flow of oil through Strait of Hormuz would threaten regional and global economic growth."

- (UK) Mirror

Read the full story:

U.S-Europe gasoline cargo declines with ship supply doubling

Europe's gasoline shipments to the U.S. are expected to drop 21 percent over the next two weeks, while the number of ships accessible for the route may double, according to a Bloomberg survey.

In a survey yesterday of six ship brokers, one trader and one owner, who all specialize in auto fuel shipments, a median estimate of 19 vessels have been booked to load vessels on Jan. 19. Two weeks earlier, 24 ships were hired for the Europe-U.S. gasoline shipments.

According to the U.S. Department of Energy, U.S. gas imports have fallen since the beginning of December, dropping 11 percent to 734,000 barrels a day for the week ended Dec. 30. U.S. unemployment and lower gasoline purchases in winter months contributed to the lower demand.

31 ships are likely available for the Atlantic route, 94 percent more than the previous survey showed on Dec. 22. The survey is based on single-voyage or spot charters and doesn't count loads under longer-term contracts.

-Bloomberg Business Week

Read the full story:

Another China maritime firm late to pay shipowner

Shagang Shipping of China owes millions of dollars in vessel rental fees to Diana Shipping, according to an industry insider. Chinese maritime companies are having trouble dealing with a decline in the dry bulk freight market.

In a yearlong trend that is ruining China's reputation with the international maritime community, Shagang is the latest in a rash of Chinese maritime firms that have delayed payments to foreign ship owners. The company says it needs extra time to obtain financing from its overseas lender.

With the overcapacity of vessels and low freight rates, Chinese shipping companies are taking drastic measures to support their businesses.

- Reuters

Read the full story:

The race to dig deeper ports by 2014

When the Panama Canal is completed in 2014, a new breed of behemoth cargo ships will call at U.S. East Coast ports. New York, Miami and Savannah are all altering their facilities to accommodate the huge ships.

Other cities are running into problems. The city of Miami is planning to deepen its port to 50 feet, but the dredging is controversial, viewed as a threat by many environmentalists, who filed a petition with the state that now has the project on hold.

The post-Panamax vessels that will call at eastern ports after 2014 will carry two to three times the cargo of standard cargo ships.

In Miami's case, the bottom of Biscayne Bay is limestone, and the Army Corps of Engineers will need to conduct two years of underwater blasting. Environmental activists are afraid of what the large amount of sediment will do to the bay's clear waters.

Several other states are also delayed in the deepening process due to environmental concerns about dredging.


Read the full story

GOP infrastructure talk ignores jobs

While Obama seems to believe improving America's roads and bridges is vital for business and for creating jobs, Republican presidential candidates seem to disagree on how to pay for transportation infrastructure, and have a strong aversion to deficit spending.

Many Republicans look at the issue as local, or look for a way to have infrastructure improvements be paid by citizens via new toll roads. Both Republican presidential hopefuls Newt Gingrich and Mitt Romney agree with the Bush era principle that private market forces will lead to innovation and more choices for the public. Romney's latest talk on infrastructure suggests he would use the Transportation Infrastructure Finance and Innovation Act to build more toll roads.

- Huffington Post

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