Cargo Business Newswire ArchivesSummary for February 2 through February 6, 2015:
Monday, February 2, 2015
Trucking Trends: How the bursting energy bubble will affect trucking
By Mark Montague, DAT Solutions
For the first time since September 2010, the national average retail price for a gallon of diesel fuel is below $3. Retail pump prices, which averaged $3.83 a gallon in 2014, have already hit an average of $2.866 a gallon this year.
No one can say where the price will settle.
All that’s certain is that lower fuel prices are good for truckers. Every 1-cent drop in the average price of diesel equates to an industry-wide annual fuel savings of $350 million, according to the American Trucking Associations, aiding an industry that faces rising operating costs and driver wages in particular.
Today’s prices are also a windfall for shippers in the form of lower fuel surcharges.
Everybody wins when the cost of fuel cycles down, right? Well, maybe not everyone. Let’s take a closer look at how lower fuel prices may affect truckload freight markets:
A Blow to Oil Production
With oil prices down by more than half since June 2014, several major oil and gas companies said they would cease new drilling projects after the first quarter. Many smaller companies are busy reworking their 2015 plans.
That’s a big change. Hydraulic fracking helped drive domestic oil production from 5.6 million barrels a day in 2010 to the current rate of more than 9.1 million. As late as November 2014, analysts and energy companies were projecting output to climb by more than 1 million barrels-per-year in the foreseeable future.
PacWest Consulting Partners predicts a 12 percent decline in the number of horizontal oil and natural gas shale wells in the U.S. land market this year and an 8 percent drop in frack demand overall.
But that was last month. Forecasts are changing every day.
Impact on Trucking
The downturn in oil and gas exploration impacts trucking in several ways.
First, there will be less oil-industry cargo to move, including oilfield service equipment, infrastructure items, water and frack sand. Second, there will be less competition for truck drivers from the oil and gas sector. For shippers, these factors should combine to free up general truckload capacity this year and potentially exert downward pressure on rates.
Shifting Freight Patterns
Freight patterns are shifting, too.
The slumping energy market is affecting the flow of freight in many oil-producing states like New Mexico, Kansas, North Dakota, Oklahoma, and Louisiana.
Elsewhere, freight continues to move but the types of commodities are changing.
For example, driven by the energy boom, Houston was transformed from a poor cousin to Dallas, in terms of tonnage, into a strong rival. Houston led all markets for spot flatbed freight growth and tonnage in 2014 by a very wide margin. While Houston-outbound flatbed corridors will be quieter this year, van freight is booming along the chemical coast due to the high availability of chemical byproducts.
Flatbed haulers who found so much work moving heavy equipment and materials to the oilfields may shift their focus to steel and auto-related cargo in the Great Lakes as well as some key Southeastern markets. So far this year, Cleveland shows the biggest increase in outbound spot market volume followed by Pittsburgh, Birmingham, and Memphis. All four markets are active in steel production.
Auto sales are increasing, meanwhile, which is positive for the economy. A strong automotive industry boosts flatbed traffic outbound from the Great Lakes region — like Detroit, of course — but also markets in Indiana, Ohio, and Texas as well as some Southeastern states.
New Growth
As gas prices fall, what will be the sources of freight growth?
The obvious answer is consumer goods. Households will likely spend $750 less on gas this year because of cheaper oil. Consumer spending for goods and services has already grown as a result of declining fuel costs.
Significantly, economists expect a surge in construction and sales of single-family homes. That sector has lagged since the recession, but with the job market recovering, younger people are finally employed and confident enough to apply — and qualify — for mortgages while interest rates are still fairly low.
Already, 2015 is shaping up to be a year of change. As new patterns play out, I’ll keep looking for rate shifts and load-to-truck ratio changes — and I’ll be here to tell you about them.
Mark Montague is manager, industry rates, for DAT Solutions, which operates the DAT® network of load boards. As a mathematician and statistician, he has applied his expertise to logistics, rates, and routing for more than 30 years, and was instrumental in developing DAT’s RateView truckload rates and analysis product. Mark is based in Portland, Ore. For information, visit www.dat.com.
Long Beach port head says congestion will ease
In his first State of the Port address last week, Port of Long Beach Executive Director Jon Slangerup said he is confident Long Beach can overcome its challenges and be known throughout the world as the Port of the Future, according to a port statement.
Slangerup shared plans for congestion-beating smart systems for cargo movement as well as an Energy Island initiative for the port to find its own self-sustaining energy sources.
"We are well on our way to becoming the Port of the Future," he said to a crowd of more than 900 attendees at the convention center.
Slangerup said the chronic congestion faced by the Port of Long Beach was caused by a "perfect storm" of factors: bigger ships with more cargo to move; a chassis shortage; a rail car shortage; and ongoing labor negotiations.
"Congestion is the single toughest issue we face," he said. "And if we don’t fix it immediately, we will drive business away permanently."
To solve some of those issues, he suggested a smart system that will help improve efficiency in loading and off-loading cargo containers; he also said the chassis shortage is being addressed now and a peak relief fleet will be established so that chassis are not a contributing factor to congestion again.
"We have a choice," he said. "We can watch our business go elsewhere, or we can come together to change the way our supply chain works."
Slangerup touted the port’s infrastructure projects, noting the first phase of the $1.3 billion Middle Harbor Terminal Redevelopment project was set to be finished this summer. Tenant Long Beach Container Terminal and its parent company Orient Overseas Container Line will begin operations there this fall, increasing port container capacity by 10 percent.
He said once the Middle Harbor project is complete, it would be so large that it could stand alone and operate as the fourth busiest port in the country. Slangerup also praised the work being done to construct a new Gerald Desmond Bridge, with the foundation piles taking shape now.
Together, the Middle Harbor project and the new bridge will allow larger and larger ships to use the Port of Long Beach, which already provides service to some of the biggest ships in the country.
Another major success for the Port of Long Beach, he said, is that it has reached a 10-year milestone for its Green Port Policy. Last year, Long Beach was recognized with the distinction of having the world’s cleanest seaport.
Touching on plans for Energy Island, Slangerup told the audience that the port would be looking at wind turbines, solar panels, fuel cells, and other clean technologies — even seawater desalination — that would make the port self-sustainable. Port energy could also help power vital city services (such as hospitals) during times of emergency.
"Our Port of the Future will be a zero emissions port," he said.
L.A-Long Beach truckers win court case
Truck drivers in the ports of Los Angeles and Long Beach are employees, not independent contractors, according to a Superior Court judge, who ruled that seven of the truckers are owed more than $2 million in damages.
Judge Jay M. Bloom ruled that trucking firm Pacer Cartage should have given the independent drivers the same benefits and protections as employees, such as health care, overtime pay and sick leave. Companies also pay fewer taxes on independent contractors than full-time employees.
Judge Bloom ordered Pacer to pay the seven drivers damages spanning from $387,936 to $85,632.
The ruling comes after two years of legal battles and five strikes by drivers. It is a boon for labor supporters and the International Brotherhood of Teamsters, which in recent months has helped bring several labor conflicts to court.
Earlier this month, drivers for a port trucking company in Carson, Calif., unionized under the Teamsters.
"This case sets the stage for all the other cases that are pending," said attorney Alvin Gomez, who was representing the drivers. "Now, every truck company is put on notice that if they have a similar scheme in place, (they) are in willing violation of California law."
Port Metro Vancouver truckers stage rolling strike
Frustrated port truckers in Vancouver B.C. held a rolling strike last week with more than 300 semi's holding up traffic on some major routes.
They’re upset with new rules at Port Metro Vancouver, where new port licenses have only been approved for 68 companies, down from 165. That means 600 drivers are out of work and claiming that the new licensing process is unfair.
The protest started in Delta and went through Richmond via Highway 91, ending up in Vancouver and down Highway 1 back to Surrey. Truckers say they didn’t want to hold up rush hour traffic so they did this in the middle of the day, before and after people normally commute. But some drivers got caught in the mess.
"All of a sudden there were a whole bunch of 18 wheelers and people were slamming on their brakes from 100 kilometers an hour down to 30," said one man.
The family of one of the truckers affected by the licensing rules says it’s going to be difficult to make ends meet.
Another protest of sorts was planned for Friday with the support of union drivers.
A treasure hunter charged with cheating investors out of their share of one of the richest hauls in U.S. history — $50 million in gold bars and coins from a 19th-century shipwreck — was arrested at an high end hotel in Florida after more than two years as a fugitive.
Federal marshals found Tommy Thompson at a hotel in West Boca Raton and arrested him last Tuesday. A warrant had been issued for him in 2012 when he failed to show up for a hearing on a lawsuit brought by some of his backers.
The U.S. Marshals Service called him "one of the most intelligent fugitives ever sought" and said he relied on cash and other means to stay under the radar.
Hanjin ship turns away from Port of Portland on congestion
Dockworkers walked off the job twice last week at Terminal 6 at the Port of Portland, a sign of ongoing contentious contract talks between ICTSI Oregon and the International Longshore and Warehouse Union.
Shippers worry that Hanjin Shipping will reconsider its decision to keep calling at the port as one Hanjin vessel was turned away last week after learning of repeated delays in loading and unloading another vessel that had already docked.
Neither ICTSI nor ILWU returned calls seeking comment by press time.
Although labor talks have been conflict-ridden for West Coast ports, port officials and shippers say the labor-management problems are even more serious at Portland, where labor disruptions have been going on for two years.
Labor relations at the port went south in 2012 after a dispute over which union workers had jurisdiction over maintenance work on refrigerated containers. Since then, terminal operators have repeatedly accused dockworkers of staging slowdowns, with ICTSI making fresh slowdown allegations Thursday. The union has denied the charges.
"It's been consistently inconsistent, which is extremely detrimental," said Josh Thomas, a port spokesman. "There's a ripple effect when there's a broken link in the supply chain, so it's in everybody's interest to get this resolved."
Maersk Line has begun talks with Asian shipbuilders to order up to 10 container megaships worth around $1.5 billion, according to the Wall Street Journal.
One source said the vessels would have a 20,000-TEU capacity and the order would probably be completed in the first quarter.
A spokesman for Maersk Line declined to comment.
Despite the extra tonnage in the water, Maersk Line CEO Soren Skou told The Wall Street Journal in November that the shipping giant intended to place new orders of mostly large container ships in the first half of this year. Skou said shipping demand would grow 4 to 5 percent over the next few years and fully loaded super-sized container vessels like the Triple-E class save the firm around 25 percent of the cost of moving a container from Asia to Europe compared with smaller ships.
Jonathan Roach, an analyst at London-based Braemar ACM Shipbroking, said the new ships would be deployed in the Asia-Europe trade loop. He said global container-fleet capacity would increase by 8 percent this year, but deliveries of bigger ships that can carry at least 10,000 TEUs would grow by 25 percent.
For more of the Wall Street Journal story: www.wsj.com
Top shipping official to retire at Port of New York/New Jersey
The top shipping executive at the Port of New York and New Jersey intends to step down as soon as a replacement can be found.
Richard Larabee, director of port commerce, will retire after 15 years at the port complex. During his tenure, he oversaw billions of dollars in improvements at the Port of New York and New Jersey, including dredging shipping channels to 50 feet, expanding port rail operations, road improvements and the launch of environmental initiatives.
Most recently, Larabee led the creation of an industry council to plan for growth at the port as it prepares for the arrival of super-sized container ships.
Chinese and Greek officials meet after Greece says it no longer wants to privatize Piraeus Port
Greek and Chinese government officials met last week after the newly elected left-wing Greek government said they wanted to halt the deal to privatize Piraeus Port.
Keeping the port's management in state hands was "a strategic move to reconstruct the country's productive apparatus," the new government said.
A meeting between Greek Economy, Infrastructure, Shipping and Tourism Minister Giorgos Stathakis, Deputy Maritime Minister Thodoris Dritsas, Chinese Ambassador Zou Xiaoli and a delegation of Chinese diplomatic officials was held Friday in Athens.
The Chinese Trade Ministry and Cosco, which is the main candidate for the purchase of the port’s majority stake, were rattled by the announcement.
Cosco, through its Piraeus Container Terminal (PCT) arm, manages the two main container terminals at the port under a 35-year concession signed in 2008.
"Agreements such as the ones with Cosco should be made in the framework of transnational agreements and we seek the strengthening of relations both with China and other countries," said Statahkis, adding that the new government will "respect the contracts, such as the one with PCT SA (Cosco)," but will examine all contractual obligations.
However, analysts note that posturing aside, the new Greek government is unlikely to try to dislodge China from Piraeus.
"From a legal point of view, I can't see how they can go back on contracts signed with Cosco, given the size of this investment, which is the biggest in Greece in recent years," said George Xiradakis, a consultant in the merchant marine sector.
For more of the South China Morning Post story: www.scmp.com
K-Line official sentenced in DOJ shipping investigation
An executive of Japan’s K-Line (Kawasaki Kisen Kaisha Ltd.) shipping company pleaded guilty Friday and was sentenced to 18 months in a U.S. prison for his involvement in a conspiracy to fix prices, allocate customers and rig bids of international ocean shipping services for roll-on, roll-off cargo, the Department of Justice reported.
According to the one-count felony charge filed in U.S. District Court for the District of Maryland, Hiroshige Tanioka, a manager in K-Line’s car carrier division, conspired to allocate customers and routes, rig bids and fix prices for the sale of international ocean shipments of Ro-Ro cargo to and from the U.S. and elsewhere, including the Port of Baltimore.
AAPA: Obama’s transportation proposal short on port funding
Shipping industry groups in D.C. are unhappy with President Obama’s $478 billion transportation plan, saying it does not include enough funding to boost U.S. ports.
The White House proposal would fund $317 billion for U.S. roads and bridges over the next six years, including $94.7 billion for the 2016 fiscal year. The plan also includes $143 billion on federal transit projects and $18 billion on freight improvements over six years.
The American Association of Port Authorities said the president’s plan offers only a paltry sum for the nation’s ports.
"International trade now accounts for fully 30 percent of the U.S. economy," AAPA President Kurt Nagle said in a statement. "To compete in global markets, America needs an efficient and modern freight transportation infrastructure system, including seaports and the land and water connections into and out of port facilities."
Nagle said the impact of the spending could be offset by a reduction in funding for the U.S. Army Corps of Engineers’, which selects port projects for federal spending under a separate water infrastructure bill that was passed last year.
The AAPA head said Obama’s transportation proposal would also reduce the amount of funding for the federal government’s Harbor Maintenance Trust Fund from $1.93 billion to $915 million.
"We’re pleased to see and support the increased funding requested for surface transportation infrastructure, but deeply troubled by the proposed cuts to maintenance and modernization of federal navigation channels, the critical waterside infrastructure that connect our ports and nation to the world marketplace," Nagle said.
Congressional group turns up the heat on PMA-ILWU talks
Since the labor contract talks for West Coast ports remain at a stalemate, and U.S. businesses are suffering, a congressional group has joined their voices to call for a swift resolution.
The two co-chairs of the Congressional PORTS Caucus, California Democrat Janice Hahn and Texas Republican Ted Poe, have written a bipartisan letter expressing hope that the negotiations "will soon reach a fair and equitable resolution."
"Reaching a fair agreement is urgent for workers and their families, for our community, for the businesses that depend on goods moving through these ports and indeed for our nation's prosperity," Hahn said yesterday during an address on the House floor.
Port of New York/New Jersey breaks cargo record in 2014
The Port Authority of New York and New Jersey set a record in 2014 for cargo volume passing through its shipping terminals, according to a port statement.
The port handled more than 3.3 million TEUs during the year, up 5.4 percent year-over-year.
"Our port is continuing to reap the benefits of an uptick in the economy, which has resulted in the hiring of more dockworkers and economic growth for the region," Port Authority Executive Director Pat Foye said in the statement. "We plan to continue our investments in the port in the coming years to maintain the port’s 296,000 direct and indirect jobs and to cement our port as the East Coast’s leading destination."
PANYNJ also pointed to a rise in its ship-to-rail system known as ExpressRail, which also set a new record by handling 465,405 TEUs in 2014, up 9.3 percent compared to 2013.
Hundreds of truckers protest Port Metro Vancouver licensing plan
Hundreds of truckers and support staff, ousted from their jobs due to new licensing requirements at Port Metro Vancouver, joined together in a rolling protest Sunday on Highway 91.
Protester Michelle Mann said she and her husband were let go last week after the trucking company they worked for was left off the approved list at the port. She says she is stunned that they no longer have jobs but are hoping for a second chance.
"There are companies who have been approved that have been around for a couple years and there are companies who have been around for 20 years," Mann said. "I can’t claim to say that I know what the answers are, but I know that the way that this was done was definitely not the answer."
Mann says the port and government were unclear about the requirements to be approved for work at the port.
For more of the CKNW News Talk story: www.cknw.com
Freighter runs aground in Galapagos
On Wednesday, Jan. 28, the cargo ship Floreana ran aground on its west side, not far from Punta Carola.
After unloading 525 tons of goods destined for San Cristóbal Island, the Floreana was leaving for Santa Cruz Island with 1,400 tons of cargo onboard when it hit bottom.
The Directorate of the Galápagos National Park and the Environmental Ministry reported the next day that they placed containment barriers and absorbent material around the Floreana to keep pollutants from the bay.
Breaking News: PMA makes contract offer to ILWU, warns lockout is imminent
In the midst of rancorous contract talks, the lead negotiator of the Pacific Maritime Association said Wednesday that management had made a "best offer" to dockworkers at 29 West Coast ports, warning that if an agreement isn’t reached, a worker lockout is likely.
In a Wednesday teleconference, Jim McKenna, PMA president and chief executive officer, outlined the terms of a five-year contract. He said the employers’ offer meets the International Longshore and Warehouse Union’s two biggest demands: maintenance of their high-end health benefits and jurisdiction over maintenance and repair of truck chassis.
Wages for full-time longshore workers currently average $147,000 per year, according to a PMA statement. In addition to wage increases of roughly 3 percent per year, the deal includes fully paid health care that costs employers $35,000 per worker per year. The maximum ILWU pension would rise to $88,800 per year.
The news comes amidst reports that although talks are continuing, a collapse in negotiations is imminent. McKenna said in his remarks that a lockout could occur in the next 5-10 days, according to a CBS news station in San Francisco.
ILWU spokesman Craig Merilees struck a more optimistic tone. "The good news is that progress is being made and that they’re getting close and if they just stick to it and knuckle down, they can have an agreement before long," he said to KCBS.
After nine months at the bargaining table, with a federal mediator sitting in for the past few weeks, the two sides are still far from an accord. The PMA has accused the ILWU of staging deliberate slowdowns up and down the West Coast, causing the chronic cargo backups that crippling U.S. ports and businesses. The union has vehemently denied the allegations, saying the cargo congestion is primarily due to the shortage of chassis and the advent of super-sized container ships.
"Our members have shown tremendous restraint in the face of ILWU slowdowns that have cut productivity by as much as 30, 40, even 50 percent," said McKenna. "This offer puts us all-in as we seek to wrap up these contract talks and return our ports to normal operations."
McKenna also said the union has recently made new demands, insisting on changes to the arbitration system that would give them the ability to unilaterally remove arbitrators who rule against them.
Citing dockworker slowdowns at major West Coast ports including Los Angeles, Long Beach Tacoma, Seattle and Oakland, McKenna said this offer "is as far as we can go at this point," and is the best chance at averting what he termed as a "coast-wide meltdown."
In a message to member dockworkers on the union website, ILWU President Robert McEllrath stated: "The Coast negotiating team continues to meet in an effort to reach a fair contract that provides security for its rank and file and stability for the industry despite the propaganda and threats from PMA. I urge the membership to stay strong and united and ignore PMA’s propaganda. Together we will prevail."
Without a new contract, employers could begin a lockout in as soon as five days, or as many as 10 days. "I couldn't tell you exactly, but I can tell you it's imminent," McKenna said.
In response to the PMA remarks, McEllrath said a worker lockout would be "reckless and irresponsible."
"We've dropped almost all of our remaining issues to help get this settled — and the few issues that remain can be easily resolved," he said in a written statement.
According to the Associated Press, McKenna characterized the proposed contract as the employers’ "best offer," even as he said he would be open to reasonable changes.
The 29 West Coast ports involved in the deal collectively generate approximately $1 trillion in trade annually.
NY legislature to vote on eliminating NY/NJ container freight charge
In welcome news for shipping lines, legislation to eliminate the 3-year-old container freight charge at the Port of New York and New Jersey was approved by a NY state senate committee last week, according to a statement from Maersk Line.
The bill has been referred to the Senate Finance Committee and this legislation has also been introduced in the NY State Assembly.
The CFC port fees will remain until New York’s legislative bodies vote, Maersk said, as New Jersey did last year, to eliminate these added costs.
Maersk referred to the Port Authority of NY/NJ as the most expensive port in the U.S. to process a container. It’s is the only port in the U.S. to impose a cargo facility charge on all containers, including empties. A fee of $4.95 is charged per-TEU, $9.90 per FEU, and $1.11 per unit for vehicle cargo.
"This fee is costing ocean carriers $30 million a year which exacerbates the extremely challenging financial environment ocean carriers have faced in recent years," said Timothy Simpson, Maersk Line, Director of Marketing and Communications for North America. "Only three carriers have made a profit the last couple of years. We are optimistic that the NY State Senate and Assembly will recognize how critical removing these fees are to local businesses, the economy and the maritime industry as a whole."
Maersk: APM Terminals’ Costa Rica port to open in 2018
APM Terminals, a division of Maersk Group, is building a port on Costa Rica's east coast that is expected to be operational in 2018, after labor and environmental concerns threatened to terminate the nation’s biggest infrastructure project.
The first phase of the Moin Container Terminal project will cost nearly $670 million and will more than double current capacity by adding 1.3 million TEUS in the country, the world's top pineapple exporter.
"The concession clock is ticking. It means that we have, under our concession agreement, 36 months to build the first phase of the terminal," Paul Gallie, Maersk's Central America managing director told Reuters.
The project, which was fraught with delays for two years, intends to reach a capacity of 2.7 million TEUS, at a total cost of about $1 billion.
DP World handled 60 million TEUs in 2014 across its worldwide network of terminals, with gross container volumes growing by 8.9 percent year-over-year.
The ports operator attributed the growth to its Asia Pacific and Indian subcontinent regions as well as its European and UAE terminals. New volume at London Gateway in the UK and Embraport in Brazil also contributed to the increase.
"The opening of an additional 2-million-TEU capacity in the third quarter of 2014 has alleviated constraint and will provide the capacity we need to achieve further volume growth at Jebel Ali," said Sultan Ahmed bin Sulayem, DP World chairman.
Fiery truck crash results in scorched chicken and bees on freeway
A container truck carrying chicken and another rig loaded with crates of bees collided in California on Monday, catching fire.
The 10 Freeway in Coachella was backed up for hours, as commuters contended with scorched chicken and the bees that had escaped from broken crates.
By Mark Montague, DAT Solutions
Dockworkers walked off the job twice last week at Terminal 6 at the Port of Portland, a sign of ongoing contentious contract talks between ICTSI Oregon and the International Longshore and Warehouse Union.
Shipping industry groups in D.C. are unhappy with President Obama’s $478 billion transportation plan, saying it does not include enough funding to boost U.S. ports.
In welcome news for shipping lines, legislation to eliminate the 3-year-old container freight charge at the Port of New York and New Jersey was approved by a NY state senate committee last week, according to a statement from Maersk Line.