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Summary for July 05 - July 9, 2010:
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Tuesday, July 06, 2010

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DC lawmakers look at changes to U.S. maritime laws

Lawmakers in Washington are fixed on the legal and financial fallout of the oil spill in the Gulf of Mexico on BP and firms like Transocean, the operator of the Deepwater Horizon rig that sank in April.

But a flurry of legislation in Congress could also have sweeping consequences, both intended and unintended, for other industries that work at sea.

One bill in the Senate would put cruise operators in its cross hairs by making it easier for damages to be awarded under the Death on the High Seas Act, which the cruise industry has lobbied hard in the past to keep unchanged.

There are bills in both the Senate and the House that would repeal a law Transocean has cited to cap some of its liabilities — the Limitation of Liability Act. Scrapping that law would also undo protection for companies that operate giant container ships, inland barges, tugs and fishing boats.

Other legislative proposals seek to amend the Jones Act, which governs death and injury claims by seamen, and to nullify the United States Supreme Court’s decision in the Exxon Valdez case to allow jurors to mete out large punitive damages against any company involved in a maritime disaster.

Under current law, recoveries for those who die at sea — be it on a rig or a cruise ship — can be limited to funeral expenses.
Most of the proposed laws are a direct response to the actions of companies involved in the oil spill. For example, a Senate committee voted last Wednesday to end the current $75 million cap for oil spill-related environmental damage under a statute known as the Oil Pollution Act.

Transocean touched off a furor when it invoked another law, the Limitation of Liability Act, to try to limit claims against it arising out of the Deepwater Horizon incident to $26.7 million.

That law limits the total liability of a vessel’s owner, apart from pollution-related claims, to the vessel’s value, including any money owed to its owner, after an accident like a sinking.

The $26.7 million figure cited by Transocean was based on the money BP owed to it for the rig’s services.

-New York Times

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Southern Cal clerical workers’ strike enters sixth day

Another round of talks ended Monday with negotiators for shipping companies and clerical workers finding little common ground in efforts to end a strike at the nation's busiest port complex.

Union negotiator John Fageaux Jr. said virtually no progress was made toward acquiring the job security guarantees and provisions against outsourcing that workers are seeking.

But Stephen Berry, lead negotiator for the Harbor Employees Association, which represents the [shipping companies], said the guarantees sought by the union would force the hiring of workers with nothing to do.

The [shipping companies] are also seeking to use new computer programs allowing customers to access booking information, a move that the union has said would endanger jobs.

Negotiations are set to resume [today] at 1 p.m.

The union has made an offer of no wage or pension increases for workers of one of the 14 companies with which it is negotiating a new contract. That company, which Berry identified as Cosco Shipping Agency, [had] until Monday evening to respond to the offer.

Berry said the union's proposal would boost already high health care costs by 49 percent and that it includes unacceptable staffing demands.

The union's contract proposals for the other 13 employers still include wage increases of up to 22 percent, Berry said.

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CMA CGM set to sell minority stake

French container shipping group CMA CGM SA, which is poised to sell a minority stake to a partner, said Monday it expects to conclude discussions with potential investors, which have reached a very advanced stage, by the end of July.

The financially troubled company added that the talks require particularly complex documents.

CMA CGM also said its business has recovered since the beginning of the year and that it expects second-quarter results to show an improvement on the first quarter, when revenue rose 29% to EUR3.2 billion compared with the same period a year earlier.

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Canadian freighter aground on St. Lawrence River

Authorities are investigating what caused a Canadian cargo ship to run aground on the St. Lawrence River in northern New York.

Officials say the 740-foot Algobay was headed to Prescott, Ontario when it ran aground Sunday morning in Chippewa Bay in the St. Lawrence County town of Hammond, 100 miles northeast of Syracuse.

The ship, which is carrying Canadian corn, suffered damage to its hull but officials say no pollution was reported from the grounding. No one was injured.

Tug boats were being brought to the scene Tuesday to refloat the ship.

The vessel reportedly lost power and drifted into shoals on the American side of the river.


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Ukrainian officials seize $60 mil in cocaine at Odessa port

Ukrainian customs officials say they've seized $60 million (euro47.5 million) worth of cocaine in the Black Sea Port of Odessa, in the country's biggest cocaine bust ever.

A statement late Monday said 580 kilograms were hidden in a cargo of scrap metal on a boat from Bolivia. The drugs were stashed between thick pipes to escape X-ray detection, the statement said.

Viktor Pogozhiy, head of Odessa's anti-smuggling customs unit, said on TV that imports of scrap metal arouse suspicion in Ukraine, a big metals producer. There was information on arrests.

National television reported that 150 kilograms of cocaine were seized at the port last week.


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Wednesday, July 07, 2010

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Maersk CEO: Rates heading back to pre-crisis levels

Danish shipping and oil group A.P. Moller-Maersk said that global container shipping rates were likely to return to pre-crisis levels by the peak season at the end of this year.

Chief Executive Nils Andersen told reporters in Singapore that Maersk will also keep adding to container box levels this year and the next to address the global shortage in the industry.

He said he did not expect the container shipping industry to be significantly affected by a possible slowdown in China, adding that the container box shortage would provide a cushion.

Global container shipping firms, which slogged through their worst-ever year in 2009, have seen strong rebound in freight rates over the past year but the surge was largely due to a container box shortage rather than significant recovery in demand.

-Manila Bulletin

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TUI shares shoot up with better container-shipping prognosis

Shares of TUI AG are soaring as the travel company says the Hapag-Lloyd container shipping business will generate higher profit this year than initially forecast.

Hannover-based TUI, which has a 43.3 percent stake in Hapag-Lloyd, said Tuesday that the business has been helped by "a notable recovery in global container shipping."

It says it now expects Hapag-Lloyd to post "significantly positive" operating earnings after transport volumes and freight rates improved. TUI added that prospects for its core tourism business remain unchanged.

Shares of TUI were up 9 percent at euro7.56 ($9.53) in Frankfurt trading.


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Evergreen orders ten 8,000-TEU vessels

Taiwan-based Evergreen Group on Friday said that it has placed an order of ten 8,000-TEU vessels to Samsung Heavy Industries Co, sources reported.

It is the first time since 2003 that the company purchases new vessels, signifying the container shipping industry is recovering.

Evergreen Group said in a statement that the first vessel is scheduled to be delivered in 2012.

Evergreen Group is parent company of Evergreen Marine Co (Taiwan) Ltd and EVA Airways Co. Evergreen Marine is the largest container shipping operator in Taiwan in terms of revenue, while EVA Airways is the second-largest airway carrier in the island only next to China Airlines Ltd.

Evergreen Group said in another statement that the unit price of the vessel is US$103 million.

-China Knowledge

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Horizon Lines Puerto Rico Terminal hit with OSHA penalties

U.S. regulators have found safety violations for a second time at a Horizon Lines Inc. shipping terminal in Puerto Rico.

The Occupational Safety and Health Administration says inspectors found a number of potential dangers to dock workers in San Juan. The violations include such things as trucks with no backup alarms and exposed electrical parts in a crane.

OSHA's statement Tuesday says the citations carry potential fines of up to $72,500. A Horizon spokesman declines comment. The Charlotte, North Carolina-based company has 15 days to respond to OSHA.

The agency found some of the same violations in an October 2006 inspection of the company's San Juan terminal.


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Swire shipping unit to stand trial over spill in Australia

Swire Navigation Co., a shipping unit of John Swire & Sons Ltd., and a cargo liner captain were today ordered to stand trial in Australia over an oil spill last year that blackened beaches, the company said.

Bernardino Gonzales Santos, the captain, was charged with disposal of oil in coastal water and of not reporting a spill after containers aboard the Pacific Adventurer fell overboard during a March 11, 2009, storm and pierced the ship’s hull, Swire said at the time. About 200,000 liters of oil spilled.

Swire Navigation agreed in June 2009 to pay A$25 million ($21 million), in addition to A$2 million it spent on cleanup, into a trust to compensate those affected by the spill. The amount compares with the A$17.5 million maximum “legal obligation,” the company said at the time.

John Swire, based in London, also controls Hong Kong property company Swire Pacific Ltd. and Cathay Pacific Airways Ltd., the city’s biggest carrier.


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Friday, July 09, 2010

Top Story

State transport leaders tout national freight plan

In 10 years there will be an additional 1.8 million trucks on the road in the U.S., and as a result, America’s freight movement network is facing a crisis, according to the American Association of State Highway and Transportation Officials (AASHTO).

"As the gateway to the Northeast, Pennsylvania gets more than our share of truck traffic," said Governor Ed Rendell, at one of three joint news conferences held in Des Moines, Iowa; Memphis, Tennessee; and Harrisburg, Pennsylvania.

"In fact, Pennsylvania is one of six states - along with Arkansas, California, Georgia, Tennessee and Texas - that collectively account for 88 percent of the most heavily used truck routes," Gov. Rendell said.

The occasion of the news conferences was centered on AASHTO’s new report: Unlocking Freight.

“The transportation system that supports the movement of freight across America is facing a crisis,” AASHTO said in a statement.
The freight movement collective said the report “identifies key projects in 30 states that would improve freight delivery and dependability, and offers a three-point plan to address what is needed to relieve freight congestion, generate jobs and improve productivity.”

AASHTO President and Mississippi DOT Executive Director Larry L. "Butch" Brown said: "The simple fact is: no transportation, no economy. They are inseparable. We must invest to maintain and strengthen the American 'transconomy.'"

Despite more long-distance freight being moved by intermodal rail, the report found that trucks would still carry 74 percent of freight. On average, 10,500 trucks a day travel some segments of the Interstate Highway System today, increasing to 22,700 per day by 2035, the report said.

Between 1980 and 2006, traffic on the Interstate Highway System increased by 150 percent while Interstate capacity increased by only 15 percent, the report said.

The report identified 1,000 miles of most heavily traveled highways used by trucks.

“To accommodate this predicted growth in freight movement, we need to think nationally, regionally, and on a multi-modal level. Central to this effort should be the creation of a National Multimodal Freight Plan to ensure that transportation investments are coordinated and made where most needed,” said Gerald Nicely, commissioner of the Tennessee Department of Transportation.

According to the report 147 million tons of freight pass through Tennessee via trucks, rail cars and barges. Nearly half of Tennessee's Gross Domestic Product comes from the movement of goods and more than half of the statewide employment is in goods-dependent industries, the report said.

Tennessee, Mississippi and Arkansas are currently working to develop a third Mississippi River bridge crossing -  the Southern Gateway Project. Environmental studies on the project are now underway and include consideration of a multi-use bridge that would include both vehicle and rail access.

For more information on the Unlocking Freight report:

APM, CMA CGM sign new terminal agreements in France, U.S.

France’s shipping giant CMA CGM has signed agreements with Denmark’s APM Terminals at shipping facilities in Dunkirk, France and Mobile, Alabama, the two companies announced.

Terminal Link, a CMA CGM container terminal investment subsidiary has acquired shares from APM in the Nord France Terminal International o.u. (NFTI); increasing it stake from 30 percent to 91 percent, with the remaining 9 percent owned by the Port Authority of Dunkirk.

CMA CGM is the primary customer of NFTI with four regular services to Dunkirk: the North Europe French West Indies (NEFWI), the French Asia Line 3 (FAL3), the Panama Direct (PAD service) and the Europe/Morocco service.

In the Gulf of Mexico, APM Terminals bought out the remaining 20 percent of Terminal Link’s shares in the Mobile Container Terminal LLC (MCT)’s shares in Alabama, giving it total ownership.

Containerized services that currently call MCT are CMA CGM’s Pacific Express 3 (PEX3), ZIM's Gulf Express and Maersk Line’s TA2 Service and Expresso Service.

Open since November of 2008, MCT has a capacity of 350,000 TEUs and will reportedly be developed in phases to capacity of 800,000 TEUs per annum.

Southern Cal office worker strike: Concern mounts over inland distribution

A week-old strike by port office workers is prompting concern at critical inland distribution centers handling freight moved through the Long Beach and Los Angeles port complex.

Experts believe a prolonged strike could have "ripple effects" in coming weeks in the Inland Empire, where many businesses are dependent on the steady flow of goods from local ports.

Talks Thursday failed to produce a breakthrough, prompting growing concern.

"In the short term, to the degree you can't get cargo out of the ports, it affects the amount of it that gets handled in our warehouses," said Redlands-based regional economist John Husing, who studies the Inland Empire.

And there are a lot of those Inland Empire warehouses that store goods from overseas as they make their way from the ports to stores to consumers.

Target Logistics, Kohl's Logistics, Big 5 Distribution, Home Depot Logistics, Kmart Distribution, among many others, are all in the Inland Empire, according to the Inland Empire Economic Partnership. And trucking and logistics companies that serve many warehouses are also based in the Inland Empire.

Disruption in the flow of containers moving east from L.A.-Long Beach could affect what had been an industry that was gradually coming out. of the economic doldrums, economists said.

The strike began when the clerks,' represented by the International Longshore and Warehouse Union's Office Clerical Unit, walked off the job July 1 after their old contract expired.

Clerical workers, who handle paperwork for the shipment of cargo, have so far targeted just four of the 16 terminals at the port complex, but that may spread if negotiations stall.

-Contra Costa Times

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A.P. Moller-Maersk upgrades 2010 earnings projection

After better than expected results for its container shipping business, A.P. Moller-Maersk has upgraded earnings for the whole of 2010.

The good results come in the wake of losses in 2009, and a previous announcement in March that the conglomerate - which includes the world's biggest container shipping company, Maersk Line – was expecting only a ‘modest profit’ this year.

Based on the new upgrade in expected earnings, profits this year will exceed those from 2008, which amounted to $3.5 billion, corresponding to 17.6 billion kroner at 2008 currency exchange rates.

According to Maersk, the upgraded expectation includes an accounting gain from a previously announced sale of shares in the Yantian port terminal in China which had been closed.

Despite the positive outlook for 2010, the conglomerate stated that the higher earnings expected for this year could only be secured if freight rates, oil prices and the US dollar exchange rate remain stable at current levels.

Possible gains from the sale of the Netto chain of supermarkets in the UK, which is still subject to approval from the British competition authorities, were not included in the new earnings estimate for 2010.

The Maersk guidance upgrade comes ahead of half-year results due on 18 August.

-Copenhagen Post

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China sourcing costs going up

Factory workers demanding better wages and working conditions are hastening the eventual end of an era of cheap costs that helped make southern coastal China the world's factory floor.

A series of strikes over the past two months have been a rude wakeup call for the many foreign companies that depend on China's low costs to compete overseas, from makers of Christmas trees to manufacturers of gadgets like the iPad.

Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government, meanwhile, is pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology.

Many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and a few are even resuming production in the West.

Beijing's decision to stop tethering the Chinese currency to the U.S. dollar, allowing it to appreciate and thus boosting costs in yuan, has multiplied the uncertainty for companies already struggling with meager profit margins.

At the other end of the scale, some in research-intensive sectors such as pharmaceutical, biotech and other life sciences companies are also reconsidering China for a range of reasons, including costs and incentives being offered in other countries.
Even with recent increases, wages for Chinese workers are still a fraction of those for Americans. But studies do show China's overall cost advantage is shrinking.
Labor costs have been climbing about 15 percent a year since a 2008 labor contract law that made workers more aware of their rights. Tax preferences for foreign companies ended in 2007. Land, water, energy and shipping costs are on the rise.

In its most recent survey, issued in February, restructuring firm Alix Partners found that overall China was more expensive than Mexico, India, Vietnam, Russia and Romania.

Makers of toys and trinkets, Christmas trees and cheap shoes already have folded by the thousands or moved away, some to Vietnam, Indonesia or Cambodia. But those countries lack the huge work force, infrastructure and markets China can offer, and most face the same labor issues as China.

So far, the biggest impact appears to be in and around Shenzhen, a former fishing village in Guangdong province, bordering Hong Kong, that is home to thousands of export manufacturers.

That includes Taiwan-based Foxconn Technology, a supplier of iPhones and iPads to Apple Inc. Foxconn responded to a spate of suicides at its 400,000-worker Shenzhen complex with pay hikes that more than doubled basic monthly worker salaries to $290. Strike-stricken suppliers to Honda Motor Co. and Toyota Motor Corp., among many others, also have hiked wages.

Given the intricate supply chains and logistics systems that have helped make southern China an export manufacturing powerhouse, such changes won't be easy.

But for manufacturers looking to boost sales inside fast-growing China, shifting production to the inland areas where many migrant workers come from, and costs are lower, offers the most realistic alternative.


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