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Summary for April 1 - April 5:
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Monday, April 1, 2013 Top StoryDrewry: Near sourcing trend more hype than reality
Although many importers say near sourcing is on the rise, it is unlikely to affect seaborne container cargo volume anytime soon, Drewry said. The case for near sourcing is increasing, as retailers increasingly have a demand for custom goods that can be delivered to market faster than from Asia. For example, a car or computer that can be sourced closer to home with a wider range of cheap extras is obviously preferable to a car or computer from Asia with limited options. And container carriers are slowing down ships, and thus shipping times, on routes from Asia to save fuel. Additionally, there have been proportionately less imports from Asia to North Europe and the U.S. over the past two years, indicating importers are rethinking the benefits of off shoring. However, Drewry says, that in itself doesn't mean the return of manufacturing to Europe and the U.S. – it could just mean that there are less factories there to close. For example, Mexico can respond to U.S. retailers' needs more quickly than Asia, and yet that country's container export growth to the U.S. has only been slightly higher than the growth of China and other Asian countries over the past few years, Drewry reports. In conclusion, Drewry predicts near sourcing will increase, but off a very low base, so its effect on ocean carriers probably won't be significant in the short-term. Since these are hard economic times for consumers, cheap prices from Asia will remain attractive. Predicting the situation long-term is difficult due to the uncertain growth rate of online shopping, Drewry says, which will soon demand same-day delivery. This is a more immediate issue confronting retailers, with up to 10 percent of all retail sales in Europe likely to be conducted over the Internet by 2016, according to Jones Lang LaSalle. Another more immediate trend will be the transfer of production away from China to cheaper Asian countries, Drewry said. New public spending questions rock Port of Oakland as it sets new policiesKTVU claims it has uncovered more questionable spending of public funds at the Port of Oakland, at a time when the port is setting new spending policies to improve its public image. Reportedly, the top public relations official for the Port of Oakland has spent thousands of dollars on phony websites apparently meant to confuse the port's perceived political enemies, as well as on food and drink at luxury Hong Kong bars and restaurants, according to documents obtained by KTVU. Port officials have not yet offered a response. Last week the Port of Oakland Board of Commissioners instituted spending policy limits for its employees in an effort to increase public confidence since last fall's spending scandals, which included thousands of dollars reimbursed to port executives for an extravagant strip club outing, a story broken by KTVU. At that time, KTVU requested expense reports for Port of Oakland public relations head Isaac Kos-Read, who receives a salary of $180,000. It took five months for the records, which have raised many questions, to be released. KTVU found that the documents reveal the Port of Oakland bought a Web domain name that appeared to rightfully belong to the International Longshore and Warehouse Union. The port also spent public money buying a Web domain that purports to be from the Occupy Oakland movement, according to the documents. "When people buy their opposition's URLs, it's not to stop them from buying them, or using them," said Peter Leyden, founder and CEO of Reinventors, a company designed to be an intersection of emerging Internet technologies and good government. "It's in fact, essentially to set a front up that's essentially what they call an 'Astroturf.'" "Astroturfing" is a term for covering up the truth online with propaganda. Kos-Read declined an interview with KTVU. This new information has popped up at a time when the Port of Oakland has announced new employee spending limits after 13 years with no credit card policy in place. Mandatory ethics training for port staff has been floated, and new per diem and airline policies have also been put in place. For more of the KTVU stories: ktvu.com1 and ktvu.com2 UPS pays $40M to settle online pharmacy investigationUPS agreed to pay $40 million to settle a federal investigation into shipments from illegal online pharmacies, reportedly admitting that it knew it was aiding in the distribution of controlled substances. UPS signed a non-prosecution agreement with the U.S. that mandates the shipping giant set up a program preventing illegal online pharmacies from using its shipping services, according to a copy of the agreement released Friday by the Justice Department. The two-year agreement requires cooperation with the Drug Enforcement Administration. "DEA is aggressively targeting the diversion of controlled substances, as well as those who facilitate their unlawful distribution," DEA Administrator Michele Leonhart said in a statement. "This investigation is significant and DEA applauds UPS for working to strengthen and enhance its practices in order to prevent future drug diversion." From 2003 through 2010, UPS had reportedly heard from employees that Internet pharmacies were using its services to distribute controlled substances and medicines without valid prescriptions in violation of the law, according to the agreement. UPS didn't implement procedures to close the shipping accounts of these pharmacies, the Justice Department said. For more of the Bloomberg story: bloomberg.com China's PMI up in MarchChina's manufacturing expanded at an elevated pace in March, indicating that the country's economic recovery is continuing. The Purchasing Manager's Index was up to 50.9, an 11-month high according to the National Bureau of Statistics and China Federation of Logistics and Purchasing. A separate scale from HSBC Holdings and Markit Economics increased to 51.6 in March from February's 50.4. The March improvement follows the weakest January-February growth for factory output since 2009. "We are clearly in a lot better state than we were at the end of last year," Alistair Thornton, a Beijing-based economist at IHS Inc., said in a Bloomberg Television interview, calling the advance "modest." However, the economy faces "fairly large headwinds" including property curbs and stricter supervision of so-called shadow banking, he said. For more of the Bloomberg story: bloomberg.com Two shipping firms pay $10.4M penalty for illegal dumpingTwo global shipping firms pleaded guilty in March to obstruction and other federal charges in falsifying records to hide the illegal dumping of engine sludge and oil-contaminated waste into the ocean, according to the U.S. Attorney's Office. The criminal case was consolidated in New Jersey for four ships that docked in New Jersey, Delaware, and California. German company Columbia Shipmanagement and Cyprus firm Columbia Shipmanagement Ltd. agreed to pay a combined $10.4 million penalty, U.S. Attorney Paul Fishman said. The two shipping companies are owned by the same holding company, he said. The companies will be placed on probation for four years, Fishman reported. For more of the Bloomberg story: businessweek.com
Tuesday, April 2, 2013 Top StoryMSC to sell $1.9B stake of terminal operations arm
TIL, the world's sixth largest container terminal operator, has a controlling interest in 30 container terminals worldwide, serving most of major trade routes and located in North and South America, Europe, Africa, the Middle East and Asia. The strategic partnership between MSC and GIP will provide a strong foundation to support the next phase of TIL's growth, according to MSC, including further acquisitions and investments. GIP's Alistair Baillie will join TIL as president. "We're extremely pleased to have joined forces with GIP, one of the largest and most experienced infrastructure funds," said Diego Aponte, vice president of MSC. "Through this partnership we are reinforcing our terminal division, which will enable us to capitalize on future opportunities and growth. This will complement MSC's strategy to maintain a leading position in the industry." Long Beach City Council appeals EIR for proposed BNSF rail yardThe City Council of Long Beach has submitted a letter to Long Beach Harbor Commissioners, appealing the Environmental Impact Report for the proposed BNSF Southern California International Gateway rail yard. However, the council didn't indicate what action it would accept in response – neighborhood "mitigation" measures or relocation of the yard. The SCIG rail yard would sit on Port of Los Angeles owned land, adjacent to West Long Beach neighborhoods. The Long Beach Harbor Commissioners voted at a public meeting this week to request that Long Beach city leadership identify preferred solutions to resolve the issues identified in the letter of appeal. Commissioners also indicated that they support the appeal. South Coast Air Quality Management District officials said their agency would also file an appeal based on the EIR's lack of adequate mitigation. Other opponents say the rail yard can't be mitigated in its current proposed location and urge moving it out of neighborhoods and into the Ports where it can provide "on-dock rail." During Harbor Commission discussion, Commissioner Dines proposed a 1.3-mile "solar electric sound wall, that could be 25 or 30 feet high" that he said "would not only reduce sound but mitigate light pollution as well," stretching from PCH to Willow Street and "blocking out the entire rail yard and protecting that neighborhood." Commissioner Dines said the solar sound wall would "provide a benefit to the community" by generating $375,000 a year in electricity. Proponents at the meeting supported moving forward on the rail yard without delay, including building and construction trade unions, IBEW, Jobs Coalition, Future Ports, Harbor Association of Industry and Commerce, Pacific Merchant Shipping Association and BNSF. U.S. March manufacturing index lower than predictedThe Institute for Supply Management's factory index dropped to 51.3 from a near two-year high of 54.2 in February, a reading that was lower than forecast, according to the ISM. A reading more than 50 indicates growth. Another report showed construction spending climbed in February, led by the strongest home-building expenditures in more than four years. The manufacturing report indicates industries related to housing and autos outperformed other areas last month, a sign that consumer spending is supporting the expansion. Exports grew at the fastest pace in almost a year. However, Congress' inability to compromise triggered sequestration and $85 billion in federal spending cuts on March 1. "The manufacturing outlook is positive, broadly, with a couple of cloudy areas," said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. "It highlights the downside of reduced government spending but underscores a fairly stable private sector." For more of the Bloomberg story: bloomberg.com Georgia approves $50M in additional port deepening fundingThe Georgia state legislature approved $50 million in additional funds for port deepening, according to the Georgia Ports Authority. An allocation of $231.1 million will go toward the state's portion of the Savannah Harbor Expansion Project. Deepening the Savannah harbor to 47 feet will allow it to accommodate post-Panamax vessels after the Panama Canal expansion is complete in 2015. "This infrastructure investment is crucial not just for the port, but for the economy of Georgia and the entire Southeast," said Gov. Nathan Deal. "A deeper Savannah Harbor means greater efficiency for 21,000 U.S. companies, 75 percent of which are headquartered outside of Georgia. A U.S. Army Corps of Engineers study has shown that SHEP will reduce shipping costs for private companies by at least $213 million a year. Neither Georgia nor this nation can afford to delay a project that provides customers with a tool that reduces their costs." Overall, the cost of the project is estimated at $652 million. Federal approval for the project was issued in October 2012, clearing an important hurdle toward federal construction funding. "Additional studies by the Army Corps of Engineers show a 5.5-to-1 benefit to cost ratio, meaning that for every dollar spent on the deepening, the nation will reap $5.50 in benefits," said GPA Executive Director Curtis Foltz. Low water levels mean lower Great Lakes cargo loadsThe current low water level of the Great Lakes is causing carriers to leave 15 percent of cargo behind, according to industry experts. Lake Michigan and Lake Huron are 26 inches below their monthly averages, with Lake Superior 13 inches lower, according to the Army Corps of Engineers. Although the lakes typically rise two to four inches in April, right now shipping companies are finding the Great Lakes difficult to navigate with full loads. Official gathered in Green Bay this week to discuss the economic impact of low water and possible solutions. Dean Haen, the director of Brown County Port and Solid Waste, said each inch of lost water means about 100 tons of cargo must be left behind. The St. Lawrence Seaway is experiencing diminished depth to a lesser degree, said Craig Middlebrook, acting administrator of the St. Lawrence Seaway Development Corp. "It hasn't been as acute, but we're still affected by low water," Middlebrook said. "I was talking with one of our major carriers last week who calculated last year it translated into leaving 9 percent of their cargo on the dock." Earlier this week, Michigan Gov. Rick Snyder signed legislation providing $21 million in emergency funds to dredge state harbors that are in danger of becoming impassable because of low water levels. The funding includes 58 dredging projects. For more of the Detroit Free Press article: freep.com
Wednesday, April 3, 2013 Top StoryTSA: Growing volumes and shipping rates signs of industry recovery
Carriers believe stronger demand and the reversal of decreased freight rates since the end of 2012 are key to upcoming negotiations with shippers, as they will soon be signing the 12-month contracts concerning the movement of more than 90 percent of all container cargo from Asia to the U.S. Most of the contracts will be renewed on or around May 1. The April 1 increases are designed to restore current market rates closer to sustainable levels, creating leverage to negotiate further increases in the contracts themselves. TSA executive administrator Brian M. Conrad said modest but steady growth is expected to continue in 2013, with improved vessel utilizations already apparent throughout April. "Coming off a period of close to zero cargo growth in 2012, the outlook is definitely more positive at this point," he said. Conrad said that despite repeated efforts to raise rates during the 2012-13 contract season, the gains were inconsistent because of grim financial reports, industry consolidation, service changes and the formation of new alliances. "As we head into the bulk of the negotiations in April," Conrad explained, "it is critical for shippers to understand that rates which reflect little or no increase in rates over 2012 levels are simply not sustainable in the long run. The financial repercussions are serious, and carriers are looking to ensure that new contracts include rates that reflect a meaningful increase above 2012 levels, and closer to the post-April 1 market trends." Hong Kong strike causes container traffic jamContainer ships idled off the port of Hong Kong as a rare strike of dockworkers at cargo terminals owned by Asia's richest man, Li Ka-shing, extended into its seventh day. The strike is starting to have a real impact on the flow of ships and trade. If the strike lasts much longer, it could affect the May-to-October peak season for container shipping, when exporters are anxious to get their goods from Chinese ports to the U.S. and Europe for holiday season. Hong Kong ranks as the third busiest container port, after Shanghai and Singapore. The Hong Kong port keeps its status, despite its greater distance from factories and higher rates, because it has the most frequent sailings to the U.S., Europe and the rest of Asia and it is considered one of the most efficient in getting the cargo in and out. Now vessels are facing delays of as much as 60 hours, twenty times the normal 3-hour wait. It will have a domino effect on the global supply chain, adding expenses due to vessel rerouting or skipping ports. "Most of the cargo comes from China or is destined for China, and the reason people bother to truck goods all the way to or from Hong Kong is because it is more efficient," said Roberto Giannetta, the secretary of the Hong Kong Liner Shipping Association. Prolonged delays "affect everything down the line," he said. Evergreen Line said that as of Wednesday, more than 10 of its ships were waiting for berths in Hong Kong due to the strike. The strike began March 28, when several hundred subcontracted workers at Hong Kong International Terminals, a part of Mr. Li's Hutchison Port Holdings Trust. The longshoremen walked off the job to lobby for a 20 percent raise from their current rate of $7 an hour. For more of the New York Times story: nytimes.com Port of Coos Bay loses final partner in coal port endeavorThe final partner has withdrawn from the proposal to ship coal to Asia through the Port of Coos Bay from Montana and Wyoming, port officials announced. Metropolitan Stevedoring Company, also known as Metro Ports, failed to renew the exclusive agreement that expired Sunday, according to the port. The coal project's two other prospective partners, Mitsui & Co. and Korean Electric Power Corp., the potential buyer of the coal, dropped out previously. Port CEO David Koch said the port would continue to develop new shipping facilities, but did not say if that would include coal. A 2012 study for the Coos Bay project estimated that construction of a bulk marine terminal would cost $250 million, and upgrades to the rail link between Coos Bay and Eugene would cost $182 million. Coal exports were estimated to start at 3 million tons and go up to 10 million tons in five years. Environmentalists campaigned against the new coal facility, citing global warming and the health of citizens along the proposed route. They also argued that Asia's demand for coal has decreased as worries rise over its contributions to global climate change. Last week, the governors of Oregon and Washington sent a joint letter to the White House requesting a study regarding climate change impacts of selling U.S. coal to Asia. For more of the Huffington Post story: www.huffingtonpost.com Report: Rail freight fleet not yet back to pre-recession numbersThe size of the North American freight railcar fleet increased by one percent in 2012, but has not yet recovered to pre-recession levels, according to a report from Railinc. Railinc's 2013 report, the annual "North American Freight Railcar Review," provides an overview of the North American railcar fleet over 2012 and includes statistics and overall trends. Cargo ship aground in Columbia River unharmedA cargo ship is on its way across the Pacific after a short delay in the Columbia River, where on Sunday it found itself aground off Rainier, Ore., when the tide went out, according to the Coast Guard. Lt. Regina Caffrey in Seattle says that when the 737-foot Swiss ship Corviglia was refloated and checked for structural integrity, no damage was found. For more of the Seattle Times story: seattletimes.com
Thursday, April 4, 2013 Top StoryU.S. halfway to 2015 export-doubling goal
The five-year goal, started in 2010, was first expressed in Obama's State of the Union address that year. Although industry insiders and analysts are betting the goal will not be met, impressive increases booked in manufacturing and exporting suggest they may want to hedge that bet. Many factors are converging to support the U.S. manufacturing resurgence. Cheap natural gas is running factories more cheaply, and gas provides inexpensive raw material for U.S. manufacturers of plastics, tires and other petrochemical products. Higher wages in China make it less attractive to American manufacturers. More foreign markets are being opened to the U.S. due to trade agreements with South Korea, Columbia, Panama and pending agreements with Europe and Asia. Additionally, high unemployment takes the pressure off manufacturers to boost wages, making U.S. labor more competitive globally. And finally, substantive advances in technology have increased factory and worker efficiency. In 2009, President Obama started out with U.S. exports of $1.57 trillion. Since then, exports have grown to a record $2.19 trillion in 2012 — approximately 48 percent to his goal of $3.14 trillion in exports annually by the beginning of 2015. However, 2012 exports have grown more slowly than the surge in 2010 and 2011, and the rate would have to spike sharply this year to keep the momentum going. Other possible roadblocks include the country's sluggish economic growth and high jobless rate, as well as Europe's recession. For more of the Bloomberg story: businessweek.com Greenbrier second quarter profits decline 22 percentThe Greenbrier Companies, a leading supplier of transportation equipment and services to the railroad industry, reported that profits declined by 22 percent for the second quarter due to a 27 percent drop in deliveries. Net income was $13.8 million compared to $17.7 million for the same period last year. Revenue dropped from $458.2 million to $423.2 million, the statement said. Adjusted EBITDA for the quarter was $36.2 million, or 8.6 percent of revenue. Net debt was down by $55 million during the quarter on strong quarterly earnings and working capital improvements, the statement said. "Our strategy is to diversify our product offerings, shift production to our lower cost manufacturing footprint in Mexico, and increase throughput in our lease syndication and management services businesses," said William A. Furman, president and CEO. "Since September 1, 2012, we have received diverse orders for 9,600 railcars in North America and Europe valued at over $1 billion." Based on current industry forecasts, Greenbrier currently anticipates its new railcar deliveries in 2013 will be approximately 13,000 units. Hamburg Süd to boost rates on Gulf Coast-to-South America routeHamburg Süd will implement a General Rate Increase, effective May 1, on all cargo moving southbound from or via United States Gulf Coast ports to Colombia and the West Coast of South America as follows The GRI will increase by $100 per-TEU and $200 per-FEU, including dry, reefer, tanks and special equipment cargo. CaroTrans expands Shanghai-to-U.S. LCL serviceNVOCC and ocean freight consolidator CaroTrans added two Shanghai-to-U.S. LCL services to its Asia - U.S. service, according to a company statement. The first sailing from Shanghai to Atlanta is scheduled for April 7. The expanded New York service starts with a May 5 departure from Shanghai. CaroTrans said its weekly Shanghai-New York service provides fast transits and broad coverage of the Northeast with express intermodal services. Former Port of L.A. employee sentenced for bomb hoaxA former Port of Los Angeles employee has been sentenced in connection to a bomb hoax that forced the evacuation of a tugboat facility and shipping terminal at the port for several hours on June 20, according to a statement issued by the L.A. City Attorney's office. City Attorney Carmen Trutanich said 41-year-old John Edward Bearden pleaded no contest before being sentenced to five months of house arrest and probation. Bearden attached a fake bomb to a forklift on June 20. At the time he was a mechanic at the port's tugboat facility on Terminal Island. A forklift operator discovered the phony device, which looked like an explosive device but was actually metal oil filters, batteries and wires bound with duct tape and black electrical tape. The hoax reportedly cost the port $126,000. For more of the Mercury News story: mercurynews.com Submit Your Press |
The buzz about near sourcing, the process of transferring manufacturing from Asian countries to those nearer Western markets, is more hyperbole than truth, according to an article in the latest issue of Container Insight published by Drewry Maritime Research.
Mediterranean Shipping Company announced it would sell 35 percent of its container terminal operations arm, Terminal Investment Limited, to Global Infrastructure Partners for $1.9 billion. The shipping giant said the transaction will likely be completed by midyear, and is subject to relevant approvals.
Trans-Pacific container lines say a combination of market indicators and advance bookings indicate the start of a gradual increase in cargo volumes, which will help support the latest round of general rate increases effective April 1, according to a statement from the TSA. 
Due to the Obama administration's agenda of doubling U.S. exports by 2015, insourcing has become the new trend as outsourcing wanes. Export levels are currently halfway to the export-doubling goal, according to Bloomberg.