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Summary for March 14- March 18, 2011:
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Tuesdsay, March 15, 2011

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Japan's supply chain tries to cope

The world's third largest economy is still operating despite the destructive 8.9 magnitude earthquake, resulting tsunami, potential nuclear facility leaks, several thousand casualties and a devastated infrastructure in parts of Japan.

The hardest hit Japanese ports are on Japan's northeast coast, where Hachinohe, Sendai, Ishinomaki and Onahama's cargo-handling operations are reportedly out of commission for months, and possibly years.

Sendai's port, where the tsunami was particularly destructive, typically handles cargoes like paper, machinery and rubberized products.

Hong Kong's container shipping line OOCL declared Force Majeure for one vessel calling in Japan, the NYK Themis.

Japan's Mitsui O.S.K. Lines said its chartered vessel C.S. Victory "was carried toward the breakwater by the tsunami and now rests on the bottom of the shallow harbor at Ishinomaki (Miyagi prefecture). All the crew members left the vessel on orders of the harbor master, and none were injured. None of the cargo (kaolin) or fuel oil has spilled from the vessel." .

Japanese electronics manufacturers' supply chains in the country were reportedly impacted including Sony, which suspended operations, and Hitachi, which lost access to the containerized ports it normally uses, including at its namesake port.

Japan had closed all of its ports temporarily last Friday at a reported estimated cost of $3.4 billion to its economy.

Auto manufacturers were also reportedly impacted, including Toyota and PSA Peugeot Citroen, which suspended its operations in Japan.

Semiconductor manufacturing facilities, like Toshiba's, a supplier of one third of NAND memory chips for the Apple iPad, among many others, are built on fault lines and shut down automatically once there an earthquake is sensed.

Ports from Tokyo and to the south are reportedly functioning but with at least some vessel delays.

Carlyle Group leads $5 bil ship-building venture in China

The Carlyle Group, the second largest private equity fund in the world with a $100 billion portfolio, announced it has launched the biggest-ever private sector shipping deal, a $5 billion joint venture to build ships in China that includes ship builder and charterer, Seaspan.

The Carlyle-led venture said it plans to build dozens of container, bulk and tanker ships at state-owned shipyards spending $900 million in equity capital over the next five years and borrowing the balance.

The containerships will be of 10,000-TEU capacity and follows on the heels of Maersk Line's recent announcement it would build ten 18,000-TEU mega-vessels with an option to build 20 more at a Korean shipyard, in what is being widely reported as a bet on global containerized demand outpacing capacity in the coming years.

China's China Ocean Shipping Company will reportedly be one of the charter customers for the ship-building venture.

Spot market truck freight index set record in February

The highest-ever spot market freight volume for North American trucking was registered by TransCore's North American Freight Index, established in 1986 – surging 38 percent over January of this year, and a whopping 65 percent above February 2010.

TransCore said the jump in truckload freight volume was led by a 44 percent increase in flatbed truck freight over January.

Dry van freight availability increased 38 percent, with refrigerated loads up 30 percent month over month, TransCore reported.

Israel seizes ship suspected of carrying weapons

Israel 's navy intercepted and boarded a German-owned, Liberian-flagged ship 200 miles off its coast that was allegedly carrying Iranian weapons bound for Palestinian groups in the Gaza Strip, according to several reports out of the region.

Israel's military said the suspected vessel departed a port in Syria, sailed to a port in Turkey, and was on its way to the Port of Alexandria, Egypt, based upon shipping documentation.

The vessel has reportedly been re-directed to an Israeli port for more detailed inspection.

Stevedore lost her legs in Oakland port accident

An investigation by Cal-OSHA is reportedly underway over the accident March 2 at Northern California's Port of Oakland, where a female stevedore lost both of her legs from being run over by container yard-handling equipment at the Ports America terminal operation.

According to a news report in the Oakland Tribune, it was raining when the accident occurred at approximately 4:AM, allegedly impairing the driver's vision.

The local ILWU labor group claims the accident was connected to a terminal yard re-configuration by Ports America, which re-opened the former APM Terminals facility over a year ago.

The union contends the terminal's gate was moved 1,000 yards creating too much interplay between equipment and pedestrians.

For the full Oakland Tribune/San Diego Mercury story:

Thursday, March 17, 2011

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U.S. food exports to Japan could slow up for several weeks

Food exports from the U.S. to Japan could slow up due to severe infrastructure damage in some parts of the earthquake and tsunami-devastated country, among other reasons.

There might also be a temporary drop in demand while emergency work takes precedence, according to an Associated Press report.

The world’s third largest economy is a major buyer of U.S. meats and grains. Japan buys close 600 million bushels of corn each year – the largest amount in the world. The corn is used in livestock feed.

According to the U.S. Department of Agriculture, Japan has huge stockpiles of rice in the event of a serious food shortage, and a commodity analyst was cited in the A.P. story as saying he sees the country’s usual high demand for beef and pork dropping as fewer Japanese will be eating out during this difficult period that includes concern over a potential nuclear crisis resulting from the 8.9 earthquake’s damage.

While Japan does import most of its pork and nearly three-fourths of its beef, Rich Nelson, director of research for Allendale Inc., a commodity advisory firm in McHenry, Ill., said he expected to see demand for those kinds of products fall off in the short term as fewer Japanese citizens eat in restaurants.

While there is still much to be ascertained about the extent of damage to supply chain infrastructure in Japan, it is known that two of the dozen ports that handle bulk commodities are damaged from the natural disaster, and several smaller ports in the northeast region are out of commission entirely.

Rolling blackouts meant to conserve power during the nuclear crisis could also reportedly have an impact on cargo unloading. There is also the concern about the state of roads and highways in some parts of the country.

Mike Callahan, the U.S. Grains Council’s senior director of international operations, said his group hadn’t heard of any cancellations of grain shipments to Japan but that there had been re-directing of cargo vessels to alternative ports there.

However, once Japan gets back to running at a more normalized pace, there could be great demand for any number of things, and that demand could come fast and furious.

“Once they do get all of those channels open, there’s going to be a lot of pent up demand within that country to refill those channels and begin rebuilding,” said Tom Neher, vice president of agribusiness at AgStar Financial Services.

“Once they get it open, things could move pretty quickly,” he said.

For the full A.P. report:

Global tech supply chains could take 4-6 weeks to recover from Japan’s tragedy

If you’re relying on the semiconductor supply chain out of Japan, you might want to look for alternative suppliers if time is of the essence, according to global investment firm Merrill Lynch.

Daniel Heyler, head of global semiconductor research for Merrill Lynch told a group of media in Taipei that global technology supply chains could take four to six weeks to recover from Japan’s tragic earthquake and tsunami.

"The recovery speed of the worldwide technology supply chain depends on how serious Japan's supply chain was damaged," Heyler told the media gathering.

Japan’s Hitachi and Mitsubishi produce more than 90 percent of the world’s supply of this critical component to semiconductors.

As reported in the March 15 CB Newswire, there is also the impact to the production of NAND flash memory chips used in tablets and smartphones as Japan produces close to 40 percent of the global market of these chips.

Boeing reports no impact yet on parts business from Japan

Aircraft manufacturer Boeing said Wednesday that it has yet to experience impacts on its parts supply chain out of Japan, where one third of its 787 parts are made, and 20 percent of its 777 parts originate.

Boeing spokesman Thomas Brabant told the media that the company’s inventory of airplane parts on hand could last several weeks.

Ships steered away from radiation risk in Japan

Ship owners are steering their ships away from potential high-risk radiation areas in Japan in the wake of the 8.9 earthquake’s damage to a nuclear facility there, according to shipping sources in a Reuters report.

The un-named shipping sources told Reuters that dry and liquid bulk vessels that would normally call in areas where the radiation levels could be higher, could re-direct elsewhere.

“Some owners are definitely considering routing differently to avoid any potential radiation cloud, and passing that on to charterers (those looking to hire ships)," a shipping source told Reuters.

For the Reuters story:

California harbor and related tsunami damage could exceed $40 mil

Last week’s tsunami damage to harbors and related infrastructure on Northern California’s coastline could exceed $40 million, according to an estimate by Mike Dayton, the acting secretary of the emergency management agency.

Japan's 8.9 earthquake set off a powerful tsunami that also hit the U.S. West Coast, including the commercial fishing harbors of Santa Cruz and Crescent City.

The damage to the harbor in Santa Cruz, which is still closed, has been estimated at $25 million, where 13 vessels sank last Friday, according to the Santa Cruz Sentinel.

The harbor reportedly won’t be reopened until the sunken vessels are removed.

Crescent City, California’s top commercial fisheries harbor, is reportedly strewn with half-sunken vessels and debris, and 16 sunken vessels.

Hundreds of vessels on California’s coast are reportedly damaged or missing; some likely lost at sea.

Friday, March 18, 2011

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Traffic up for some West Coast ports in February

Both Southern California ports and a Pacific Northwest seaport posted cargo gains in February, although growth at 8 percent was softer for L.A-Long Beach compared to the double-digit increase of the previous month.

At the busiest port in the Americas, the Port of Los Angeles recorded 5.6 percent growth over the same period last year in its containerized business at 554,913 TEUs, and next-door neighbor Long Beach reported 10.9 percent growth at 458,336 TEUs compared to February of 2010.

Exports at both Southern California ports were essentially flat.

The Port of Tacoma, Wash. posted a 15 percent increase year-over-year for February with imports surging 33 percent, according to the port.

For the first two months of 2011, Tacoma said it is up 14 percent at 221,773 TEUs. The port’s intermodal rail lifts were up 12 percent.

In addition, Tacoma’s breakbulk business in February was up a whopping 148 percent, with auto imports up 38 percent, bringing a total tonnage increase of 14 percent.

Hutchison Ports’ IPO slumps in Singapore debut

According to several news reports out of Singapore, the IPO debut there of Hong Kong’s Hutchison Ports Holdings, the largest-ever in Southeast Asia, fell by up to 6.9 percent. HPH’s 616.8 million units fell as low as 94 cents, well below its $1.01 IPO price. "With markets where they are, it's a matter of picking the windows. It is going to be very volatile, until the nuclear situation [in Japan] is resolved," a Hong Kong-based investment banker told Reuters.

Port of Tacoma staff to get $1,000 in place of usual pay increases

The harbor commission at the Port of Tacoma has decided to give employees of the port an additional $1,000 next month instead of the usual pay increases tied to cost of living and performance, the Tacoma News Tribune reported.

In the meantime, the Pacific Northwest port authority is changing how it compensates its staff, such as instituting a new “salary grid” that actually bumps the minimum pay level from $38,652 to $40,404, and a revised merit pay plan that rewards employees who perform at a higher level.

The port says its goal is to be at the 50th percentile of salaries for employees compared to the rest of the job market, and to lower the benefits package from the 95th percentile to 75th.

For the full Tacoma News Tribune story:

Incoming flights from Japan checked for radiation

The United States has stepped up efforts to detect radiation on airline flights arriving here from Japan.

Passengers and cargo have been screened and so far the U.S. Customs and Border Protection Agency says no dangerous levels of radiation have been detected related to the impacts of Japan’s 8.9 earthquake on a nuclear facility there.

New video of tsunami rushing small port town of Miyako

The tsunami is caught by a video camera rushing the small port Japanese port town of Miyako in this recently released footage courtesy of CBS News:

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