Cargo Business Newswire ArchivesSummary for May 18 through May 22, 2015:
Monday, May 18, 2015
COSTCO sticking with West Coast ports
Costco Wholesale Corp. said it doesn’t plan to shift any of its U.S. imports to the East Coast due to concerns over the labor conflict that added to lengthy shipping delays at West Coast ports earlier this year, according to a senior executive.
"That’s over now, so we don’t expect any more problems," John Thelan, senior vice president for depots and traffic at Costco, said in an interview at a supply chain meeting in Washington.
Any shift in Costco’s import flows would have a significant impact on shipping. The third-largest U.S. retailer, according to the NRF, Costco had $113 billion in global sales in its last fiscal year.
Officials at East Coast ports and some analysts have said they expect some U.S. importers to permanently shift portions of their logistics operations away from the West Coast after bitter contract negotiations.
The dockworkers and terminal managers reached a tentative contract settlement in late February that still needs to be ratified by members of the International Longshore and Warehouse Union.
"We don’t envision any wholesale change in how we import goods into the country," Mr. Thelan said. "We bring product into North America in as close a proximity to the appropriate distribution network as we can, whether that is West Coast depots or East Coast depots, and we will continue to do that."
Port of Long Beach will call for bids to run new chassis pool
The Long Beach Harbor Commission voted this week to accept bids from companies interested in managing a new program to provide truckers with the equipment they need to ease traffic congestion around the port.
Commissioners voted unanimously to request the bids. Whoever wins the competition would obtain a five-year contract to operate the Port of Long Beach’s planned Peak Hour Chassis Pool. The concept behind the chassis pool is that the port may be able to help trucking companies to access equipment needed to haul shipping containers when gear is not otherwise available.
A shortage of the equipment around the Ports of Long Beach and Los Angeles has been blamed as a major factor behind the current congestion problem.
The port’s plan calls for the winner of the bids to initially deploy 1,000 chassis. Another 2,000 chassis could be added to the pool at port officials’ discretion. Members of the International Longshore and Warehouse Union would be hired to maintain the chassis.
The Port of Long Beach’s chassis pool would be separate from a "gray chassis pool" created by equipment leasing companies as a means to allow truckers to hook their rigs up to chassis without having to worry about any contractual restrictions on where the equipment can be used.
Steven Rubin, the port’s managing director of finance and administration said that port officials plan to spend $10 million on the program during the current budget year and an additional $20 million during the fiscal year that starts Oct. 1.
Bidders have until 10 a.m. June 2 to submit their proposals. The contract could begin July 1.
Shell Oil rig arrives in Seattle despite calls for delay (video)
A 400-foot-long offshore oil drilling rig arrived in Seattle Thursday afternoon, despite the city's opposition to letting it dock here, environmentalists' protests and requests from the port authority for a delay.
The Polar Pioneer arrived in Elliott Bay at about 1:50 p.m. Thursday after a 12-hour journey from Port Angeles. It made its way through the Duwamish River toward Harbor Island and docked at Terminal 5 around 5 p.m.
About three dozen protesters in kayaks paddled into Elliott Bay when the rig entered Seattle, holding signs protesting oil drilling in the Arctic. According to the rules, water protesters must stay 500 yards from the Polar Pioneer while its moving and 100 yards from it when it's docked. Coast Guard officials say they take these rules very seriously and conditions on Elliott Bay can be very dangerous.
The Polar Pioneer is one of two drill rigs petroleum giant Royal Dutch Shell plans to park at leased space from Maritime Foss at the Port of Seattle, where it will load its Arctic drilling rigs and other vessels with supplies and personnel. It is preparing to explore for oil this summer in the Chukchi Sea off Alaska's northwest coast.
Due to increasing market demand, Evergreen Line said it will partner with COSCO and China Shipping to launch a joint China-Surabaya Express (CSX) Service.
The CSX service will employ four ships of 2,000-2,700 TEUs, including one each provided by Evergreen and CSCL and the remaining two by COSCO. The first sailing is planned to depart from Qingdao on May 20th, with the following the port rotation: Qingdao-Shanghai-Xiamen-Shekou-Pasir Gudang (Malysia)-Singapore-Surabaya (Indonesia)-Singapore-Qingdao.
This weekly service covers major ports from China in the north to Malaysia and Indonesia in the south, providing regular and convenient links for regional trade and connecting to Evergreen's global service network via Singapore.
Iran fires on cargo ship
Iranian gunboats opened fire on a cargo ship in the Persian Gulf after trying to force it into Iran's territorial waters, according to a senior U.S. official.
The Alpine Eternity, an oil products tanker flagged to Singapore, fled toward the shore of the United Arab Emirates, said the official who spoke on condition of anonymity since he was not authorized to speak publicly.
Nobody was injured, the source said.
The incident seems to have been triggered by an alleged accident on March 22 when the Alpine Eternity struck and damaged an Iranian oil platform in the Gulf, the official said. The ship did not stay to deal with the damage.
CN rail terminal planned near Toronto for U.S.-bound container cargo
Canada National Railway is building a huge railway terminal outside Toronto in order to handle the growing need for containers-by-rail. The move is part of a goal to shift more freight away from U.S. ports, truckers and railroads and toward their Canadian counterparts.
Transporting cargo containers via rail has been expanding as railroads target trade and amid a long-running rise in U.S. industrial production, which typically feeds growth in container transport.
Canadian railroads are taking advantage of the trend, drawing more goods that are coming from overseas and heading to stores and factories across the border.
Now, Asian shippers appear to be moving a larger share of their U.S.-bound cargo through Canada.
To help serve those shippers with U.S.-bound cargo, CN Railway announced plans in March to build a $210 million container terminal just outside Toronto to serve as a main hub for cross-border shipping. That facility will increase CN’s Toronto-based annual capacity by some 350,000 containers, allowing for two additional trains moving south each day.
"We would like to focus a lot more on cross-border business," said CN Chief Marketing Officer J.J. Ruest. "We think we have an appealing solution to convert road traffic onto rail."
Over the last ten years, Canada has invested billions of dollars in coast-to-coast infrastructure projects. Last month, the Port of Prince Rupert, announced an expansion to its container terminal that will increase annual capacity by 60 percent to 1.3 million containers. In January, the Port of Montreal announced an expansion to increase its container handling capacity by 25 percent to 2.1 million containers a year.
Drewry: Weak Q1 Asia-Europe rates may cause carriers to regret ULCV push
Weak first-quarter demand figures on the Asia-Europe trades has exposed the big risk shipping lines taking on ultra large container vessels (ULCVs), according to Drewry Maritime Research.
The good news is that after 14 weeks of falling Asia-to-North-Europe spot market freight rates, carriers finally had a win the week ending Friday, May 8, when rates on that route surged by 153 percent. The World Container Index benchmark for Shanghai to Rotterdam went from a low of $670 per-FEU to $1,698 per-FEU.
It's too early to say whether the rate increase will stick. More GRIs (in the now typical $1,000 per-TEU range) have been announced for June and Drewry expects spot rates to fall in the interim weeks.
The latest numbers from Container Trade Statistics show that combined Asia-to- Europe and Mediterranean volumes declined for the first time in over two years in the first quarter, posting a 1 percent fall year-over-year. China’s goods are becoming more expensive in a European market that remains in a near recessionary state — not a good indicator for the rest of the year.
Weak demand is compounded by the large number of new containerships that are due to be deployed in the Asia-Europe routes. Ordering ships that take years to build is always something of a risk, and the gamble doesn’t seem to be paying off for carriers.
From May until the end of 2015 there is 630,000-TEU-worth of capacity from new ships of 10,000 TEUs and above scheduled for delivery, with similar levels slated for 2016 and 2017. The orderbook for 2018 and 2019 is already filling up and the data in the chart does not include reportedly imminent big new orders from Maersk Line and China Cosco.
Drewry assumes that all of the 14,000-TEU+ vessels – amounting to a cumulative capacity of 503,000 TEUs for the remainder of 2015 – will enter the Asia-Europe trade, which poses a huge risk to carriers in a slowing market. Moreover, the 10,000-TEU newbuilds will make it harder to cascade smaller ships currently deployed in Asia-Europe into other trades.
In conclusion, Drewry says, the rush to order the biggest containerships might pay off in the long run but, at present, that gamble has backfired and carriers are faced with overcapacity in Asia-Europe, making it very difficult to see how rates will become sustainably profitable.
Alibaba purchases stake in Chinese logistics firm YTO Express
Alibaba announced Thursday that it has made an investment in Chinese logistics company YTO Express to help both businesses improve logistics efficiency for their customers.
YTO Express, founded in 2000, is one of 14 logistics partners that Alibaba's affiliate Cainiao works with to deliver products from its online marketplaces. It services more than 2,300 Chinese cities and is one of only three logistics companies in the country that is licensed for aviation logistics, which it began offering last year.
"The strategic investment in YTO Express reflects our commitment to improving quality and service standards in China's logistics industry," Judy Tong, senior vice president of Alibaba Group and president of Cainiao said. "As a platform, we look forward to working closely with partners who share our vision in developing an efficient logistics infrastructure and solutions that will drive development of China's logistics sector in order to fully satisfy our customers' needs."
Recently Alibaba has made a number of investments in U.S. companies, including Zulily, Snapchat, Jet, and Lyft, but this investment takes the company back to its core, focusing on improving delivery in China.
Russia wants France to pay for canceled warship contract
Russia wants $1.32 billion from France in compensation for cancelling a contract to deliver two Mistral helicopter carriers to the Russian navy, a Russian source close to the negotiations said Friday.
French President Francois Holland is being pressured by Western allies not to deliver the Mistrals because of Russia's role in the Ukraine crisis.
He discussed the 2011 contract worth $1.3 billion with Russian President Vladimir Putin last month and Moscow has said it is willing to accept financial compensation if Paris does not fulfill the deal.
The source said Russia was eyeing $1.16 billion, confirming a report on Friday by Russian daily Kommersant, which also said Paris was offering to pay $887 million euros.
Perhaps moving to an "all-in" pricing model will help the struggling air cargo industry, or at least reduce the struggle.
An all-in rate is the total cost of an item, including all direct and indirect costs for that item. Forwarders are calling for airlines to end air freight surcharges and shift to all-in rates. Speaking recently at The Loadstar’s air freight seminar at Multimodal in Birmingham (UK), Doug Overett, UK business development director for CEVA, said: "I just want to see consistency. Some airlines have moved to all-inclusive rates, and others haven’t."
All-in pricing reduces complexity in favor of stability and consistency. As Nigel Wilkins, head of UK air freight operations for DB Schenker says, "With lots of different mechanisms, it’s very hard to organize pricing."
"Customers want to see a reduction in the fuel surcharge since prices went down," said Overett. "I understand that the price of jet fuel is not exactly the same as the oil price, but there is definitely a relationship. But when we ask airlines, we get a fairly waffled response. We want to clear up the nonsense of surcharges. All-in prices at least will reset the fuel surcharges to represent prices better."
Apparently, momentum is building for all-in pricing. Joost van Doesburg, air freight policy advisor for the European Shippers’ Council said, "Shippers will demand more all-in air cargo rates, and we need to make the air cargo mode more attractive for the customers. Surcharges were always the number one source of frustration for shippers. So it’s time to focus on their needs and wishes."
American Airlines, Virgin Atlantic Cargo and AirBridgeCargo, among others, are all in the process of ditching fuel and security surcharges.
The International Air Transport Association (IATA) reported that global air freight figures for March masked "significant regional and commodity variations." According to the latest monthly reports from IATA and WorldACD, the numbers indicate that average global prices, including surcharges, were down 10 percent, year on year. WorldACD said there was hardly any tonnage growth (+0.3 percent worldwide), while IATA figures reported a modest 1.6 percent rise in volumes in March compared to a year ago, measured in freight ton kilometers (FTK).
The industry’s March performance contrasted with a strong 12.2 percent rise reported for February, noted IATA, although the numbers for that month were "skewed by the combined impacts of the timing of the Lunar New Year and the labor dispute at U.S. West Coast seaports."
IATA said air freight performance over the first quarter of the year indicates year-on-year growth of 5.3 percent, "in line with general global economic trends and slightly higher than the 4.5 percent growth that was anticipated in IATA’s December outlook."
Tony Tyler, IATA’s Director General and CEO said the air cargo industry "is on a solid but unspectacular growth trend. And there is little evidence today that would point towards an acceleration as the year goes on."
IATA and the United Nations Economic Commission for Europe (UNECE) signed a Memorandum of Understanding to strengthen their support to developing countries seeking to implement the World Trade Organization Trade Facilitation Agreement. In a statement, IATA said the agreement promises "enormous potential" for countries to reduce transport costs by up to 10 percent through more efficient facilitation, making them more competitive in the global economy.
Air cargo businesses need a digital strategy for the future. Without one they face a competitive threat from disruptive technology, said Marcus Fromm, managing director, Accenture Freight. "A digital business model is not just for growth but for survival," he told delegates in early May at the Air Cargo Europe conference in Munich.
In line with that thought, Kuehne + Nagel launched a booking platform designed for small and medium-sized shippers, FreightNet, which allows customers to get a quote, book and ship with the ease of a consumer transaction.
The time is now for air cargo firms to embrace digital technology, according to Fromm.
"Time is running out," he said "We can’t wait another 15 years. There needs to be action now, and far outside the scope of the industry’s circle."
Port of L.A. container numbers down in April, Long Beach volume up
Cargo volumes at the Port of Los Angeles declined by roughly 6 percent in April, while container volume was up 7.9 percent at the Port of Long Beach compared to April of 2014, according to port statements.
For the Port of Long Beach, 614,860 TEUs of containerized cargo were handled last month. Imports reached 317,376 TEUs, a 7.3 percent increase from last year. Exports fell 6.1 percent to 137,546 TEUs.
L.A. shipping activity continued to be affected by the lingering effects of winter’s labor strife, according to Port of Los Angeles spokesman Phillip Sanfield, who said shipping volumes have likely fallen off because cargo ships have not returned to normal schedules following the difficult final months of labor negotiations between dock workers and their employers. Also, last year’s April figures reflected shippers sending goods early in order to avoid any possible fallout resulting from the upcoming labor talks.
In April, nearly 663,000 TEUs moved through the Port of Los Angeles, compared roughly 706,000 during April of 2014.
More than 328,000 of the container units that moved through the Port of Los Angeles last month were inbound shipments. Outbound shipments accounted for nearly 146,000 container units.
April’s decline in shipping volumes happened one month after a big increase in activity at the ports of Los Angeles and Long Beach while workers processed the major backlog of cargo that accumulated during the final weeks of labor negotiations between dock workers and port employers.
April Savannah container volume up nearly 26 percent
Cargo volume at the Port of Savannah surged 25.8 percent in April for a total of 335,000 TEUs. The Georgia Ports Authority also saw strong growth in Ro-Ro traffic, moving 77,574 units through Brunswick and Savannah, a 14.1 percent increase.
"Across the logistics industry, focus has centered on GPA’s ability to handle large volume increases with no congestion," said Curtis Foltz, the port’s executive director. "Georgia has built world-class port facilities, and our customers appreciate service reliability for current and future volumes."
In his report to the GPA Board, Foltz noted that Ocean Terminal, Georgia’s multi-purpose facility in Savannah, nearly doubled its breakbulk cargo in April – expanding at a rate of 96.3 percent (81,691 tons) to reach 166,489 tons of breakbulk goods. GPA’s total breakbulk tonnage grew by 38.7 percent for April (89,946 tons) to reach 322,603 tons.
"Registering double-digit growth in both Savannah and Brunswick illustrates the depth of support our customers have for Georgia Ports," said GPA Board Vice Chairman Jimmy Allgood. "The numbers show it; when businesses want to reach important markets in a reliable, cost-effective way, Georgia delivers superior supply chain efficiency."
In order to maintain excellent service levels, the GPA board on Monday approved $141.8 million in capital improvements with passage of its fiscal year 2016 budget.
To upgrade existing assets, the board allocated $33.4 million to improve power infrastructure for cranes, paving, increased rail capacity and other terminal improvements at the ports of Savannah and Brunswick.
Another $83.4 million will go toward property development and the purchase of new equipment. Of that, $33 million will pay for 30 new rubber-tired gantry cranes. The addition of conductor rails to support Savannah’s transition to more efficient electric RTGs will cost $11.5 million and allow 20 more RTGs to run on electricity instead of diesel.
The board also dedicated $16.5 million toward the purchase of four new ship-to-shore cranes. The super post-Panamax cranes will cost a total of $48.19 million.
Greece invites bids for Piraeus port
The Greek government has ask COSCO, APM Terminals and ICTSI to submit binding bids for the nation’s biggest port, a senior privatization official told Reuters.
Greece had shortlisted China's Cosco Group and four other companies for a 67 percent stake in Piraeus Port last year, but the sale was stopped when Prime Minister Alexis Tsipras's leftist government came to power in 2015 and said privatization was no longer on the table. Tsipras has changed his tune, in what has been regarded as a major concession to EU and IMF lenders during ongoing talks to secure aid for the beleaguered country.
Athens contacted investors this week with an amended invitation to bid for 51 percent rather than the previous 67 percent stake, according to the official.
"It will be for 51 percent with an option to reach 67 percent in five years if they invest 300 million euros," he said. "We want to name the winner at the end of September or early October."
The new Greek government is trying to renegotiate a $270 billion bailout and has said it will review asset sales, but wants the state to remain involved in any privatizations.
Western Australia's largest cargo port, Fremantle, will form the core of a $5 billion asset sale program to help the Barnett government cut spiraling debt.
West Australian Treasurer Mike Nahan said falling iron ore prices and soaring debt left the government needing to sell more assets. The government expects to generate between $3 billion and $5 billion in the next year from the expanded asset sales program.
"The way to reduce our debt levels is through recycling assets and selling assets more aggressively than we would otherwise do," Nahan said.
In addition to Fremantle Port, which the government has delayed selling for more than three years, it will also sell a portion of the government's low-income home lender KeyStart's $5 billion loan book.
Other assets to be sold include government office buildings, the Forest Products Commission, betting agency TAB, government regional homes, 11,000 motor vehicles and some generation assets held by Synergy and Horizon Power.
The government lost its triple A credit rating in 2013 and has been slow to sell assets announced a year ago, including Port Hedland iron ore export terminal Utah Point, the Perth Market Authority, Kwinana Bulk Terminal and large land holdings. Of the 20 property sites flagged for sale, only two have been sold so far.
Nahan blamed a lack of experience in his Treasury Department for delaying sales.
Container service reliability reached a high in April with the aggregate on-time performance for the three main East-West trades rising 4.1 points to 67.6 percent in March, according to Carrier Performance Insight, the online schedule reliability tool provided by Drewry Supply Chain Advisors.
Maersk Line was the most reliable carrier in April, Drewry said, with an average on-time performance of 85 percent, followed by OOCL (77 percent); MOL and NYK (both 74 percent). At the bottom of the rankings were Wan Hai (51 percent) and PIL (40 percent).
Previously, the best figure since Drewry’s new data series started in May 2014 was achieved in October last year (64.3 percent), after which the industry struggled with heavy port congestion on the U.S. West Coast and the implementation of new alliances and their services.
Now that relatively normal operations have returned to the U.S. West Coast, the Transpacific trade saw the biggest improvement in April, with on-time reliability rising by 15.1 points to 54 percent. However, Drewry says Transpacific reliability remains about 20 points down on the series peaks of June and July 2014.
The maritime analysts report reliability on the Asia-Europe trade improved for the third consecutive month in April, while the Transatlantic reversed a six month declining trend with a higher performance.
"Drewry expected the upturn in reliability following the end of the exceptional circumstances," said Simon Heaney, senior manager of supply chain research at Drewry. "We expect further improvements in the next few months, but as on-time performances are approaching the historical ceilings, they might only be marginal."
City of Seattle issues violation notice to port and Foss over use of terminal
On Monday, opponents blocked port entrances to protest Shell Oil's use of Terminal 5 at the Port of Seattle to service two Arctic oil rigs, and the City of Seattle declared that Shell and its maritime host lacked a proper permit.
Five days after the Polar Pioneer drilling platform arrived in Seattle, the city issued a violation notice to the Port of Seattle, Foss and Shell — asserting that use of Terminal 5 by a massive floating drill rig was in violation of the site's permitted use as a cargo terminal. The 400-foot Polar Pioneer and its support tug Aiviq must be removed from the terminal or Shell's host, Foss Maritime, must obtain an appropriate permit, according to the Seattle Department of Planning and Development.
Possible fines start at $150 per day and can rise to $500 per day. The notice said the violation must be corrected by June 4.
The city’s interpretation of the permitted use of Terminal 5 has been challenged, and both the port and Foss have filed appeals to that contention. The appeal filed at the end of last week by the port calls the city’s take "irrational" and suggests that, taken to its logical conclusion, it would bar a variety of other types of vessels from using port docks.
ATA: Industry starting to feel impact of trucker shortage
The trucking industry is beginning to feel the impact of the shortage of up to 40,000 drivers, according to the American Trucking Associations. Some believe this will grow to as much as 240,000 drivers by 2022, according to Gail Rutkowski, executive director of the National Shippers Transportation Council.
The shortage is rocking the trucking industry as the volume of goods grows with the economy.
Experts say there are many reasons behind the shortage, including more stringent work requirements and low wages which have made the difficult working conditions tougher to bear. The trucking workforce is getting older—the average age of truckers is 49—and younger Americans are showing less interest in a career on the road.
The average age of drivers has reached 49 as drivers retire and the industry struggles to recruit new drivers. Poor treatment of drivers at shipping facilities and federal government restrictions that can force drivers to take breaks away from home between shifts have made it a more difficult task, drivers and logistics executives say.
The shortage is also increasing costs for shippers as truck companies step up efforts to recruit and retain drivers. Smaller companies may lose drivers, since bigger companies can lure them away by paying thousands of dollars in signing bonuses.
The ATA estimates more than a third of companies owning private fleets and less-than-truckload carriers, which carry goods for multiple shippers on one truck, are now offering signing bonuses. Nearly half of truckload carriers, which serve one shipper at a time and operate on longer routes, are doing the same.
The shortage has had some benefit for drivers. The ATA said average driver pay across the industry was more than $54,585 in 2014, up 9 percent from about $50,000 in 2013. And shippers are beginning to realize the benefits of being more driver-friendly, upgrading their fleet in terms of technology and comfort, hoping to attract youth to the field.
April cargo volume static at Ports of Seattle and Tacoma
Puget Sound container volumes grew 1 percent year-over-year to 1,106,384 TEUs, according to a joint statement.
Containerized exports at the ports of Seattle and Tacoma grew 3 percent year to date to 394,118 TEUs, while imports improved 1 percent to 456,068 TEUs. Domestic volumes fell 1 percent to 256,198 TEUs.
The ports expect container volumes to continue to stabilize in the coming months as vessels return to normal service schedules and manufacturers in Asia clear excess inventory.
Fourteen missing after ship capsizes in Singapore waters
The Maritime and Port Authority of Singapore is conducting search and rescue operations for a Bolivian-registered sand carrier that capsized 7.5 nautical miles north-east of Pedra Branca in Singapore waters.
In a statement, MPA said it received a report on the capsize of Oceanline SC208 about 10 am Wednesday.
There were 15 crew members on board at the time of the incident, according to the vessel’s agent.
One Chinese national was reportedly rescued by the Malaysian Maritime Enforcement Agency. Fourteen crew members — one Malaysian and 13 Chinese nationals — are still missing.