Cargo Business Newswire ArchivesSummary for April 6 through April 10, 2015:
Monday, April 6, 2015
Capitol Watch: Devolution: Sideshow or Legitimate Alternative?
By Anna Denecke, Associate, Blakey & Agnew, LLC
The pressure is on for Congress to find the funding for a long-term surface bill. The administration has placed a stake in the ground — on March 30, Secretary Foxx transmitted a six-year, $478 billion surface transportation bill to Congress. President Obama suggested that in addition to the $239 billion in expected revenue from fuel taxes over six years, $239 billion could be recouped from a one-time, mandatory 14 percent tax on off-shore earnings of U.S.-based companies. Despite "laying their cards on the table," as Secretary Foxx called it at a February Capitol Hill hearing, Republicans and Democrats alike remain skeptical of the proposed corporate tax structure overhaul.
With a long-term surface transportation price tag comes a likely resurgence of the “devolution” movement. Devolution is the other side of the federal funding coin argument – we need less federal funding and oversight, not more – and advocates of this theory ask that Washington shift current federal taxing authority from the federal government to the state governments.
Last Congress, Republicans in the House and Senate introduced companion bills that would lower the federal gas tax from 18.3 cents to 3.7 cents per gallon and phase out the diesel fuel tax from 24.3 cents to 5 cents. Rep. Tom Graves (R-SC) secured 55 co-sponsors for the Transportation Empowerment Act. Sen. Mike Lee (R-UT) introduced a companion bill that ended up in the form of an amendment to the short-term extension of MAP-21. It received 28 yeas and 69 nay votes.
This Congress, the devolution companion bills have not yet been reintroduced. However, the Republican budget moved to reform the Highway Trust Fund by limiting expenditures in FY16 to receipts coming in. Although the budget is a nonbinding resolution, the House adopted the document. It essentially proposes to take the first step towards devolution by absolving Congress of the responsibility of finding new funds to meet existing obligations.
Devolution activists have more than just the House budget in their sights in the 114th Congress. Some in the conservative wing of the Republican Party are pointing to the fact that Republicans control both sides of Capitol Hill for the first time since 2006. Furthermore, if Congress can’t produce a bill, thwarting a long-term plan is producing a "de facto devolution." In other words, states like Iowa and Virginia are hiking their own gas taxes in the face of a bankrupt Highway Trust Fund and dwindling federal dollars.
Former Majority Leader Harry Reid (D-NV) allowed a vote on Sen. Lee’s devolution bill last year. Hopeful devolution advocates don’t foresee a scenario that Majority Leader Mitch McConnell (R-KY) wouldn’t also allow the bill, or some version of it, to come up for vote. However, it should be noted that Sen. McConnell voted against the Lee amendment in the 113th Congress.
He’s not alone – the original author of devolution, Sen. Jim Inhofe (R-OK), who is the self-assessed "most conservative member of the Senate," is an ardent backer of a strong federal role in surface transportation. Senator Inhofe repeatedly reminds conservatives to refer to Article 1, Section 8 of the U.S. Constitution, more commonly known as the Commerce Clause. It is there, Sen. Inhofe argues, that Congress derives its power to oversee investments in roads, bridges, and transportation.
Key to countering the devolution movement is a show of force from House and Senate leadership. Transportation & Infrastructure Committee Chairman Shuster is on record criticizing devolution as an unworkable theory. On the other side of the Capitol, Sen. Inhofe’s is well-positioned as Chairman of the Environment and Public Works (EPW) Committee to stop a move towards devolution; EPW drafts the highway language in transportation bills.
With Sen. Inhofe’s strong-arm, a continued anti-devolution stance from Majority Leader McConnell and partnership with Chairman Shuster, the hope among transportation circles is that the devolution firewall will stand.
Blakey & Agnew, LLC is a public affairs and communications consulting firm based in Washington, DC.
Cargo congestion eases at L.A./Long Beach ports
Cargo congestion at the two busiest U.S. container ports has eased considerably in the six weeks since West Coast dockworkers and port employers reached a tentative labor deal, but port officials said it would take several more weeks for cargo traffic to return to normal.
The most obvious sign of improved cargo flow through the ports of Los Angeles and Long Beach is a sharp drop in the number of inbound vessels kept waiting at anchor for dock space to open, according to Port of Los Angeles spokesman Paul Sanfield.
Nine vessels stood idle outside the Southern California port complex on Tuesday and Wednesday, down from the 31 stacked up during the height of the cargo crisis in February, Sanfield said.
He said berths were now normally available as soon as ships arrived.
Sanfield said the average time it took cargo ships to get in and out of the terminals fell to 7.6 days last week from 8.4 days in early March. Turnaround times usually average four to five days, he said.
Cargo loads faced lag times of two weeks or more during months of labor negotiations at all 29 U.S. West Coast ports between the International Longshore and Warehouse Union and major shipping lines and terminal operators. Congestion was also exacerbated by a lack of available truck chassis and the logistics of processing super sized container ships.
All cargo ships that had been queued in San Francisco Bay have finally berthed at the Port of Oakland, according to Port Maritime Director John Driscoll.
"When a ship comes to Oakland, it goes straight to berth and we go straight to work loading and unloading," said Driscoll in a recent statement. "No more delays: that’s the message we’re sending to our customers and the shipping lines that carry their cargo."
A long difficult labor dispute between port operators and dockworkers represented by the International Longshore and Warehouse Union has delayed shipments throughout West Coast ports, including Los Angeles, Seattle and Oakland.
Pressured by the Obama Administration, the union and port operators reached a tentative agreement on a new five-year contract in February, but union members might not vote on the deal until the latter part of 2015.
The Port of Oakland announcement is good news to companies frustrated by shipping delays. As recently as last month, up to 20 vessels a day were lined up waiting to berth.
Port officials now say most ships berth and leave the facility within two days. The facility said customers were taking possession of the cargo "shortly" after being unloaded, a vast improvement from the "several weeks" it took during the labor dispute.
A shipping source told The Chronicle that it was still taking about four hours for a truck to get a container.
"We are slowly recovering," he said.
Port officials warned the facility might suffer temporary backups in the future because up to 10 ships remained anchored throughout Southern California, disrupting schedules across the West Coast.
Cargo ship runs aground in Delaware River
A large cargo ship ran aground in the Delaware River off Burlington City, according to the local police.
The ship ran aground near the Burlington Bristol Bridge after it lost propulsion, according to 6ABC.com. The Burlington City Police Department said the U.S. Coast Guard were on scene and no injuries were reported.
The Agia Irini was heading from Fairless Hills, Pennsylvania to Philadelphia. The bulk carrier is currently sailing under the Liberian flag.
Cargo ship rescues sailor missing for 66 days off N. Carolina coast
Louis Jordan, 36, was found floating on the overturned hull of his vessel by a German cargo ship after being missing at sea for 66 days, according to the U.S. Coast Guard.
Jordan was reported missing by his father on Jan. 29. He had set sail about a week earlier on the 1950s-era, single-masted sailboat Angel from Bucksport Plantation Marina in Conway, South Carolina.
Jordan told Coast Guard officials he survived by rationing the food he had packed for the journey, drinking rain water and catching fish with a net. He added that his mast broke and his communication gear was damaged in a rough storm. When he was found he had lost his mast and the boat had capsized.
Trucking Trends: Georgia on my Mind: How additional container traffic in Savannah is affecting truckload rates in the South
By Mark Montague
A rising tide may lift all boats, but they’re riding a little higher in Savannah.
Container traffic at the Port of Savannah grew 14 percent during February to a total of 284,037 TEUs. Activity is up in virtually every category, from heavy machinery to breakbulk freight to bulk commodities such as soybean meal and peanut pellets.
Savannah’s annualized volume during the last two months has approached the 4.5-million TEU mark that is considered the port’s capacity. Last year’s volume was 3.3 million TEUs.
The Georgia Port Authority no doubt expects business to stay strong. The GPA will deepen the port’s 18.5-mile outer harbor to 49 feet at low tide and significantly expand truck and rail facilities this year.
While it takes almost twice as long for ships from Asia to reach ports on the Atlantic Coast compared to the Pacific, congestion and a still-uncertain labor situation at West Coast ports have many shippers shifting to less crowded berths on the Gulf Coast and East Coast.
Plus, cargo that’s destined for East Coast population centers can be transported by land more quickly and economically from ports like Savannah, just a four-hour drive from Atlanta and Orlando. So shippers get a couple of days back on the total transit time.
A predictor of rates
How has the additional volume affected outbound truck capacity and rates?
In 2014, the ratio between demand and capacity was an excellent predictor of rate changes for outbound vans from Savannah. There was a 0.76 correlation between truckload load-to-truck ratios (dotted line) and the spot market line haul rate (orange line), and the correlation was even stronger between the ratio in one month and the price in the following month.
That means a change in the load-to-truck ratio predicted a rate change in the following month 79 percent of the time (0.89 x 0.89 = 0.79). This was true despite a robust supply of trucks in Savannah, which kept load-to-truck ratios at or below national averages.
Some of those trucks are coming up from Florida, running empty all the way. During the off-season, trucks delivering to southern and central Florida often deadhead out, sometimes as far as the Florida panhandle or even Georgia, to find northbound and westbound freight.
Most truckload freight leaving Savannah is bound for markets within a single day’s driving distance, like Georgia and the Carolinas, or back down to Florida. The primary destination is Atlanta, the region’s biggest freight hub.
Freight availability was up 8.3 percent outbound from Savannah in January compared to January 2013, which is a strong result. (I’m comparing this winter to 2013 because the Polar Vortex of 2014 led to atypically high demand on the spot market.) Even with the increased freight availability, however, carriers searched for loads almost twice as often in January 2015 as they did in the same month of 2013.
The diversion of freight from West Coast to East Coast ports may be permanent. At minimum, it is likely to continue until late May, when the backlog is expected to clear at the Ports of Los Angeles and Long Beach. Truck turn times in Los Angeles-Long Beach are improving but the average truck visit to the harbor in February was still 50 percent longer than a year prior.
In the meantime, East Coast and Gulf Coast ports are working hard to attract business. Shifting freight patterns and additional traffic should have a significant impact on capacity and rates as the busy season ramps up.
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.
ILWU recommends approval of tentative West Coast dockworker contract
ILWU Coast Longshore Caucus delegates voted Friday to recommend approval of the tentative agreement reached on February 20, 2015, between the union and employers represented by the Pacific Maritime Association, according to an ILWU statement.
The proposed 5-year contract, which covers 20,000 dockworkers at 29 West Coast ports, was approved in February by ILWU’s 16-member elected Negotiating Committee and 8-member Safety Sub-Committee.
ILWU said 90 delegates to the Coast Longshore Caucus spent last week reviewing the proposed agreement line-by-line, before voting by 78 percent to recommend the proposal on Friday.
"This agreement required ten months of negotiations – the longest in recent history," said ILWU International President Bob McEllrath, "but we secured a tentative agreement to maintain good jobs for dockworkers, families and communities from San Diego to Bellingham. Longshore men and women on the docks will now have the final and most important say in the process."
The union said copies of the agreement would be mailed to longshore union members, who will then have a chance to discuss the proposal at local union meetings. A secret ballot membership ratification vote will be the final step in the process. A final tally will be conducted on May 22.
Port of Portland may lose Hapag-Lloyd
The Port of Portland’s Terminal 6 may have lost its remaining business. Top customer Hanjin Shipping pulled out in February due to delays caused by constant labor conflicts—and now it’s been reported that Hapag-Lloyd, the port’s second-largest carrier, has stopped scheduling trips to Portland.
"Although Hapag-Lloyd has not made an official announcement or given notification that it will no longer be calling on Terminal 6, its current vessel schedule does not show any such calls for the near future," said Elvis Ganda, CEO of ICTSI Oregon.
Ganda said shippers should contact Hapag-Lloyd directly for more information.
If Hapag-Lloyd is indeed gone, the negative impact will be huge to small and midsized firms that trade with Europe. The German carrier is Portland's only direct connection to those customers.
Hanjin Shipping Co. terminated its business with Portland in February, taking nearly 80 percent of the port’s container business with it.
About nine months of slow dock work during West Coast-wide contract negotiations between port operators and the International Longshore and Warehouse Union brought West Coast ports to a near standstill. Although the union announced Friday that its members plan to ratify a new contract, and the cargo backlog will soon be cleared, Portland's labor dispute rages on.
There has been bad blood between ICTSI Oregon and the dockworkers for years, with the union saying the port operator is mismanaging the port, and Ganda saying the workers are intentionally sabotaging the company to drive it out of business.
Port and agriculture industry officials said they worry other ports will become more expensive to ship out of, without Portland competing for the same business.
The only remaining shipping line is Westwood, which only sends a few vessels in and out of the Port of Portland.
Drewry explores viability of APL-OOCL merger rumor
Drewry Maritime Research says rumors of a merger between APL and OOCL are probably just that, but speculates on the viability of such a major M&A in the container shipping industry in their recent issue of Container Insight.
The speculation of a NOL-OOCL tie-up arose after NOL’s announcement to sell off its logistics arm, APL Logistics, to Kintetsu World Express for $1.2 billion. The prospect of becoming less debt-burdened and focused only on container operations appeared to some analysts to make NOL a considerably more attractive proposition.
OOIL’s large cash reserves (the company had liquid assets of $2.7 billion as of December 2014) are probably what put the Hong Kong-based company a likely candidate.
The planned sale of APL Logistics is part of a growing trend among shipping lines to sell off non-core assets to repair balance sheets from years of operating losses. By getting rid of cash generating businesses such as terminals and logistics units and sticking with the container operations that caused most of the damage in the first place, companies are placing a lot of faith in an industry with a terrible track record for making money.
NOL, for example, made a Core EBIT loss of $76 million last year, which would have been far steeper without the APL Logistics’ contribution of $66 million. In contrast, the liner division posted a loss of $143 million, which perhaps suggests the parent company is getting rid of the wrong unit.
APL’s recent history of losses does call into question why OOIL would be interested in joining forces. Over the past five years, APL has cumulative Core EBIT losses of $581 million, whereas OOILs container and logistics unit has generated profits of $1.6 billion.
The disparity in the two companies’ operating results is especially significant when considering their similarities. As members of the G6 Alliance they operate on the same routes, with similar volumes, and they are both what could be described as medium-sized operators in terms of active fleets with both having just under 3 percent of the world’s total containership capacity. If they were to come together, the combined entity would become the world’s fourth largest operator with an active fleet of approximately 1.1 million TEUs, still a long way behind 2M carriers Maersk and MSC.
Drewry said it agrees with Ron Widdows, former APL president and now chairman of the World Shipping Council, who said that a merger of APL and OOCL would not make that much difference to the industry. The analysts say such a deal would remove one of the big players from the roster, but enough competitors would remain for shippers to find a better rate. It would also reduce the number of carriers wanting to buy mega-ships, but it wouldn’t do anything to address the overcapacity that already exists.
The researchers note that although there has been some increased M&A activity of late with Hapag-Lloyd-CSAV and Hamburg Sud-CCNI, these deals cannot be described as industry game-changers. "In our view," writes Drewry, "carriers will continue to shy away from major M&A and will stick with the defensive game plan of mega-VSAs."
Drewry analysts conclude that the merger of APL and OOCL is highly doubtful and that it would take more than one merger of big carriers to reshape the container shipping market.
Ship capsizes off coast of India
A Yemen-flagged ship on its way to the Alang-Sosiya Ship Recycling Yard capsized off the coast of Gujarat, India, while another ran aground early on Saturday morning, and marine police and the Indian Coast Guard rescued all the 11 crew members aboard.
The ICG station in Pipava got a message saying the MV Ayman had started listing on its side and that its crew membets were in danger. Similarly, the police also were told that another vessel named MV Abdulla, also flying a Yemeni flag, had run aground in the vicinity.
"We have rescued all the 17 crew members of the twin vessels. The vessels were going towards Alang for being dismantled. We are waiting for further details," the superintendent of police of the Amreli district, Antrip Sood, told The Indian Express.
West Coast port delays a boon to Hampton Roads warehouses
Photo credit: J. Mallin/Bloomberg
The once half-empty warehouses of Virginia’s Hampton Roads port are brimming with cargo these days, which could mean long-term economic improvement for the region.
In order to sustain this increase in business, two key stakeholders need to be convinced — importers and bankers, who will want to see if that shift from west to east is permanent.
"Things are ramping up," said Ann Crenshaw, a local real estate attorney with Kaufman and Canoles and president of the Hampton Roads Association for Commercial Real Estate. "I think as the economy improves and demand continues, we expect this trend to hold."
In 2014, Hampton Roads had approximately 108 million square feet of leasable industrial space located in 2,936 buildings, according to a recent Old Dominion University E.V. Williams Center for Real Estate and Economic Development (CREED) report. Of the industrial warehouse and distribution space available last year, the report said about 91 percent of the space was leased — approaching highs not seen in nearly 15 years.
U.S. Labor Secretary praises ILWU for recommending W.C. labor deal
Labor Secretary Tom Perez praised ILWU leaders on Friday for recommending the deal he helped broker to resolve the West Coast dockworker labor standoff that stalled the flow of cargo early this year.
"With their vote to recommend ratification of the contract between shippers and dockworkers at the West Coast ports, leaders of the International Longshore and Warehouse Union have taken an important step toward finalizing the agreement," said Perez in a statement. "I am optimistic that the rank and file membership will recognize the contract as a fair resolution, and will vote to approve the contract."
President Obama sent Perez to mediate stalled labor contract negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union, who represent dock workers at 29 ports on the West Coast. The ports were shut down in mid-February due to labor strife.
Perez said Friday that congestion at the ports has been greatly reduced since the deal was announced in February.
"Since the parties reached the tentative deal in February, congestion at the ports has eased considerably as the shippers and dockworkers have worked together to restore full operations at the 29 West Coast ports," he said.
"Continued economic growth and job creation depends on dynamic, fully functioning ports, so moving forward, restoring confidence in the ports must be a priority for all stakeholders," Perez continued. "The port operators and dockworkers must work together to demonstrate that the West Coast ports can be among the most efficient and effective ports in the world. I am confident in their commitment to that shared goal, and I applaud their willingness to put an end to their dispute and move forward together."
The Virginia Port Authority has appointed F. Blair Wimbush, vice president of real estate and corporate sustainability officer at Norfolk Southern Corp., to the VPA board.
Gov. Terry McAuliffe announced the appointment on Friday. Wimbush replaces G. Robert Aston Jr., chairman and CEO of TowneBank, who resigned from the board in January.
Aston, who had been appointed to the board a year ago, replaced a board member whose term was up on June 30, 2016.
Evergreen Line announced it would partner with Simatech, a leading feeder operator in Dubai, to launch a joint Chennai-Colombo-Gulf Service (CCG) service in May.
The CCG weekly service will use four 2,000-TEU container ships — one operated by Evergreen Line and the remaining three by Simatech. The first sailing of will be from Colombo on May 9th and call at Vizag (India), Krishnapatnam (India), Chennai (India), Colombo, Cochin (India), Jebel Ali (UAE), Sohar (Oman), Cochin and Colombo once more.
In addition to linking the ports of Southern India and Sri Lanka with the Persian Gulf, the shipping line reports its intra-regional service will also connect to Evergreen's global service network via its transhipment hub in Colombo.
Reefer trawler sinks off Russia, resulting in 56 dead, 13 missing
Russian emergency workers retrieved bodies from the freezing Sea of Okhotsk on Thursday after the refrigerated trawling ship Dalny Vostok sank in Russia’s Far East, killing at least 56 of a crew of 132.
The sinking is the deadliest Russian maritime disaster since 2011, when a tour boat sank on the Volga River in central Russia, killing 112 people.
Helicopters and dozens of ships were deployed for a large-scale rescue operation that continued into Friday morning off the Kamchatka Peninsula, where 13 members of the crew were still missing. Sixty-three sailors were rescued from the icy waters, and the bodies of 56 crewmembers were recovered.
Survivors faced complications from hypothermia and were being evacuated to mainland Russia.
The reason for the sinking of the trawler was not immediately clear and is being investigated, according to government officials.
Hapag-Lloyd officially terminates business at Port of Portland
Container terminal operator ICTSI Oregon confirmed Tuesday that shipping line Hapag-Lloyd has given official notice and will no longer call the Port of Portland.
The Oregonian reported Friday that Hapag-Lloyd was no longer scheduling containers to be shipped in and out of Portland, and had stopped scheduling ships.
The official announcement comes about a month after Hanjin Shipping stopped its Portland services calls. Together, Hanjin and Hapag-Lloyd make up nearly all of Terminal 6's business.
Only Westwood, which is scheduled to send a ship at the end of April, is still moving products through Portland's container port. The line, which visits once a month, has a contract with the port through December.
Elvis Ganda, chief executive of ICTSI Oregon, said he is working to attract new lines to the port. But years of labor slowdowns at the docks has given Portland a difficult reputation - on top of the 100-mile-inland port's existing challenge of only being able to accommodate vessels that can fit through the Columbia River channel.
CMA CGM Group scores Kingston Containers Terminal concession
French shipping giant CMA CGM Group has been awarded the concession of Kingston Container Terminal for a 30-year period, according to a company statement.
"This is a key investment for the CMA CGM Group," said Farid T. Salem, CMA CGM Group executive officer. "With this terminal, the group anticipates the Panama Canal widening, expected to be completed in 2016, and the entire area development that it will create. The CMA CGM Group therefore reaffirms its ambition to offer additional services to our core business, in order to improve our clients’ needs satisfaction."
Salem signed the agreement with the Port Authority of Jamaica in early April.
With a total 7874 feet of wharf with a 50-foot draught, Kingston Container Terminal will increase its annual capacity up to 3.6 million TEUs, the statement said. The terminal will feature 14 gantry cranes and 60 port riders.
The terminal extension is expected to transform the Kingston Container Terminal into a major transshipment hub port in the Caribbean, the company said.
Former Cold Train executives sue BNSF for $41 million+
Two top officials of the now defunct Cold Train, a refrigerated rail service, are suing BNSF Railway for putting them out of business by devoting more and more trains to shipping oil and coal.
Capital Press reported that the suit contends BNSF reneged on a promise to provide rail service to Cold Train, misrepresenting itself in saying it would improve rail service and did so knowing a sale of the company depended on it.
The plaintiffs are Michael Lerner and Steve Lawson, whose company, Cold Train Express Intermodal Service, shut down in August 2014.
Cold Train operated from 2010 to 2014 and handled about 700 refrigerated east -bound containers per month, most filled with apples, other produce and frozen goods.
The plaintiffs say the business was based on a 72-hour guaranteed delivery time for fresh produce, and that the on-time performance plummeted from 90 percent in mid-2013 to less than 5 percent in April 2014.
BNSF, in a statement released Tuesday, said the railroad did experience well-documented service issues because of unprecedented demand levels and historic winter weather events in 2013 but worked hard to remedy the situation.
Singapore port authority spends $47M on maritime program
The Maritime and Port Authority of Singapore will inject another $47 million to fund an existing program aimed at attracting and grooming local talent for the maritime sector.
The additional funding to the Maritime Cluster Fund manpower development program will be used to introduce new initiatives and boost existing efforts, according to an MPA statement.
"MPA is committed to building a strong core of local talent in the maritime industry, which offers diverse career opportunities for Singaporeans in both seafaring and shore-based jobs," said Andrew Tan, chief executive of MPA.
"The enhancement to the MCF-MD program not only lends strong support to the national SkillsFuture initiative, but also allows us to support more skills-based learning, upgrading, and re-skilling for those who want to switch careers. We will be announcing more initiatives on manpower development by the two taskforces in the coming months," Tan said.
By Anna Denecke, Associate, Blakey & Agnew, LLC
By Mark Montague
Photo credit: J. Mallin/Bloomberg
Container terminal operator ICTSI Oregon confirmed Tuesday that shipping line Hapag-Lloyd has given official notice and will no longer call the Port of Portland.