Cargo Business Newswire ArchivesSummary for February 17 through February 21, 2015:
Tuesday, February 17, 2015
Shippers Face Choppy Waters
By William DiBenedetto, CBN Features Editor
With the West Coast congestion crisis threatening to explode into a full-scale lockout, shippers seem locked in a lose-lose-lose dance with carriers and ports.
Add to that the uncertainties surrounding decisions to divert cargoes, the low price of fuel and what that means for slow steaming, carrier reliability and the price of doing business — and it’s likely that once the congestion eases, the endgame is likely to be lengthy, complex and unsatisfactory.
Frustration is the watchword. One large group of shippers, the National Retail Federation, has run out of patience. In a statement late last week, the NRF asserted: "Enough is enough. The escalating rhetoric, the threats, the dueling press releases and the inability to find common ground between the two sides are simply driving up the cost of products, jeopardizing American jobs and threatening the long-term viability of businesses large and small.
"Our message to the ILWU and PMA: Stop holding the supply chain community hostage. Get back to the negotiating table, work with the federal mediator and agree on a new labor contract."
And that’s just one issue facing shippers; they are also dealing with "unacceptable" performance and reliability levels on all trades by container operators, according to Simon Heaney, Senior Manager of Supply Chain Research at Drewry Supply Chain Advisors. He said the latest data reveals that "reliability ended 2014 on a downer."
Heaney added that container operator performance is "unacceptably low." For instance, East-West trade schedule reliability from July through September last year was 58.9 percent, and it improved only marginally between October and December to 61.9 percent. Even worse news for shippers is that there is “no link between reliability and freight rates," he said.
"It’s vital for shippers to know the reliability performance of their providers," he continued. "Predictability and reliability are key for shippers; they are already used to extended load times under slow steaming," but even with slow steaming pretty much engrained, the on-time trend for container operators is "worryingly poor."
Heaney said that shippers should "keep a close eye on reliability and should insist on performance incentives and penalties" for non-performance. Incentives? Penalties? Heaney noted it is a "fairly rare occurrence," and even when they are included in a contract most of the time they are not acted upon. Most shippers “don’t have the stomach to follow through," he said.
Can shippers expect carriers to speed up now that fuel prices are so low? If they do it won’t be by very much, Heaney says. "I expect carriers to speed up slightly, but it won’t start just yet because it’s useful to keep load levels at reasonable levels."
The mega-alliances such as the 2M have increased their speeds slightly to 18.5 knots from 17.8 knots, Heaney said, as a consequence of low bunker fuel costs — and perhaps more important — in order to impress shippers by getting their new services off to a good start. Going faster would put extra capacity on trade routes, so it is unlikely that carriers will increase speeds anywhere near their top speeds of 24-25 knots.
Another factor, barring an increase in speeds, is that many operators have modified their vessels to travel at slower speeds. It would be too expensive to make the modifications needed to increase speeds. They are also hesitant to speed up because slow steaming allows them to employ their excess capacity; going faster could force them to lay up vessels.
Slow or fast, it is all problematic for shippers and supply chains. At the moment carriers seem more interested in cutting capacity on oversupplied trade lanes. Maersk Line said it would cut the capacity on the struggling Europe-South America trade lane as it battles with an oversupply situation.
Next: Dealing with the EU’s new shipper rules and the "capacity crunch."
Washington State Senate considers $15B package to facilitate cargo flow
The Washington State Senate are considering a $15 billion transportation revenue package that would help speed the movement of cargo through the ports, according to a statement from the ports of Seattle and Tacoma.
The measure is expected to pass with bipartisan support. Under the 16-year plan, the gas tax would increase in three stages: a 5-cent increase would take effect this summer, a 4.2-cent increase would follow next year, and then a final 2.5-cent increase would take effect the following year, according to an article in The Columbian. The plan would also redirect sales tax money from transportation projects to a transportation fund instead of the state's general fund, the article said.
The ports have been advocating for funding to complete the key freight routes — State Route 509 in King County and State Route 167 in Pierce County — which now are supported in both the new Senate proposal and the earlier proposal passed in the state House of Representatives.
"We want to thank lawmakers for their hard work and collaboration to develop this transportation package. It is critical for our ports to maintain a competitive edge and supports the Seaport Alliance," said Port of Tacoma Commission President Don Johnson. "Completing state routes 167 and 509 will keep and grow jobs throughout Washington state."
The Washington State Department of Transportation estimates a competed SR 167 could fuel job growth to the tune of $10.1 billion, according to the port statement.
"Farmers, manufacturers and businesses of all sizes need an efficient gateway to reach global markets," said Port of Seattle Commission Co-President Courtney Gregoire. "This package means jobs and economic development across our state, and we thank our senators and legislators for recognizing the need to invest in transportation infrastructure."
According to studies commissioned by the Port of Seattle and cities of SeaTac and Des Moines, the completion of SR 509 will allow for development of over 5 million square feet of office, retail and commercial space totaling nearly $700 million in new construction.
Port Metro Vancouver reports record cargo volume in 2014
For the second consecutive year, Port Metro Vancouver reported record-breaking cargo handling levels.
The port processed record high total tonnage in 2014 in the bulk and container sectors. PMV’s terminals handled 140 million tons of cargo in the year, up 3 percent year-over-year. Import cargo was up 4.1 percent and export cargo increased by 3.3 percent.
"The port had another record year for cargo volumes, increasing the demands created by a growing Canadian economy and increasing international desire for Canadian trade," said PMV president and CEO Robin Silvester.
Bulk cargo increased 5.3 percent over the past year, after growing 11 percent in 2013. The port attributed the growth to an 18 percent increase in wheat exports and 31 percent growth in canola shipments.
Maltese cargo ship assisting migrant ship off Libya
A Maltese cargo ship was on its way Friday to assist a migrant boat with around 100 passengers that was in distress off the coast of Libya, while an Italian coast guard vessel helped two other boats, according to the Italian coastguard.
More than 300 African migrants have already died this week, attempting to reach Italy from North Africa.
Coastguard headquarters in Rome said it had received a call for help by satellite telephone and had directed the Maltese ship to the location of the first vessel, a rubber boat.
President Obama sends Labor Secretary to negotiate West Coast labor deal
Photo credit: Reuters/Jonathan Ernst
President Obama is sending Labor Secretary Tom Perez to negotiate a resolution to the labor standoff that has shut down trade at 29 ports along the West Coast.
White House Deputy Press Secretary Eric Schultz said Saturday that Perez is reaching out to port management and International Longshore and Warehouse Union officials to broker a deal due to concerns about the economic impact of further delays. Perez reportedly met with both parties on Tuesday.
"The negotiations over the functioning of the West Coast Ports have been taking place for months, with the Administration urging the parties to resolve their differences," said Schultz.
The White House has been facing pressure to intervene in the labor dispute, which is impeding cargo flow to cities as distant as Chicago. A federal mediator, who joined the talks early in the year, has been unable to forge a deal.
"We welcome the administration's attention to this important national and international economic and supply chain issue and hope it recommits the two sides to reaching a deal," said Jonathan Gold, vice president of supply chain for National Retail Federation. "The slowdowns, congestion and suspensions at the West Coast ports need to end now."
The Pacific Maritime Association, which handles labor negotiations for port employers, closed ports in Washington, Oregon and California Feb. 12, 14, 15, and 16 due to allegedly unfair union contract demands and work slowdowns.
By Saturday morning, 32 vessels were waiting to unload at the ports of Los Angeles and Long Beach, California, according Lee Peterson, a Port of Long Beach spokesman.
"What they’re doing amounts to a strike with pay, and we will reduce the extent to which we pay premium rates for such a strike," PMA spokesman Wade Gates said in a statement.
The ILWU has offered a starkly different take, arguing that managers are needlessly closing the West Coast ports "to divide us."
"They’re using lies and tactics to turn the public against and town locals against the negotiating committee, and the rank-and-file against each other," ILWU President Robert McEllrath said in a video that was posted on the union’s website.
"We want to go to work, and they’re blaming us," he continued. "There’s space on the docks to unload vessels, there’s cargo to be delivered, and we’re here to do it."
Lawmakers representing districts near ports on the West Coast lauded the Administration's move to get involved.
"I spoke to Secretary Perez on Thursday about the negotiations at our port and the need for a quick resolution," Rep. Janice Hahn (D-Calif.) said in a statement. "I am encouraged by this development and I hope that Secretary Perez will work to keep both sides at the table and help them find a resolution that keeps our ports open and our workers on the job."
Canadian Pacific and union workers agree on arbitration after 1-day strike
Canada’s Labor Minister Kellie Leitch announced Monday the government would withdraw back-to-work legislation now that Canadian Pacific Railway and the Teamsters union have agreed to arbitration.
Leitch had issued a strongly worded statement Sunday that blamed the union representing CP’s locomotive engineers and conductors for the breakdown in contract talks over the weekend, calling on its officials to abandon their strike and recommence negotiations with the company.
Earlier, NDP labor critic Alexandre Boulerice told reporters that back-to-work legislation wouldn't help resolve worker issues such as fatigue, arguing the problems linger three years after the government last introduced back-to-work legislation.
The strike by members of the Teamsters Canada Rail Conference started Sunday after contract talks failed to reach an agreement before a Saturday night deadline.
The Port of Seattle has signed a two-year lease with Shell Oil under which the company will use Terminal 5 as the headquarters for its efforts to drill in Alaska’s Chukchi Sea.
The authorization, negotiation and signing of the lease were completed quickly, securing $13.17 million for the port and forestalling efforts by environmental groups to stop it.
Covering 50 acres of Terminal 5, the lease is with Foss Maritime, which offers a range of supply and tug escort services.
The lease was signed Monday. On Tuesday, Fuse Washington announced that more than 1,000 members of its organization had signed a letter questioning the Shell homeport agreement. Fuse is the state’s largest progressive organization.
The environmental community argues that Arctic waters cannot be safely drilled, and that a spill would endanger a major polar bear population as well as North America’s largest walrus population and gray whales, which feed in the Chukchi Sea in summer and fall.
The oil giant expects to spend $1 billion on its Arctic plans this year. Shell’s profits for 2014 totaled $19.04 billion, even as oil prices were dropping.
DP World to build third berth at London Gateway
DP World London Gateway has announced plans to move forward with a third berth, according to the port’s website.
Berth Three will use an additional 400 meters of quay length with a dredged depth of 55 feet. DP World London Gateway port can easily handle the largest container ships and has developed innovative technology to ensure the port remains open in bad weather.
Contracts have been awarded to VolkerFitzpatrick for civil and electrical works and four new quay cranes have been ordered from ZPMC, according to the port statement. The third berth is scheduled to be operational in the second half of 2016.
"Since opening, DP World London Gateway has continued to attract more shipping line services and we remain committed to increasing speed and efficiency in supply chains," said DP World Vice Chairman Jamal Majid Bin-Thaniah.
DP World London Gateway Port, close to key consumer areas such as London, Birmingham and Manchester, has 16 million consumers within 50 miles. Rail services from the port call at 11 destinations across the UK.
Fire breaks out on MOL vessel at Port of Oakland
Oakland firefighters fought a two-alarm blaze aboard the MOL Contribution Sunday evening, a battalion chief said.
Battalion Chief Geoff Hunter said firefighters responded to a report of a fire at 5:55 p.m. onboard the ship, which was berthed at Pier 32. He said the fire was inside the third officer's cabin and passageway area on the "F" deck, which are five decks above the main deck.
Fifteen of the ship's crewmembers were already fighting the fire when Oakland firefighters got there, Hunter said. The Oakland Fire Department assumed control of the firefighting efforts and Hunter said fire crews were able to extinguish the blaze within about 30 minutes.
U.S. Labor Secretary joins West Coast port labor talks
On Tuesday, U.S. Labor Secretary Tom Perez urged PMA and ILWU negotiators to settle the dockworker contract dispute that has contributed to unprecedented cargo backups at 29 West Coast ports.
He arrived just as several West Coast ports, including L.A.-Long Beach, were reopened following a three-day weekend closure implemented by employers who said they didn’t want to pay overtime for dockworkers who were not working up to speed. Consequently, no container ships were unloaded over the holiday weekend.
Perez met separately with each side, then briefly with both parties together. Further sessions were expected to occur on Wednesday, inside sources told Reuters.
"Secretary Perez made clear that the dispute has led to a very negative impact on the U.S. economy, and further delay risks tens of thousands of jobs and will cost American businesses hundreds of millions of dollars," said Labor Department spokeswoman Xochitl Hinojosa in a statement Tuesday afternoon.
Perez encouraged the parties "to come to an immediate agreement to prevent further damage to our economy," she said.
Invoking Taft-Hartley would be a long shot under current circumstances, according to Daniel Mitchell, professor emeritus for management and public policy at the University of California, Los Angeles.
Mitchell said President Obama would need to convince a federal judge that there was a work stoppage — not just a slowdown — connected to the labor discord that posed a national emergency, rather than an inconvenience to industry.
In an effort to expand its presence in the U.S., Japan freight company Kintetsu World Express is buying the logistics business of Neptune Orient Lines — APL Logistics — for $1.2 billion.
The price tag may shock skeptics who had suggested offers for APL Logistics could be closer to $600 million, due to weak global freight rates. But many Japanese conglomerates have been making major deals worldwide since the start of 2014 to counteract sluggish trading in Japan, often paying hefty premiums.
Kintetsu Express, worth $1.5 billion, said it would use its own capital and bank loans to fund the deal. The company was attracted by APL Logistics' international reach, and expertise in offering logistics services for the automobile and retail industries.
NOL Group President and CEO Ng Yat Chung said the agreement would help the company focus on improving its liner shipping business. The firm has been looking for a buyer for its APL Logistics operation since August of last year.
Hamburg Süd has inked a deal to acquire Chilean container carrier Compañía Chilena de Navegación Interoceánica (CCNI), according to a company statement.
The takeover, subject to regulatory approval, is scheduled to take effect at the end of March.
The German shipping line said it would operate the CCNI container liner business under its well-established brand name on the main trades between the West Coast of South America, Asia, Europe and North America.
The CCNI purchase includes the related general agency functions of Agunsa Agencias Universales, (Agunsa), which is headquartered in Valparaiso and Santiago de Chile, the statement said.
Hamburg Süd said CCNI would discontinue their container line services and would only use the CCNI name for the car carrier activities that they will retain.
China launches $40B Silk Road infrastructure fund
On Monday, China launched its $40 billion Silk Road infrastructure fund.
The Silk Road Fund, which will finance China-proposed "Belt and Road" initiatives, has begun operations, according to the People's Bank of China. Belt and Road refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives proposed by China in 2013 to improve cooperation with countries in large regions of Asia, Europe and Africa.
The Silk Road Fund Co. Ltd., which will be managed by three of the nation’s financial institutions, was established in December last year in Beijing. The fund is drawn from China's massive $4 trillion forex reserves.
"The priority (of the company) is to seek investment opportunities and provide investment and financing services during the progress of the Belt and Road Initiatives," the People’s Bank statement said.
Hong Kong Customs seizes container filled with pangolin scales
Hong Kong Customs have seized just over one ton of pangolin scales from a shipping container that arrived from Kenya.
Pangolins, also known as scaly anteaters, are an endangered species protected by an international ban on their trade. Their meat is in great demand in China and Viet Nam, where they are considered a delicacy.
This is the second interception in Hong Kong of a shipment of pangolin scales from Africa in just five months, following the seizure of 320 kilograms of pangolin scales in October 2014.
Labor Secretary turns up heat on W.C. talks as employers take "last and final" deal straight to the docks and rumors fly that deal hinges on one local official.
According to USA Today, Secretary of Labor Thomas Perez gave leaders of the ILWU and PMA a Friday deadline, saying if they don't reach an contract agreement by then for longshore workers at 29 West Coast ports, they will have to move their negotiations to Washington D.C.
Perez, who joined the labor talks on Tuesday, said if the two sides did not succeed, he would haul their leaders to the nation's capital next week, according to Oakland Mayor Libby Schaaf, who learned about the deadline in an evening call Perez had with mayors of major West Coast port cities.
Changing the venue to "the shadow of the White House will place immense pressure on these parties to resolve an issue that is being underscored as being of national importance," Schaaf said. Perez's office did not have immediate comment Thursday night.
The Associated Press said Thursday that West Coast port employers went straight to dockworkers with their "last, best and final offer," bypassing the union in an action sure to anger ILWU officials, who were in closed session at the time, with both sides supposedly adhering to a media blackout.
The employers reportedly distributed letters to rank and file workers at ports from Los Angeles to Washington state, outlining in detail the offer that management made to the union Feb. 12. The AP story noted the letter's "last, best and final offer" syntax could be laying the groundwork for "the declaration of an impasse and therefore a full lockout of workers by employers."
Meanwhile, the Los Angeles Times reported on word that the main sticking point in West Coast port labor negotiations constellates the fate of a single, local arbitrator who rules on conflicts involving Los Angeles and Long Beach dockworkers.
Talks between the Pacific Maritime Association and the International Longshore and Warehouse Union are at a stalemate, ostensibly due to a union request to change the rules for removing local arbitrators who decide on workplace issues. Inside sources say the real sticking point lies in union leaders' wish to fire local South California arbitrator David Miller, who could not be reached for comment.
"It's crazy, and you can quote me," Los Angeles Mayor Eric Garcetti said Thursday, after spending Wednesday in San Francisco trying to help move the talks forward.
"It is highly disappointing that with so much at stake, you have not been able to come up with a path forward on this one remaining issue," wrote California Sens. Barbara Boxer and Dianne Feinstein in a joint letter to the PMA and ILWU.
Right now, both sides have to agree to appoint and fire arbitrators. However, according to the employers, the union wants either side to be able to remove local arbitrators at the end of a labor contract.
Rep. Janice Hahn (D-Los Angeles), a union supporter, said ILWU leaders have told her that Miller is "too close" to employers.
Garcetti said Thursday that "the whole contract could be wrapped up in a matter of hours if this last issue is overcome."
Breaking News: CBN West Coast Update: PMA and ILWU make a deal
Photo credit: Luis Sinco/Los Angeles Times
On Friday night, the Pacific Maritime Association and the International Longshore and Warehouse Union announced that they have reached a tentative agreement on a new five-year contract for dockworkers at 29 West Coast ports, according to a joint statement. No details were revealed.
"After more than nine months of negotiations, we are pleased to have reached an agreement that is good for workers and for the industry," said PMA President James McKenna and ILWU President Bob McEllrath in the statement. "We are also pleased that our ports can now resume full operations."
The press release acknowledged that the deal, subject to ratification by both parties, was reached with assistance from U.S. Secretary of Labor Tom Perez and Federal Mediation and Conciliation Service Deputy Director Scot Beckenbaugh.
"We thank the ILWU and PMA and look forward to everyone getting back to business as usual starting immediately," said Port of Long Beach Chief Executive Jon Slangerup. "We know that the marine terminal operators, longshore workers, truckers, railroads and others will be extremely busy as they work to clear out the massive backlog of cargo at all of the West Coast ports, including Long Beach. All of us will be working together to make this happen as soon as possible, but once again, we are extremely pleased with today’s news."