Cargo Business Newswire ArchivesSummary for March 23 through March 27, 2015:
Monday, March 23, 2015
Five Questions to Ask Now to Protect Holiday Deliveries
By Rich Thompson, Managing Director and Global Leader, Supply Chain and Logistics Solutions, Jones Lang LaSalle
Work slow-downs in West Coast ports are one thing in February but another during the pre-holiday delivery season.
To protect holiday profits, retailers are making fundamental shifts in supply chain strategies now. Significant efforts to diversify how consumer and other goods arrive in the U.S. are underway. The industry has high hopes that diversification can mitigate the $7 billion in damages expected from this year’s port labor and backlog issues, a figure projected by management consultancy Kurt Salmon.
Though February’s work slowdowns at some of the West Coast’s largest ports may be temporarily resolved, the long-term issue is far from over. As such, retailers and third-party logistics companies are aggressively re-evaluating their supply chain strategies to ensure they stay afloat during this particularly costly storm.
Every retailer will diversify in different ways to support unique supply chain needs. Asking the right questions is critical when moving fast to shape a new strategy, including these five questions supply chain executives should ask:
Can product be diversified across multiple ports? With nearly 40 percent of imports from Asia moved through the ports of Los Angeles and Long Beach, port delays are packing a serious punch to businesses. Workaround distribution strategies have been a common theme in recent retailer quarterly analyst calls where they have reported spending more on air freight and shifting goods to the east, closer to major population centers. As this change takes place, the cost of shipping from China to the East Coast of the United States has increased 25 percent since early 2014, according to Macquarie Research. The eventual arrival of megaships in East Coast ports from the Panama Canal expansion will force further rebalancing.
How can multi-modal transportation be better leveraged? As the movement of goods on the West coast crawls along at a snail’s pace, shippers are looking not only to examine different ports, but also the methods they can use to move goods along quickly once they get there. Intermodal solutions are becoming more popular. Thirty inland port facilities have either opened or been formally announced since 2000, including 19 since 2008 alone, according to JLL’s Perspectives on Supply Chain. PIERS research ranked the Port of Savannah the "Fastest Growing Port" in the first half of 2014, benefitting from its rail connection to Atlanta. Charlotte is also evolving as a hub market, thanks to a new inland port connecting to Charleston.
Where can buffers be created? Delivery demands have intensified so getting goods to the consumer as quickly and efficiently as possible is becoming a major strategy for many retailers. As a result, companies are looking to build a backlog of inventory in several strategic locations to satisfy demand in the event of an emergency. Warehouses near airports and major population centers are in high demand, particularly around the Chicago O’Hare, Miami International and LAX International airports, where the markets are expected to experience faster than average growth over the next decade, according to JLL’s 2014 United States Ports, Airport &t; Global Infrastructure Outlook.
Are redundancies built in to arrival locations? Businesses typically strive to eliminate redundancies, but redundancy has become a necessary evil in the supply chain to help mitigate risk. While many retailers have traditionally unloaded ships in the West, then used trucks or trains to ship from the point of entry, savvy executives are challenging that notion and considering smaller East Coast ports as alternative entry strategies. This means that real estate choices will multiply as the port choices expand.
Are there other sourcing options? Shipping woes and rising costs have caused retailers to re-examine everything down to the basics, including alternative locations from which they can source goods. In some cases, that means bringing the manufacturing process closer to home, eliminating the need to ship goods across the world. Boston Consulting Group’s third annual Made in America, Again, survey estimates that reshoring and rising exports will add 600,000 to one million factory jobs in the United States by 2020.
As port and logistics executives look to resolve headaches created by the current crisis, retailers are already changing course. It’s time to take a serious look at how to partner with shippers and retailers to help — and not hinder changing supply chain objectives.
Rich Thompson is a Managing Director and leads the global Supply Chain & Logistics Solutions team for JLL. He has more than 25 years of combined supply chain consulting and industry experience. Rich has experience working in the U.S., Europe, Africa, Asia, and the Middle East, providing results for a wide range of clients across a number of industries. He specializes in supply chain strategy, transportation and distribution, network optimization, third party logistics, and global logistics management.
Truck cargo up 46 percent at Port of L.A./Long Beach
Now that a tentative labor deal has been announced and a port-wide chassis pool has been created, marine terminals at the Ports of Los Angeles and Long Beach moved 46 percent more cargo containers by truck during the first half of March compared with the same period in February, according to a PierPass statement.
From March 2 through March 15, nearly 303,000 TEUs moved by truck into or out of the terminals, compared to nearly 207,000 TEUs from Feb. 2 through Feb. 15, according to gate transaction data collected by PierPass. These include containers moved during day shifts and the OffPeak shifts managed by PierPass on nights and Saturdays. The OffPeak program diverts about half of port truck trips out of Monday-through-Friday daytime traffic while roughly doubling the capacity of the Los Angeles and Long Beach ports.
According to the Marine Exchange of Southern California, there were 30 ships waiting to be unloaded at the Los Angeles and Long Beach ports on Monday March 16, down from 36 on Feb. 26.
"The terminals are intensely focused on returning to normal operations as quickly as possible," said John Cushing, president of PierPass, which represents the 13 container terminals at the two adjacent ports. "While much work remains to be done, we can report progress in accelerating cargo movement by mid-March."
PierPass also reported some progress in reducing transaction times for trucks at the terminals. Average truck turn times dropped during the month of February compared to January. It took trucks an average of 49.6 minutes to complete one transaction on the peak (weekday daytime) shift in February, down from 60.9 minutes in January. On off peak shifts, turn times in February averaged 53 minutes, down from 55.8 minutes in January.
Terminal operators continue to work with trucking companies and cargo owners to increase the use of free-flow, sometimes known as peel-off, a practice PierPass said it has promoted to reduce truck waiting times. Free-flow enables bulk delivery of large groups of containers destined for the same location, typically to a single cargo owner. The terminals pre-stage the containers in a separate stack, and cargo owner then sends a stream of trucks into the terminal and each truck takes the next container in the stack.
"We have been very proactive with different terminal efficiency tools that include our appointment system and peel-off piles," said Rickey Childs, head of operations for Eagle Marine Services. "We continue to work with the trucking community for increased OffPeak utilization, especially during the second half of the shift when there is minimal truck activity at the gates."
CMA CGM to order 3 megaships
France’s CMA CGM wants to build at least three container megaships, joining their carrier peers in using economies of scale to increase market share on the world’s busiest trade routes, according to inside sources.
The ships would have a capacity of 20,000 TEUs each and cost about $420 million in total, the source said. Deliveries would begin in 2017, and the order would probably go to South Korea’s Hanjin Heavy Industries and Construction Co., which offered the CMA CGM a discount of around 5 percent compared with other South Korean yards that have so far monopolized the construction of the huge Triple-E class of container vessels, said the source. South Korea’s Daewoo Shipbuilding and Marine Engineering Co., Hyundai Heavy Industries Co. and Samsung Heavy Industries Co. have won almost all orders for Triple-E’s to date.
CMA CGM, the third-largest container line by capacity, would deploy the supersized ships to move cargo between Asia and Europe.
Union Pacific Railroad has applied for a permit to haul liquefied natural gas, which would add another incendiary cargo to a U.S. rail network already being criticized for transporting ethanol and crude oil through populated areas.
UP said the application for a permit from the Federal Railroad Administration is in response to a request for liquefied natural gas transportation from an existing customer. Union Pacific operates 32,000 miles of track in the western U.S., which is home to many natural gas production and storage installations.
If Union Pacific were granted the permit, it would be the first Class 1 freight railroad to haul liquefied natural gas, according to the Association of American Railroads.
The permit application coincides with a major surge in railway ethanol and crude oil cargo, which has drawn heavy opposition after a fatal oil train explosion in Canada in 2013 and three oil train fires so far this year in the U.S. and one in Canada.
"The timing for U.P. is awkward given recent accidents and mounting public apprehension," said Joseph Schwieterman, a transportation sciences professor at Chicago’s DePaul University. "I am sure there will be pressure for a go-slow approach on it, but the fact is that railroads are the best bet to get significant amounts of natural gas to market given the decades it takes to permit and construct pipelines."
The Coast Guard and firefighters worked to extinguish a smoldering blaze on a cargo ship that had engine trouble after leaving New York.
The Coast Guard says the Motor Vessel Grey Shark was towed to Staten Island this week about four days after the fire broke out in the 360-foot ship's cargo areas. An on-board firefighting system had contained the blaze.
No injuries were reported among the 13 crew members.
FMC: Port congestion will continue until maritime infrastructure upgraded
Port cargo congestion will continue to be an issue until the nation invests in long-term maritime infrastructure, according to the chairman of the Federal Maritime Commission.
FMC Chairman Mario Cordero said the issue of congestion was not brought on by any one event, not even the recent labor standoff between West Coast dockworkers and their employers. He said it has been the result of a new, ever growing model for how cargo is delivered.
"Congestion has been a problem long before labor negotiations ... and will continue to be a challenge," Cordero said at the 2015 Legal Ports Conference in Long Beach.
He spoke of the growing number of supersized container ships being ordered by the world’s top shipping lines. The industry has evolved from vessels hauling 2,000 TEUs to ships carrying 10,000 to 13,000 TEUs — megaships that now regularly call at the ports of Los Angeles and Long Beach, which collectively handle about 40 percent of U.S. imports.
Now Maersk Line is poised to order up to 10 ships, each with the capacity to carry 20,000 container units, while Japan’s MOL confirmed orders for ships carrying 20,150 TEUs earlier this month.
"Clearly the world is preparing for increased trade," Cordero said, adding that funding for dredging and bridge building is necessary to pave the way for the bigger ships.
An estimated $78 billion of President Obama’s $478 billion, six-year surface transportation reauthorization proposal has been slotted for infrastructure related to the port/freight network, the FMC chairman said.
Port of Long Beach may cap dockage fees for three more months
This week, the Long Beach Board of Harbor Commission will consider extending the cap on dockage fees for three more months to provide customers with some relief from cargo congestion at the Port of Long Beach.
Pushing the exemption to June 30 would keep customers from being charged more when ships are docked for more than four days.
Usually, it takes about three days to load and unload goods from ships. But due to backups at the port it is taking longer, stretching from the typical four days to seven days. Costs paid to the port go up after four days and the current exemption is set to expire at the end of this month.
Earlier this month, Port of Long Beach Chief Executive Jon Slangerup and Port of Los Angeles Executive Director Gene Seroka said it would take about three months for the ports to return to normal operations.
DP World acquires port infrastructure firm EZW for $2.6B
Port operator DP World has announced the closing of the acquisition of Dubai industrial and logistics infrastructure firm Economic Zones World from Port and Free Zone World for $2.6 billion.
EZW ‘s key asset is the Jebel Ali Free Zone (JAFZ), one of the largest free zones in the Gulf Cooperation Council. It is widely recognized, along with DP World, as a key driver of the United Arab Emirate’s rapid economic growth.
"We are very pleased to have reached the close of this acquisition, which is compelling from both a strategic and financial perspective," said HE Sultan Ahmed Bin Sulayem, chairman of DP World. "This will allow us to enhance our position as the leading logistics hub in the Middle East region, accelerate growth and deliver shareholder value."
The purchase comes during a significant growth phase in port capacity at Jebel Ali and a strong economic outlook for Dubai and the wider GCC region.
ILA local to vote on settlement from Port of Baltimore employers
International Longshoremen's Association Local 333 has scheduled a secret ballot vote for March 25 on a settlement that may resolve a long-standing labor issue at the Port of Baltimore.
ILA Local 333 members did not ratify a contract offer in February, sending their leaders back to the table with the Steamship Trade Association of Baltimore, which represents port management.
The latest settlement, which would modify a previous agreement that expired in 2010 and extend it through 2018, addresses a number of dockworker concerns, according to a letter from Local 333 Trustee Wilbert Rowell. It includes measures guaranteeing wage increases, specifies hiring practices and eliminates language that union members wanted removed.
Local 333 has been operating under trusteeship since late 2014, when the national union chapter stepped in after there were accusations of mismanagement. The local staged a three-day strike in 2013 that was later deemed illegitimate by an arbitrator, who ruled that the union must pay $3.9 million for strike damages. However, the parties have agreed to waive those damages if the local approves the settlement next week and does not strike through September 2018.
Washington state regulators want to fine BNSF $700K
Regulators in Washington state have recommended that BNSF Railway be fined up to $700,000 for failing to properly report more than a dozen hazardous materials spills in recent months, despite the fact that the state had reminded the company about its reporting obligations in the fall of 2014.
This month Washington’s Utilities and Transportation Commission staff found BNSF had failed to report 14 releases of hazardous materials, including crude oil leaks, within a half hour of learning about the leaks, as required by state law.
In one case, crews at BP Cherry Point refinery discovered crude oil had leaked onto the sides and wheels of a tank car, which was found to be 1,611 gallons short. That was on Nov. 5, but the UTC didn’t find out about it until Dec. 3, when it got a copy of the report BNSF sent to the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration. Railroads have 30 days to file that DOT report.
Maersk: 2015 container traffic demand will increase by up to 5 percent
Demand for container shipping is expected to grow 3 to 5 percent in 2015, but freight rates are expected to continue to decline due to oversupply, according to Lars Mikael Jensen, chief executive of Maersk Line’s Asia Pacific region.
As ships ordered several years ago are delivered, supply growth is anticipated at 5-7 percent, Jensen said.
Maersk Line has noted a trend that the average revenue per TEU is dropping amid the rate variations seen in some trades, mainly because of the supply-demand situation. Jensen said this puts pressure on shipping lines to reduce the cost on a per box basis.
"We are working in a scenario that there will not be a massive upward return of the average revenue per box so cost savings and efficiencies are important," he said.
Jensen added that the recent financial results of most lines suggest that revenues and profit margins are under pressure, especially those generated from the east-west trades.
"Structurally there is a need for the average rates on the east-west trades to make them profitable and this will depend on the supply and demand situation," he said.
S. California legislators advocate for port project funding
Californian members of Congress are advocating legislation to support port project funding.
U.S. Congressional Reps. Alan Lowenthal, Dana Rohrabacher and Mark Takano authored a bipartisan bill this month to create $8 billion in dedicated annual funding for U.S. freight-related projects. Funding would come from adding a 1 percent tax on shipping invoices.
Under the bill, H.R. 1308 — Economy in Motion: The National Multimodal and Sustainable Freight Infrastructure Act — agencies could receive funding two ways. A state could get money annually based on its existing freight infrastructure by creating a state freight plan and forming a state freight advisory committee; or local, regional and state government agencies could participate in a competitive grant program.
"Goods movement is one of the most powerful economic engines in our nation. And yet, the infrastructure this engine depends on is crumbling around us," said Lowenthal (D-Long Beach) in a statement. "We have the ability to fix it, make it stronger and make it better, while also taking action to address the negative impacts of goods movement on our communities."
Separately, Rep. Janice Hahn (D-San Pedro) is pushing to raise the amount of benefits the ports of Los Angeles and Long Beach receive from a tax they annually pay. The Harbor Maintenance Tax is collected from all ports and then a portion is redistributed across the nation to address specific needs.
The Port of Los Angeles, puts in more than $260 million annually toward the fund, while the Port of Long Beach contributes more than $200 million annually. Both get very little back to reinvest in projects.
Mitsui buys 20 percent stake in Penske truck leasing firm for $750M
Japan’s Mitsui & Co. made a deal to pay $750 million for a 20 percent stake in a U.S. truck leasing company, another step in the company’s drive to reduce it’s dependence on raw material businesses.
Mitsui said it would acquire the stake in Penske Truck Leasing Co. from GE Capital Corp. Penske has a fleet of approximately 216,000 trucks, semi-tractors and trailers in North America, according to the statement.
Subsidiaries of Penske Corp. will remain majority shareholders of the trucker with 50.1 percent and GE Capital retains 29.9 percent. Mitsui said it’s a current investor in one of the subsidiaries, Penske Automotive Group.
Canada to spend $50M on program for first-time exporters
The Canadian government will spend $50 million over five years to help small and medium-sized businesses export goods to emerging markets for the first time.
Prime Minister Stephen Harper announced the program on March 18, which intends to help up to 1,000 exporters a year. Businesses that receive assistance will be required to match the government money for activities such as trade missions and research.
"We understand that the majority of private-sector jobs are created by small and medium-sized enterprises," Harper said.
The program will help participating businesses to "to seek out emerging markets for their goods and services, generating economic growth, increasing our global competitiveness, and creating jobs as a result," he added.
S.C. Ports Authority to handle 1 million containers in FY 2015
The S.C. State Ports Authority intends to handle 1 million pier containers by the end of its fiscal year in June, a goal that CEO Jim Newsome said has eluded the port since before the recession.
The SPA has moved about 700,000 pier containers (total boxes moved, regardless of size) so far in fiscal year 2015, including about 86,000 in February, up 17 percent year over year.
"February container volumes were particularly strong for a short month," Newsome said. "Our import gains are reflective of a strengthening U.S. economy and population growth across the Southeast, while manufacturing in our state and region bolsters our export business."
Newsome said he expects the Port of Charleston to continue growing through the rest of fiscal 2015, particularly with manufacturing exports.
For the fiscal year to date, the port has handled about 1.23 million TEUs, up 14.3 percent year over year.
World Bank: China’s next logistics push should be containers-by-rail
Moving containers by rail could grow substantially in China, especially if the country keeps adopting the kinds of operations and regulatory reforms that helped develop the North American rail network, according to a new World Bank research paper.
The paper "Customer-driven Rail Intermodal Logistics: Unlocking a New Source of Value for China" says such actions would include facilitating the ability of rail operators to customize service offerings — including pricing, routing, and delivery time — allowing rail operators to focus on their strengths.
"A more intense use of rail as part of the country’s containerized freight delivery logistics system could be a game-changer for Chinese manufacturers and consumers alike, as we have seen in North America," said Luis Blancas, a World Bank senior transport specialist and lead author of the paper. "That’s because more and more manufacturing has moved to China’s western provinces, which increases the distance of international and domestic shipments. At the same time, China’s highways are becoming more congested, making it difficult to deliver goods and get value-for-money in trucking services."
By eliminating government-regulated tariffs to promote competition, and allowing rail carriers to design networks and collaborate with other transport providers, regulatory reform in the U.S. rail sector empowered rail operators to become critical players in international and domestic supply chains.
That experience can inform China, the study said, because North America shares many of China’s economic and geographic features, and many of the supply chains served by intermodal rail in the U.S. originate in China.
China Railway Corporation, China’s national rail operator, started reforms in 2013 to improve operational efficiency and customer service, with more flexibility in setting rates and offering services based on market forces of supply and demand.
Such initial reforms can pave the way for the broader adoption of some of the approaches that helped make North America a world leader in rail container transport, according to the paper.
This paper is part of the China Transport Note Series produced by the World Bank to share experience about changes in the Chinese transport sector.
Port of Virginia officials work on reducing truck wait times
Port of Virginia officials continue to improve conditions for truckers who have had to wait in line for up to seven hours to drop off and pick up containers.
The port now pledges to reduce the window of deliveries at Norfolk International and Portsmouth Marine Terminals. They announced Friday they will no longer accept empty containers arriving by train, which should help reduce the number of containers port-wide.
Several new measures have been implemented:
- Effective Monday, March 23, the port will reduce the window for delivery of exports at Norfolk International Terminal (NIT) and Portsmouth Martine Terminal (PMT) to 7 from 9 days at NIT. This is a temporary measure focused on reducing container density at the terminal and is consistent with the same policy put in place at VIG on March 18.
- Effective Monday, March 23, the port no longer accepts empty containers arriving at VIG by rail. This temporary measure is aimed at reducing 22,000 empty containers at the port, and is consistent with the policy at NIT.
- On March 19, the port announced that it would provide 2 days of free time to shipping lines for all containers at PMT. Today, the port extended the free time by 3 additional days, bringing the total amount of free time for boxes at that terminal to 5 days.
- The port will move three RTGs (rubber-tire-gantry cranes) to PMT from NIT starting mid-next week, if weather permits. These units will bolster the lift capacity at PMT and increase throughput.
President Vladimir Putin announced that Russia's first "free port" would be operational in 2016 at the Far East city of Vladivostok, in an action seen as a way to boost trade and bolster the economy.
Primorsky Krai Governor Sergey Nekhaev said the focus is being placed on developing logistics, ship repairs, manufacturing, export-oriented and import-substituting industries, and agriculture. The corresponding draft law will pass through parliament towards the end of the year to be signed by the president.
"This will provide an opportunity to start implementing [the law] already in 2016," said Nekhaev.
Along with adopting the draft on the free port in Vladivostok, the authorities will have to make amendments to more than 20 federal laws. These will ease customs procedures and the terms of stay for foreigners. The new status will give the area a right to import and export certain goods without customs.
With a population of 600,000, Vladivostok is located at the head of Golden Horn Bay, not that far from the borders with China and North Korea.
Port of Anchorage identifies dockworker killed at port
The Port of Anchorage has identified the longshoreman killed in a work-related accident at the port.
Port officials said that Charlie Tom "WD" James Jr. died immediately when he was pinned between two vehicles at 9:14 a.m. March 13, while military equipment was being loaded onto flat-deck railcars headed for Fairbanks. He was 64.
James, an Army veteran, had retired from the Anchorage Fire Department in 2014 after 34 years of service. He had worked as a dockworker for more than a decade, according to port officials.
For more of the Alaska Dispatch News story: www.adn.com