Monday, April 22, 2013
Study: Manufacturing costs in China and U.S. will be even by 2015
The price for U.S. firms outsourcing manufacturing to China will equal making goods in the U.S. by 2015, according to a new study by consulting company AlixPartners.
"The Chinese manufacturing cost advantage has eroded dramatically in the last few years," said Steve Maurer, AlixPartners managing director. "If you go back to 2005, it was pretty common for landed cost from China to be 25 to 30 percent less than the cost of manufacturing in the United States. Based on our analysis, two-thirds of that gap has closed."
The cost of shipping goods from China, higher Chinese worker wages, and the increasing value of Chinese currency are all factors in the higher costs of doing business in China, Maurer said. Compared with ten years ago, wages have reportedly jumped an average of 12 percent annually, while China's money, the RMB, has appreciated 25 percent vs. the U.S. dollar.
There have been reports of some companies leaving China to find cheaper locations or re-shoring to the U.S., but most industry insiders doubt that companies will leave China altogether due to their growing consumer market.
I don't think companies are going to pull out of China," said Hal Sirkin with the Boston Consulting Group. "Because of Chinese domestic demand which is growing at 8 or 10 percent a year, even if they decide to pull out their export plants they will then convert those plants, basically re-tool them into Chinese consumption because there is a great market in China given all that growth."
For more of the CNBC story: cnbc.com
Hong Kong docker strike drives down shares in Hutchison Port Holdings, shippers to reroute cargo through Guangdong
Shares in billionaire Li Ka-shing's Hutchison Port Holdings went down Friday, as the dockworker strike at Li's HongKong International Terminals at Kwai Tsing dock continues.
HPH Trust shares were 1.2 percent lower Friday in Shanghai trading, and were down more than 4 percent on the week. The three-week strike has severely disrupted operations at the port. Hutchison operates 16 of Hong Kong's 24 deep-water ship berths and has a 70 percent market share of port handling volumes.
The Hong Kong Shippers Council said shippers have a back-up plan to reroute Hong Kong cargo through Guangdong, and that Customs there has agreed to expedite approval of diverted shipments.
"Delayed shipments can result in huge business losses," said Willy Lin Sun-mo, chairman of the Federation of Hong Kong Industries, a trade group of exporters, importers and manufacturers. "That is why making sure the goods can be delivered in time is always our prime concern." He added that a back-up plan had to made to protect the flow of trade for next month's peak season.
More than 400 Hong Kong port workers have been on strike since March 28, demanding a 20 percent pay rise from HIT. On Friday, hundreds of dockworkers and supporters participated in a rally outside of Li's Cheung Kong Center in downtown Hong Kong. Stanley Ho Wai-hong of the Union of Hong Kong Dockers, said about 2,000 attended the rally, but police reported 600 people attended.
On Friday, Global Stevedoring Service Co., one of the sub-contractors employed by HIT, said it would not renew its contract with HIT when it expires June 30. The contractor will close the company and lay off its staff.
"Hong Kong faces serious competition from equally efficient regional ports [that] have lower operating costs, and if all parties do not consider the proposals with an open mind and try to understand the challenges that the industry is facing, workers across the [city's] entire logistics industry will suffer," Global Stevedoring said in a statement.
For more of the Wall Street Journal story: blogs.wsj.com
For more of the South China Morning Post story: scmp.com
Idaho port dredging faces opposition
Barges transport cargo from the Port of Lewiston, Idaho, the most inland port on the West Coast, to Portland, Ore. for shipment to Asian countries. Dredging is necessary every few years to keep the port's channel to a depth suitable for barge traffic, but critics say Lewiston's volumes are declining and the taxpayers are subsidizing shipper's costs.
Environmentalists are challenging the plans of the Army Corps of Engineers to dredge a shipping channel on the lower Snake River. Barges can sail to the Pacific Ocean from Lewiston because the federal government in the 1960s and 1970s built four massive hydroelectric dams, equipped with locks, on the upper Snake River.
"Costs are rising, use is dropping and taxpayers won't continue to foot this bill," said Sam Mace of Save Our Wild Salmon, part of a coalition of environmental groups that oppose dredging. The groups tried and failed to stop dredging by the corps in 2005 and 2006, and are now claiming that the corps is not seriously considering alternatives, such as loading less cargo or using trucks or rail.
The corps is preparing an environmental impact statement for the dredging and is required by law to maintain a shipping channel 14 feet deep and 250 feet across, according to spokesman Bruce Hendrickson.
"A barge is still equal to 35 railroad hopper cars or 134 trucks on the road, creating pollution," Hendrickson said. "Barging is a very efficient and nonpolluting way to move cargo up and down the river."
In 2000, the Port of Lewiston shipped more than 900,000 tons of grain, a number that declined to just over 500,000 tons in 2012, according to port statistics. The number of containers shipped was more than 16,000 in 2000 and had dropped to around 5,000 by 2012.
The economy and the Port's business are rebounding after the recession, reports David Doeringsfeld, the port's general manager. "Business is up 88 percent so far this year," he said.
For more of the Seattle Times story: seattletimes.com
Shipbreaking operation proposed at Port of Astoria
The commissioners at the Port of Astoria, Ore., last week discussed a proposed shipbreaking operation at the port, a business to cut apart and recycle vessels.
In 1999, when the Division of State Lands owned North Tongue Point, a Seattle company that was renting part of the coastal facility prepared it for a potential military ship dismantling operation. Now Portland-based Blue Ocean Environmental has proposed using the facility for that purpose, recycling the metal from ships.
Shipbreaking has boomed recently, according to the Daily Astorian, taking advantage of the downsizing of older, unprofitable vessels in the struggling shipping industry.
Opponents worry about the handling of hazardous materials used in ship construction.
After the Port of Astoria commissioner's meeting last week, Commissioner Floyd Holcom declined to comment, citing the port's nondisclosure agreement with the company.
For more of the Oregon Live story: oregonlive.com
Port of Portland crane collapses
A 600-ton crane collapsed Saturday morning at the Port of Portland Terminal 4.
Workers were in the process of removing the older crane when they heard a sound that indicated something was wrong. They evacuated the site, and the crane fell about a minute later. No one was hurt in the incident.
The contractor hired to dismantle the crane is working with investigators to figure out what caused the equipment to fall.
"As far as industrial accidents go, this is really a best-case scenario," said Josh Thomas, a port spokesman. "No one was hurt. It didn't end up in the river, and it didn't hit any other structures or conveyances."
For more of the Oregon Live story: oregonlive.com
Wednesday, April 24, 2013
Union Pacific profits up 11 percent in first quarter
Union Pacific, the largest railroad in the U.S., posted first quarter profits better than forecast, as higher prices offset a decline in cargo.
Net income increased 11 percent to $957 million, or $2.03 a share, according to a statement from the railroad. That was greater than the $1.96 average estimate of 28 analysts polled by Bloomberg and compares with $1.79 a share a year earlier.
Although freight volume was down due to lower coal and agriculture shipments, freight revenue was up 3 percent.
"We efficiently managed our operations in the face of dynamic volume shifts across the network," CEO Jack Koraleski said in the statement.
Total revenue at Union Pacific climbed 3.5 percent to $5.29 billion, the railroad said, compared to the average analyst estimate of $5.21 billion.
For more of the Bloomberg article: businessweek.com
Port of Tacoma container traffic up 37 percent YTD
Container traffic at the Port of Tacoma is up 37 percent, with 469,233 TEUs handled year-to-date through March, according to a port statement.
Import volumes surged 52 percent to 172,421 TEUs on greater demand for industrial machinery, furniture, auto parts and electronics. Exports were up 39 percent to 134,867 TEUs due to growth in agricultural and wood products, the statement said.
Domestic volumes to Alaska and Hawaii were 103,458 TEUs, an increase of 7 percent year-over-year.
Bowman chosen for Port of Seattle Commission seat
Stephanie Bowman was chosen to join the Port of Seattle Commission, filling the seat vacated by Rob Holland. Bowman, executive director of the Washington Asset Building Coalition, is the former manager of federal government affairs at the Port of Tacoma.
Euro declines as manufacturing and services contract
The euro fell to a two-week low against the dollar as a survey showed services and manufacturing in the region contracted for the 15th consecutive month.
"The overall picture is pretty bleak," said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. "The likelihood of the ECB cutting interest rates increased today. All in all, it's negative for the euro."
A euro-area index reading based on a survey of purchasing managers in the services and manufacturing industries was 46.5 in April, below the level of 50 that indicates growth, according to Markit Economics. A gauge of German factory output dropped to 47.9 from 49, Markit said, while economists surveyed by Bloomberg forecast no change.
The European Central Bank may cut interest rates if data show a need for it, Executive Board Member Joerg Asmussen said in Washington April 20.
For more of the Business Week story: businessweek.com
Mississippi River near St. Louis reopens for shipping after 11 barges sink
A 15-mile stretch of the Mississippi River near St. Louis reopened to shipping Monday after the Coast Guard determined 11 barges that sank last weekend in the rain-elevated channel were not a danger to other ships.
Investigators are still trying to figure out why 114 barges broke free from a dock in St. Louis County Saturday night.
All of the barges that didn't sink were retrieved.
Salvage operations for the sunken barges will soon commence, according to Coast Guard Lt. Colin Fogarty.
For more of the State Journal-Register story: sj-r.com
Thursday, April 25, 2013
PMSA protests new annual CAPA port tariff general rate increase
The Pacific Merchant Shipping Association wrote a letter to the California Association of Port Authorities this week, opposing the CAPA annual general rate increase proposal.
In 2012, CAPA adopted an annual port tariff general rate increase program based on the annual change in the consumer price index, according to a presentation at the April 15 meeting of the Board of Harbor Commissioners of the Port of Long Beach.
According to Donald Snyder, the Director of Trade Development at the port, the new CAPA annual GRI would implement an increase of 1.7 percent to port tariff programs effective July 1. He said that all 11 CAPA ports would have to unanimously vote to adopt the 1.7 percent increase, indicating that most ports were leaning in favor of the increase.
According to Snyder's board presentation, the increase would affect rates for doing business at the port, such as wharf, dockage and pilot rates as well as rules for environmental projects such as Clean Trucks and Green Flag. Cargo storage and area assignments would also be impacted, according to Snyder.
Port lease agreements would also go up under the CAPA GRI, said Karl Adamowicz, Director of Real Estate at the Long Beach port. He advised the board that container terminals, pipeline license agreements and area assignments would all be impacted by the adoption of the rate increase.
Harbor Commissioner Rich Dines said he supported the CAPA GRI after the presentation.
PMSA Vice President Michele Grubbs spoke out against the CAPA GRI at the meeting, urging the Port of Long Beach not to implement the increase. She pointed out the costs at the Ports of Los Angeles and Long Beach were already the highest in the country and the shipping industry is currently losing millions, citing a recent Lloyd's article that reported 21 of the top 30 carriers reported an overall loss in 2012. Her further talking points aligned with those in the PMSA letter.
The PMSA letter asserted that the CAPA automatic increase comes at a time when California ports are losing market share and does not take into account the state of the economy, the industry or its impact on competitiveness. It also noted that California lease rates are among the highest in the nation and that port customers and tenants also face $5 billion in California's state-imposed environmental costs. It pointed out that port leases are typically reviewed every five years to consider increases, and that the annual GRI is a cost placed on top of that review process.
The letter from the PMSA also asserted that CAPA members face growing competition from Canada, Mexico and U.S. Gulf and East Coast ports through both the Panama and Suez Canals. They stated that the proposed increase was counterintuitive to the "Beat the Canal" campaign waged by the Ports of Los Angeles and Long Beach. The letter notes that since ports can adjust their rates independently, there is no need for the collective policy GRI of the CAPA.
Snyder said the CAPA program is modeled after the Pacific Northwest ports GRI program that has been in place for a couple years. Their program, as well as the new CAPA one, uses a Board of Labor West region consumer price index, taking the previous year's increase to formulate the increase proposed to take place the following July.
Drewry: Container trade to grow 4.7 percent in 2013
Container trade will grow by 4.7 percent in 2013 and by 5.7 next year, reaching 684 million TEUs by the end of 2014, according to the latest predictions from Drewry.
Port capacity is expected to reach 994 million TEUs by 2014, increasing at a compound annual growth rate of 3.9 percent since 2011, which will bump average utilization up to 69 percent in 2014 from 67 percent in 2011.
Drewry said there will be wide regional variations in utilization levels. For example, emerging markets such as South East Asia and the Far East will see average utilization of 75 percent in 2014, while the average in Western Europe will likely be down to 57 percent.
Shares to watch for, according to Drewry Maritime Equity Research, are Cosco Pacific and HHFA. Cosco Pacific is favored because of its stable revenues from container leasing, its exposure to the Bohai Rim and early signs of the Chinese economy bottoming out as the global trade recovers. HHFA has a good value at current levels, says Drewry, and will benefit from growth potential in the Baltic Sea market.
Evergreen adds new trans-Pacific service
Evergreen Line announced the launch of a new weekly direct service linking central China with the U.S. West Coast.
Evergreen will use five vessels of 4,000 TEUs to start its China-Pacific South West service. The CPS2 service will begin with an inaugural sailing from Ningbo on May 14. The port rotation will be Shanghai, Los Angeles, Oakland and Ningbo.
Evergreen will also use the CPS2 and its existing HTW services to partner in a slot exchange arrangement with COSCO's CEN and Hanjin's CAX and PSX services.
The rotations will be as follows:
FedEx beats UPS for $10.5 billion USPS deal
FedEx won a $10.5 billion, seven-year contract to carry U.S. Postal Service mail between U.S. airports, defending a challenge from UPS.
The new contract to fly Express Mail and Priority Mail begins in October when the current deal ends, FedEx said in a statement. No other details were disclosed concerning the arrangement.
The deal eases worries that FedEx would have to share up to 30 percent of its USPS work with UPS as the Postal Service restructures after years of losses.
"This contract win is a sorely needed shot in the arm for FedEx," Justin Yagerman, an analyst at Deutsche Bank in New York, wrote today in a note to Bloomberg.
For more of the Bloomberg story: businessweek.com
Three burned in barge explosion in Alabama
At least six explosions rocked two barges moored on Alabama's Mobile River, which caught fire on Wednesday.
The fires were dying down by Thursday, but were still too hot for firefighters to board the barges, according to Steve Huffman, spokesman for the Mobile Fire-Rescue Department.
The initial explosion and fire Wednesday night severely burned three workers who were preparing the barges for reloading, Huffman said.
The first explosion occurred on a barge that carried compressed natural gas, according to the U.S. Coast Guard. Although empty at the time of the blast, a spark ignited a buildup of natural gas vapors, causing an explosion that lit a second barge on fire, said Coast Guard Lt. Mike Clausen.
For more of the CNN story: cnn.com