Cargo Business Newswire ArchivesSummary for January 11 through January 15, 2016:
Monday, January 11, 2016
Drewry: Container shipping losses could grow up to $5B in 2016
Losses in the container shipping industry could grow to $5 billion in 2016, as fuel prices bottom out and freight rates continue to fall, according to the latest issue of Container Forecaster by Drewry Maritime Research.
Further widening of the supply-demand imbalance at the trade route level and insufficient measures to reduce ship capacity will lead to more freight rate reductions and sector-wide losses in 2016, the Drewry analysts said.
The decline in global container shipping freight rates is anticipated to have been as great as 9 percent last year and Drewry is forecasting that carrier unit revenues will decline further in 2016, although at a slightly slower pace. Excluding 2009, the past 12 months has seen the lowest spot rates in most major trade lanes and all at the same time. The researchers assert this is not solely due to fundamental supply/demand imbalances caused by weak volumes and over supply.
End of year 2015 spot rates from Asia to the U.S. West and East coasts were around $815 and $1,520 per-FEU, respectively. These were easily the lowest since 2009 and with decent cargo growth and load factors of over 90 percent to the U.S. West Coast, the rate deterioration emphasizes that carriers have been fighting for market share and are positioning themselves further for the potential shifting of cargo from the West to the East Coast after the Panama Canal widening.
Spot rates of below $200 per-FEU in the Asia-North Europe trade during June 2015 were also unprecedented. While spot rates have recovered since the start of 2016, Drewry forecasts these gains will be short-lived.
Many stakeholders point to the fact that bunker prices of, for example, $140 per-ton in Rotterdam, are contributing to lower overall container freight rates, but Drewry believes carriers’ most recent data suggests that they are no longer able to cut costs faster than the prevailing declines in the freight rate market.
Drewry says that oil prices have probably hit the market bottom right now and costs for the positioning of empty containers and vessel lay-ups will increase this year. Their latest calculation is that a 10,000-TEU ship would incur a minimum of $450,000 in reactivation costs if laid up in Asia for three months or more. The consequence of this is that Drewry expects industry losses to widen to over $5 billion in 2016.
Ocean carriers have taken a great deal of corrective action during the final three months of 2015 in order to lift very low freight rates. But the removal of six major East-West services and the blanking of 32 voyages in November and 21 in December did little to improve supply/demand imbalances. At the beginning of October 2015, average headhaul East-West load factors were only 85 percent, compared to 94 percent one year earlier.
With the idle fleet touching one million TEUs in late 2015, or just under 5 percent of the global fleet, the analysts say decisions must be made by lines to remove more vessels and restructure more trade lanes with new operational agreements. Big vessels no longer guarantee decent profitability and if Asia-to-North Europe contract rates are signed at an average $900 per-FEU (and Drewry says this could be too optimistic) for 2016, this equates to an estimated $1.4 billion loss for the carriers on one trade lane.
"Comparisons are being made to 2009 when approximately 1.3 million TEUS (were) removed from a considerably smaller fleet," said Neil Dekker, Drewry’s director of container research. "The mass scale lay ups were triggered by the fact that lines ran out of cash. The industry is not there yet as some lines are still making a profit and the very low fuel prices are propping them up. But a further two or three quarters of declining financial profitability may trigger a notable rise in the idle fleet as we enter the second half of 2016."
Port of Oakland opens revamped container terminal
The Ben E. Nutter Terminal at the Port of Oakland has reopened following two months of improvements to upgrade cargo handling, and this week will receive its first container ship since early December.
"Across the port we're taking steps to improve performance and efficiency," said Maritime Director John Driscoll. "We're pleased that the management of Ben E. Nutter Terminal shares our desire to upgrade operations in Oakland."
Located in Oakland's Outer Harbor, Nutter terminal is managed by Everport Terminal Services. It began renovations in November and closed last month to complete improvements that include rebuilt entrance gates for harbor truckers, more than 100 new pieces of cargo-handling equipment and a new terminal operating system.
The terminal reopened last week to begin receiving export cargo and empty containers. It resumed vessel operations Friday with arrival of the 1,100-foot container vessel Ever Liberal.
The Nutter terminal serves all Evergreen Line ships calling Oakland. It's named after former Port of Oakland Executive Director Ben E. Nutter, considered a pioneer in containerized trade.
Port Everglades issues RFI for new regional logistics center
Port Everglades has issued an RFI (request for information) from companies interested in developing, financing and managing a regional logistics center on approximately 16.7 acres of land on the port.
Port officials want to establish a new logistics center to replace the older, on-port Foreign-Trade Zone (FTZ) warehouse facility, which sits on land that will be redeveloped into a marine terminal.
The RFI s meant to gather input on a number of questions associated with the development, financing and construction of the facility and applicable value-added services such as consolidating and stripping containers; de-palletizing, packaging, distribution, transloading, labeling and sorting of cargo; and fumigation and cold storage of perishables.
"Ultimately, we want a logistics center that is state-of-the-art and offers services that are needed in today's global marketplace. Therefore, we are first going out with an RFI to get input from third-party logistics companies and developers about public-private partnership opportunities so we can incorporate this information in a future request for proposals," said Glenn Wiltshire, deputy port director.
The RFI is currently open with Broward County for firms interested in the project through January 25, 2016, and can be obtained by contacting Jorge Hernandez at 954-468-3501 or pev_ftz_rfi@broward.org. All responses must be submitted by January 25, 2016 through Bidsync (bidsync.com/bid-notifications).
Brazil steelmaker CSN receives 10 proposals for container terminal
Companhia Siderurgica Nacional (CSN) has received 10 proposals for the purchase of Sepetiba Tecon. The container terminal in Rio de Janeiro went on sale in August.
According to Economic Value newspaper, proposals have been submitted by port operating companies PSA International (Singapore), Chile’s SAAM, Wilson Sons and LOGZ, among others. The assets are valued at up to $250 million.
The Brazilian company will choose the three best proposals so that companies can make the necessary adjustments, which should happen by the beginning of February, the newspaper said.
Shaken by the fall in demand for steel and iron ore, CSN seeks to sell its assets to reduce its $7.9 billion bank debt.
Port workers at Rotterdam’s container terminal were ready to begin a 24-hour strike last Thursday and five other day-long strikes are being planned, according to news agency ANP.
The unions want port terminal operators to rule out making compulsory redundancies, despite overcapacity and growing automation in the sector. The port authority said it would not be going to court in an effort to stop the strike.
"Striking is a right and we would rather put our energy into a solution," a spokesman told ANP.
Some 800 out of 3,500 jobs at the port are under threat over the next four years, the unions say. The last all-out strike in the port was 13 years ago, the Financieele Dagblad reports.
NRF: 2015 imports up 5.4 percent at major U.S. container ports
With the holiday season over, import cargo volume at the nation’s major retail container ports is expected to slowly decline through the first quarter of the year, according to the latest issue of Global Port Tracker report from the National Retail Federation and Hackett Associates.
"This is the time of year when the retail supply chain catches its breath before the next big rush begins," NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. "Retailers are still tallying the bottom line of the holiday season, but they’re also making plans for the spring and summer."
Ports covered by Global Port Tracker handled 1.48 million TEUs in November, the latest month for which there is verifiable data. With most holiday goods already in the country by that point, volume was down 5 percent from October but up 6 percent from the year before. December was estimated at 1.44 million TEUs, the same as 2014.
The numbers are still subject to change, but 2015 came to a preliminary total of 18.2 million TEUs, up 5.4 percent from 2014.
January 2016 is forecast to be up 18.9 percent at 1.47 million TEUs, significantly up from weak volume seen a year ago just before the contract for West Coast dockworkers was signed, ending months of congestion. February is forecast at 1.41 million TEUs, up 17.5 percent, also skewed by the congestion. March is forecast at 1.34 million TEUs, down 22.4 percent from high levels seen when a flood of backlogged cargo started to flow. Patterns are expected to return to normal in April, which is forecast at 1.48 million TEUs, down 1.8 percent from last year. May is forecast at 1.55 million TEUs, down 3.5 percent from last year.
Hackett Associates Founder Ben Hackett said inventory levels remain high, in part due to warm weather that reduced demand for winter clothing.
"We continue to remain concerned about the high inventory-to-sales ratio," Hackett said. "Enough time has passed since the disruption on the West Coast that we can no longer look to that for justification of the high level."
FedEx wins EU approval for TNT deal
FedEx Corp. received unconditional approval from European Union regulators to buy smaller parcel delivery rival TNT Express NV, almost three years after United Parcel Service was blocked from a similar takeover.
The EU’s formal review of the $4.8 billion deal revealed no antitrust concerns, the companies said in a statement. The deal still needs clearance in Brazil and China and the companies "anticipate that the offer will close in the first half of" 2016.
"Many businesses and consumers rely heavily on affordable and reliable small package delivery services, in particular with the growth of e-commerce," EU Antitrust Commissioner Margrethe Vestager said in a statement. "The commission has thoroughly assessed the markets affected by this takeover. The conclusion is that European consumers will not be adversely affected by the transaction."
FedEx’s bid to add the Dutch company’s vehicles, staff and customers will expand its reach and allow it take on Deutsche Post AG’s DHL and UPS.
"We are extremely pleased to receive the European Commission’s unconditional approval," said David Binks, regional president Europe of FedEx Express.
Two trade unions representing workers at fourth-ranked U.S. railroad Norfolk Southern have expressed opposition to an unsolicited bid from Canadian Pacific Railway, one in an unpublished letter sent to the U.S. rail regulator and the other in an interview with Reuters.
The moves add to a growing list of opponents to any deal, which includes customers of Norfolk Southern and a number of elected U.S. officials.
In a Jan. 7 letter to the Surface Transportation Board that has not yet been made public but was viewed by Reuters, Transportation Communications Union/International Association of Machinists President Robert Scardelletti urged the rejection of any proposed merger.
"CP's proposed merger would result in massive job reductions of United States rail workers," Scardelletti wrote. "If such a merger is approved, it undoubtedly would lead to further consolidation of the remaining U.S. carriers, with attendant job loss throughout every railroad craft."
The TCU/IAM letter comes a few days after Reuters reported on a series of letters from Norfolk Southern customers to the STB opposing any merger.
Norfolk Southern declined to comment. A Canadian Pacific spokesman said this was evidence that Norfolk Southern "continues to mislead all stakeholders" while refusing to meet to discuss "the merits of this transformational opportunity."
The Canadian company in mid-November disclosed its $28 billion offer to buy Norfolk Southern.
Opponents fear any deal could trigger a wave of mergers that would leave North America with an anticompetitive rail duopoly and that Canadian Pacific would squeeze profit out of Norfolk Southern by cutting back on necessary investments.
It would be the first merger involving a U.S. railroad since the STB rewrote rules in 2001 after a flurry of consolidation reduced the number of major North American railroads to seven from 35.
CMA CGM updates FAL1 service with direct call at Shanghai
CMA CGM is pleased to announce its customers that a new direct EB call at Shanghai, the number-one-ranked container port in the world, is to be introduced on the rotation of its FAL 1 service ex-North Europe.
Starting in Southampton on January 11, 2016 with the voyage of the M/V CMA CGM Kerguelen, the new FAL 1 will offer the following rotation: Southampton - Dunkirk - Hamburg - Rotterdam - Zeebrugge - Le Havre - Malta - Khor Fakkan - Shanghai - Tianjin - Dalian - Busan - Qingdao - Shanghai (WB) - Ningbo - Yantian - Port Kelang - Algeciras – Southampton.
Shanghai will now be called at twice, both Eastbound and Westbound.
Russian cargo ship runs aground off Japan
A cargo ship has run aground off the coast of Yamagata prefecture in northeast Japan on Sunday.
Japan’s self-defense forces sent a helicopter to the scene to evacuate 14 Russians and 4 citizens of Bangladesh to nearby Sakata port.
The cargo ship, flying the flag of Panama, left the Russian port of Nakhodka and arrived in Akita prefecture, located not far from Yamagata, where it was partly unloaded. After that, the ship left for South Korea but ran aground near Sakata port because of high waves.
The 18-member crew consisting of Russian and Bangladeshi nationals is unhurt, according to the local fire department.
U.S. border agents to inspect trucks entering U.S. on Mexican side
For the first time, U.S. border agents will inspect trucks entering the U.S. on Mexican soil, working with their Mexican counterparts.
The new facility in Tijuana, which aims to reduce congestion and speed cargo crossings into San Diego, overcame resistance in Mexico to letting U.S. officials carry guns. In April, Mexican lawmakers approved changes to the country’s firearms law to permit foreign customs and immigration officials to be armed on the job.
U.S. Customs and Border Protection Commissioner R. Gil Kerlikowske and Mexican Treasury Secretary Luis Videgaray were scheduled to open the joint inspection facility Tuesday in Tijuana’s Mesa de Otay section, blocks from one of the busiest crossings on the 1,954-mile border.
Customs and Border Protection said the effort "represents the shared commitment between the U.S. and Mexico to promote economic growth and prosperity between the two countries connected by more than just a shared border."
The larger significance is that U.S. and Mexican officials will work under the same roof, sharing intelligence and other information, said Christopher Wilson, deputy director of the Woodrow Wilson Center for International Scholars’ Mexico Institute.
"They’re going to get to know each other better than ever before," Wilson said. "This is really joint border management in its early stages."
Plans for the joint inspection facilities have long been in the works but faced resistance in Mexico over allowing U.S. agents to be armed. An air terminal in San Diego with a bridge that crosses a razor-wire border fence to Tijuana’s existing airport, is believed to be the only cross-border airport outside the European Union.
In October, Mexican authorities began inspecting Mexico-bound cargo at the airport in Laredo, Texas. U.S. authorities plan to inspect U.S.-bound trucks in San Jeronimo, in the Mexican state of Chihuahua, near the border cities of Ciudad Juarez and El Paso, Texas.
Cargo has long been inspected in the U.S. and in Mexico. The new "pre-inspection" facilities effectively blends two stops into one.
Americold, which provides temperature-controlled warehousing and logistics to the food industry, announced it has finalized the purchase of the Tradewater facility in Atlanta, GA. Financial terms of the purchase were not disclosed.
The facility, at 6500 Tradewater Parkway in Atlanta, was constructed in 2005 as a build-to-suit site for an international food producer. Americold assumed the lease in 2006 and has operated it as a public refrigerated warehouse facility since. The addition of the Tradewater site increases Americold’s owned temperature-controlled storage capacity in the Atlanta market to more than 53 million cubic feet.
The facility is more than 455,000 square feet and offers temperature-controlled storage capabilities between 0° and 34° F. The property is rail-served by CSX with temperature-controlled rail and truck docks, and has 60 dock doors with significant staging area capabilities for an assortment of value-added services including: case picking, order-kitting and assembly, repacking, tempering, blast freezing, cross-docking, date coding, full transportation FTL and LTL capabilities, and customized order processing.
"It’s always been our goal to fully integrate the Tradewater site into our portfolio, and everything aligned to conclude the purchase early in the year. As owners of the property, we will continue to invest in the site to further enhance the services offered to our clients," said Fred Boehler, president and COO. "These are exciting times for Americold and our customers."
Germany’s Linde selling logistics unit Gist for $875M
Germany's Linde is launching the sale of its temperature-controlled logistics unit Gist in a deal potentially worth more than $875 million, as it streamlines operations to focus on core industrial gas operations, two sources familiar with the matter told Reuters.
Linde has mandated Morgan Stanley to find a buyer for the unit with 570 million euros ($618 million) in 2014 sales and is planning to send out first information packages to prospective bidders by the end of the month, they said. Linde and Morgan Stanley declined to comment.
Linde had earmarked Gist for sale in March last year, when Chief Executive Wolfgang Buechele said that the unit, which delivers cooled food and beverages mainly in the United Kingdom, was no longer considered "core business."
The company is expected to shop Gist to logistics players such as Deutsche Post, UPS, Kuehne+Nagel, Logwin, and Imperial as well as private equity groups.
Analysts at Bank of America are looking at the U.S. railroad, which has dropped the most in six years in 2015, and things aren't looking good for the new year.
"We believe rail data may be signaling a warning for the broader economy," says a recent note from Bank of America. "Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009."
BofA analysts led by Ken Hoexter look at the past 30 years to see what this type of steep decline usually means for the U.S. economy. What they found wasn't particularly encouraging: All such drops in rail carloads preceded, or were accompanied by, an economic slowdown.
Many would argue a shift away from coal-powered energy, a slowdown in the industrial sector, and the diminishing U.S. shale boom would naturally lead to fewer goods being moved by rail. Hoexter and his team, however, say that the slowdown is spreading to more consumer-oriented segments. Intermodal carloads typically related to consumer goods were up 1 percent in the first quarter of 2015 and 3.6 percent in the second quarter but fell 1.7 percent in the final quarter of last year.
Thus the team is taking a cautious tone, at least through the first half of the year when the analysts cite tough comparitives. "While many of the rails have successfully trimmed expenses commensurate with volume declines, we are concerned about the extent to which cost-cutting can support [earnings-per-share] growth targets," they write.
The Icelandic Coast Guard patrol ship Þór reached a cargo vessel belonging to Icelandic logistics company Samskip that suffered engine failure on Sunday (1-10) 160 nautical miles southwest of the Faroe Islands.
Hoffell is a 5,500-ton container ship with a crew of thirteen. Its engine broke down and the crew have been unable to restart it.
It took Þór just over 24 hours to make the journey to the stricken vessel. A tow-cable has been successfully attached and Þór is now towing Hoffell back to safety in Reykjavik. They are expected to arrive by the end of this week.
Norfolk Southern consolidates Virginia units to cut costs
Photo credit: Reuters/Valerie Volcovici
U.S. railroad operator Norfolk Southern Corp, which has repeatedly rejected the Canadian Pacific Railway takeover bid, said it will consolidate its Virginia and Pocahontas units, to cut costs and support growth.
The company said the two units will be consolidated to form a new Pocahontas division on Feb. 1.
The railroad said the move will affect management and staff positions based in Bluefield, West Virginia, but did not detail the number of employees who would be impacted.
It will also idle parts of its West Virginia Secondary, a 253-mile railway line between Columbus, Ohio, and central West Virginia due to business demand declines in recent years.
Norfolk has rejected Canadian Pacific Railway's multiple bids over the last month, saying the offers were "grossly inadequate."
Data reliability questioned after China-Hong Kong trade surges 10.8 percent
China exports to Hong Kong rose 10.8 percent year-over-year for the biggest increase in over a year, making the city the biggest destination for shipments in December and triggering renewed skepticism over data reliability and the broader recovery in China’s exports.
Exports to Hong Kong rose to $46 billion last month, according to just-released General Administration of Customs data. That was the highest value in almost three years and the biggest amount for any December period in the last 10 years, customs data show. Imports from Hong Kong surged 65 percent, the most in three years, to $2.16 billion.
Economists said the surprise gains may echo past instances of phony invoicing and other rules skirted to escape currency restrictions. China’s government said in 2013 that some data on trade with Hong Kong were inflated by arbitrage transactions intended to avoid rules, an acknowledgment that export and import figures were overstated.
The increase in exports to Hong Kong and China’s imports from the city probably indicate "fake invoicing," said Iris Pang, a senior economist for Greater China at Natixis in Hong Kong. Invoicing of China trade should be larger in December because of the wider gap between the onshore yuan and the offshore yuan traded in Hong Kong, she said.
China’s exports to the Special Administrative Region of more than 7 million people eclipsed the $35 billion tallies last month for both the U.S. and the European Union, the data show. Exports to Brazil, Canada, Malaysia, and Russia all dropped more than 10 percent.
The imports gain "points to potential renewed fake trade activities," said Larry Hu, head of China Economics at Macquarie Securities in Hong Kong. When the yuan rose in 2013, exports to Hong Kong were inflated artificially, he said, and "now it’s just the opposite."
The recovery in exports in December may prove to be a temporary one due to a seasonal increase at the end of the year, and it doesn’t represent a trend, a spokesman for customs said. A weak yuan will help exports, but that effect will gradually fade, the spokesman told reporters in Beijing.
Cosco confirmed as only bidder for Greece’s Piraeus port
Greece has only received one bid — from China's Cosco Group — for a majority stake in the Piraeus Port Authority, the operator of the country's biggest port, the privatization agency said.
The leftist government of Alexis Tsipras halted the port privatization after winning elections in January last year, but resumed the process under the $93 billion bailout with its euro zone partners in August.
Privatizations, a key element of Greece's bailouts since 2010, have produced revenue of only $3.8 billion so far.
Athens concluded a $1.3 billion airport leasing deal with Germany's Fraport in December, hoping this would help it to meet its target for privatization proceeds of $3.25 billion this year.
The final bids for a 51 percent stake in Piraeus Port were submitted on Dec. 21. The prospective buyers were not made public, although there was speculation that Cosco was the sole bidder.
The privatization agency said it will ask the bidder to raise its offer.
Greece has said that Cosco, Denmark's APM Terminals and Philippines-based International Container Terminal Services were interested in the sale.
Hapag-Lloyd executive appointed CEO of Port Canaveral
Canaveral Port Authority Commissioners announced they have chosen shipping line executive Capt. John W. Murray as the next chief executive officer of Florida’s Port Canaveral.
Murray currently is the president and CEO of Hapag-Lloyd USA, a major shipping line that operates approximately 150 modern container ships and transports more than five million TEUs per-year.
"We believe our port and our community will be well served having Capt. Murray at the helm," said Commission Chairman Jerry Allender. "He brings strong business experience and leadership skills that will help the Port navigate to our next level."
Allender said he hopes to have a negotiated contract with Murray on this month’s Commission meeting agenda scheduled for January 20.
Outgoing CEO John E. Walsh’s last day is January 21. If necessary, Port Canaveral CFO Rodger Rees will step into the CEO role in the interim.
Cargo ship catches fire off UK’s Norfolk coast
Two Coastguard helicopters, a lifeboat and two other vessels were dispatched to respond to a ship fire today off the coast of Cromer.
The ships seven crew members were still on board and trying to keep the fire under control. An additional Coastguard rescue helicopter from Humberside came on scene along with the Cromer RNLI Lifeboat.
The UK Coastguard received a mayday message, broadcast at 5:20 in the morning to report that the vessel, carrying wheat to Rotterdam, had a fire in its accommodation.
"The crew are still on board the vessel and keeping the fire under control. However, we have a rescue helicopter hovering above as well as a lifeboat on scene so that, should the need arise, they can evacuate the ship," said Ian Guy, a spokesman for the Coast Guard. "The Humberside Fire and Rescue fire fighting crew will be on scene soon and will assess the fire at that point."
Losses in the container shipping industry could grow to $5 billion in 2016, as fuel prices bottom out and freight rates continue to fall, according to the latest issue of Container Forecaster by Drewry Maritime Research.
With the holiday season over, import cargo volume at the nation’s major retail container ports is expected to slowly decline through the first quarter of the year, according to the latest issue of Global Port Tracker report from the National Retail Federation and Hackett Associates.
For the first time, U.S. border agents will inspect trucks entering the U.S. on Mexican soil, working with their Mexican counterparts.
Photo credit: Reuters/Valerie Volcovici