Report: CMA CGM could default as freight rates approach zero for Asia-Europe trade
The world’s third largest container-shipping group, France’s CMA CGM, reportedly has a nine in 10 chance of defaulting on bonds and derivatives within the next five years amid news that freight rates in the Asia-Europe trade are close to zero, and on the heels of a penalty the company was hit with last month by the U.S. Department of Treasury for violating trade sanctions with Cuba, Iran and Sudan.
According to Bloomberg Bond Trader data, the price of CMA CGM’s $475 million worth of 8.5 percent notes that are due in 2017 has dropped to 47.25 cents on the dollar since there were sold on April 14 of this year.
As a result, credit-default swap prices indicate a 90 percent probability of default on the notes within the next five years.
According to Bloomberg’s data, CMA CGM has approximately $4 billion in loans. In November, the Marseilles-based shipping line in the course of restructuring $5 billion of debt, received $500 million from Turkey’s family-owned Yildirim in return for a 20 percent stake. Yildirim agreed to acquire 50 percent of Malta Freeport Terminals from CMA CGM for $280 million.
Softening freight rates, impacted in part by high U.S. unemployment and Europe’s financial troubles, have contributed to the shipping industry slump as rates are almost at zero in the Asia-Europe trade excluding fuel surcharges, according to Bloomberg.
“A lot of companies run the risk of default if freight rates remain at such a low level,” said Jacob Pedersen, an analyst at Denmark’s Sydbank A/S.
“Companies have been taken by surprise this quarter because just a few months ago they were all sure there would be a lack of capacity and that would be positive for freight rates,” he said.
While 2011 does not look to be anything like 2009’s global economic meltdown when container-shipping owners and operators lost an estimated $20 billion, that sector could lose up to $3 billion this year, according Philip Damas, director of liner shipping and supply chains at Drewry Shipping Consultants.
CMA CGM was also dealt a $374,400 settlement with the U.S. Department of Treasury’s Office of Foreign Assets Control in August for allegedly violating U.S. trade sanctions by accepting payments for shipping services to Cuba, Iran and the Sudan between December 2004 and April 2008, although the shipping firm says there was no finding of fault.
In one case, the CMA CGM Victoria was seized by the Israeli Navy where three containers were found to contain weapons that the shipper falsely listed as a cargo of lentils.
The shipping group said recently that it plans to focus on emerging markets including Latin America and Russia as a means to find business growth.
The World Trade Organization upheld a December 2010 ruling supporting the United States’ 35 percent tariff on imported tires from China.
"This is a tremendous victory for the United States as well as for American workers and manufacturers," said U.S. Trade Representative Ron Kirk said in a statement.
"We have said all along that President Obama's decision to impose duties on Chinese tires was fully consistent with our WTO obligations,” he said.
The tariff was enforced by the U.S. in September of 2009 over complaints from the U.S. Steelworkers union, according to a Bloomberg report.
"It was a protectionist measure and unsupported by the U.S. tire industry. The safeguard measure does not help reducing U.S. tire imports, but injures China's legitimate trading interests," said China's trade mission in Geneva in a statement.
Imports to the U.S. of Chinese tires fell over 23 percent in 2010 and by another 6 percent for the first half of 2011, according to Bloomberg data.
UP’s Linda Brandl recognized as woman “worth watching”
The Union Pacific Railroad's Linda Brandl was recognized in the 10th annual Women Worth Watching feature of the September/October edition of Profiles in Diversity Journal, the Omaha-based railroad announced.
Brandl is the UP’s vice president and general manager for Automotive, a division that generated $1.2 billion in freight revenue in 2010, the railroad said.
"It is a tremendous honor to be recognized alongside so many accomplished women in leadership roles," Brandl said in a statement.
"From growing up on a cattle ranch to working at Union Pacific, I learned it takes a combination of hard work, a willingness to embrace change, and teamwork to be successful. I am fortunate to be part of a great team and encourage those around me to not be afraid to leave their comfort zones," she said.
Brandl started her career at the Union Pacific in 1988.
INTTRA files counterclaims against GT Nexus
Ocean freight e-commerce provider INTTRA announced it has filed patent infringement counterclaims against GT Nexus, Inc. at the U.S. District Court in Oakland, Calif.
GT Nexus filed a lawsuit on May 2 that alleged INTTRA’s Common Carrier System patents are invalid after prior negotiations between the two tech firms failed over INTTRA’s proposal that GT Nexus utilize its patented technology.
INTTRA’s counterclaims allege that GT Nexus' supply chain management platform infringes on U.S. Patent Nos. 7,752,142; 7,756,794; 7,761,387; and 7,827,119 (the "Common Carrier System patents"), that relate to certain proprietary systems and methods for managing shipments using an e-commerce platform.
"We regret that we are forced to respond to the patent infringement and corresponding litigation initiated by GT Nexus," said Ken Bloom, Chief Executive Officer of INTTRA in a statement.
"Our competitive advantage today is a direct result of our significant investment in research and development, which is now compromised by GT Nexus' illegal action. We will vigorously defend our intellectual property to promote the continued creation of innovative logistics solutions for the benefit of our customers, carriers and shippers," he said.
Bloom also said: "We have attempted on numerous occasions to resolve this issue with GT Nexus without resorting to litigation. Despite our best efforts, GT Nexus has chosen to unlawfully infringe on our patents and has demonstrated complete disregard for the U.S. patent system."
Wednesday, September 7, 2011
Top Story
Report: U.S. transportation downshift points to slowing economy
Oil and other commodity price increases in the first half of 2011 have underpinned a slowdown in U.S. transportation growth as consumers have reacted by tightening their belts, according to a rating agency’s report.
Since transportation volumes are inextricably linked with economic activity, data tracked by Fitch Ratings indicates the economy continues to grow, but at a slower pace.
Cuts in government spending and a subsequent decrease in government-related employment are also likely contributing factors, the Fitch report said.
Infrastructure ratings are not currently impacted as a result of the slowing economy, according to Fitch.
The evaluation of debt issued to finance transportation related public infrastructure is a 'rating case' that takes into account some downward movement of demand for the facility, Fitch said.
Transportation facilities with annual debt service obligations that increase over time and those with less pricing power will have more rating pressure if volume grows more slowly than debt service, according to Fitch.
However, another downturn like the one that started in 2008 would pressure many ratings, the rating agency said.
Longshore protests spread from Longview to Vancouver, Wash.
A new $200 million, privately funded grain terminal at the Port of Longview, Wash. that is attempting to operate without longshore labor has been a magnet for union protests this summer, and now those protests have moved to nearby Vancouver, Wash, home to its own cargo port on the Columbia River.
On Wednesday morning, the Columbian newspaper reported that dozens of local International and Longshore and Warehouse Union members gathered on the BNSF railroad tracks in Downtown Vancouver on Wednesday morning to protest against terminal operator EGT Development, a joint venture of Japan’s Itochu, Korea’s STX Pan Ocean, and St. Louis-based Bunge of North America.
“This is the latest in a very long line of actions that longshore men are taking to stand up to a foreign company that’s trying to get a foothold in Washington and undermine the grain industry,” said ILWU spokeswoman Jennifer Sargent who was on scene as reported by the Columbian.
The BNSF train that was blocked by the protesters was on its way to the EGT facility in Longview, according to Sargent.
The ILWU protests at the Port of Longview have been more contentious with reported death threats and physical assaults.
No arrests had been made today as of the filing of this report.
The Port of Miami signed a letter of intent with Florida Inland Port, creating a cooperative alliance that is to include sharing data, technologies, and joint marketing, it was announced today.
“We believe that Florida can emerge as a major gateway for containerized merchandise trade,” said Bill Johnson, port director, Port of Miami, in a statement.
“The development of rail-served inland logistics center is a key element to capturing the full economic benefit of trade for Florida. To this end, we support the alliance of cooperation aimed at facilitating the exchange of intermodal-supportive planning to the development of Florida Inland Port and other inland sites throughout the region,” Johnson said.
“This strategic collaboration fits into our development strategy and solidifies our relationship with the Port of Miami and the other container seaports in Florida,” said Preston Perrone of the Florida Inland Port.
The 4,000-acre facility, formerly known as Treasure Coast Intermodal Campus, is a privately funded, rail-oriented logistics center in southwest St. Lucie County, according to the industrial real estate firm involved in the venture, Jones Lang LaSalle.
The development of the Florida Inland Port is expected to take place over the next 25 to 30 years, the real estate firm said.
Pot in the hot sauce
U.S. Customs and Border Protection officers arrested a 39-year-old male after confiscating approximately 2,330 pounds of marijuana found hidden in boxes of hot sauce in a tractor-trailer at the Otay Mesa cargo facility last week, according to a story in San Diego’s ABC affiliate.
The tractor-trailer was scanned by the port's x-ray imaging system and picked up irregularities within the cargo where 123 wrapped packages of marijuana worth $1.4 million were located.
Modern-day global trade is, at least in part, a direct result of the first viable commercial steel shipping container that a gentleman named Keith W. Tantlinger designed and built in the 1950s.
Tantlinger died in his home on August 27 at the age of 92, according to the New York Times.
Tantlinger trained as a mechanical engineer and during World War II worked for the Douglas Aircraft Company designing tools used to build the B-17 bomber.
By the mid-1950s, Tantlinger was vice president of engineering at Brown Industries, a manufacturer of truck trailers in Spokane, Wash. when Malcolm McLean, president of Pan-Atlantic Steamship, called saying he wanted to come up with a method to stack truck trailers directly onto ships.
McLean, who came from the trucking industry, bought Pan-Atlantic in 1955 with the intent of integrating of sea and land transportation cargo services; hence the name of the company eventually changed to SeaLand.
Tantlinger joined McLean’s shipping company and designed a set of steel fittings with twist-locks that were welded to each corner of a container that allowed for stacking of the steel boxes, and in such a way that they could also be fitted to truck chassis and rail cars.
Tantlinger was able to convince McLean to relinquish the patents to the corner fittings and twist-locks in the 1960s for industry-wide use.
Following is an excerpt from a New York Times story that was published in 1958 describing the new shipping technology:
“A trailer is loaded, for example, in Springfield, Mo. It travels by road to New York or San Francisco, sealed, virtually damage-proof and theft-proof. By ship it goes to France or to Japan, eliminating warehousing, stacking and sorting. Each ship takes on her cargo with a few hundred lifts, compared to 5,000 individual lifts by the old method.”
International trade would never be the same again.
Several hundred longshoremen storm Port of Longview
Several hundred Longshoremen reportedly barraged the Port of Longview this morning, taking six security guards hostage, causing damage to BNSF railroad cars, in the continuing summer-long standoff between International Longshore and Warehouse Union members and the owners of a new $200 million, privately funded grain terminal that has been trying to operate with a different contracted labor force at the Columbia River port.
Six guards were held hostage for a few hours after an estimated 500 or so longshoremen stormed through the terminal’s gates at about 4:30 a.m. today, according to Longview Police Chief Jim Duscha as reported by local radio station KLOG and the Associated Press.
As of this story’s filing, no injuries or arrests were reported.
On Wednesday morning, the Columbian newspaper reported that dozens of local International and Longshore and Warehouse Union members gathered on the BNSF railroad tracks in Downtown Vancouver to protest against terminal operator EGT Development, a joint venture of Japan’s Itochu, Korea’s STX Pan Ocean, and St. Louis-based Bunge of North America. There were 19 subsequent arrests made.
“This is the latest in a very long line of actions that longshore men are taking to stand up to a foreign company that’s trying to get a foothold in Washington and undermine the grain industry,” said ILWU spokeswoman Jennifer Sargent who was on scene as reported by the Columbian.
This morning’s mass of ILWU protesters reportedly returned to their union hall after cutting brake lines and spilling grain from a railroad car at the EGT terminal, according to Duscha.
The International Longshore and Warehouse Union’s contention is that its members should be the labor force working at the EGT Terminal as the Port of Longview employs ILWU workers, but the new facility hired a contractor that is supplying a different labor union.
One Longview police sergeant was reportedly threatened with baseball bats and departed the scene.
Police Chief Duscha said: "One officer with hundreds of Longshoremen? He used the better part of discretion."
Air cargo exec sees “sluggish” peak season
The chief executive of an air cargo carrier says he expects the peak shipping season to be “sluggish,” but low retail inventories could tighten the shipping market.
"Any kind of [positive] movement on consumer demand should drive a peak," said William J. Flynn, chief executive of Purchase, New York-based Atlas Air Worldwide Holdings at the Dahlman Rose & Co. conference.
Flynn expects this fall’s peak season to be shorter than usual; however, retailers could push shipping volumes higher through the introduction several new products, he said.
Rob Knight, the chief financial officer of the Union Pacific Railroad told conference attendees he expects a "compressed" peak season this year.
Home improvement retail giant, Lowe's, announced it would build a $125 million, 1.4 million square-foot distribution facility in Rome, Georgia that could eventually account for up to 600 jobs.
The Rome distribution facility will service between 130 and 150 Lowe’s stores throughout six states, the company said.
The project is scheduled for completion by April 2013.
Jaxport replaces two container cranes
The Port of Jacksonville has replaced two container cranes at its Blount Island marine terminal that had been damaged by a storm in 2008.
The two new cranes were built by Shanghai-based ZPMC at a cost of $10 million each, bringing the facility’s total cargo-handling crane count to eight, according to the port authority.
The new cranes are scheduled to be operational in early October.
Danish family released by Somali pirates after $ 3 mil ransom paid
Somali pirates released a family of five from Denmark and two crew members on Wednesday after a $3 million ransom was paid, according to one of the pirates who spoke to Reuters Africa.
The pirates had held a man, woman, children and the crew since February 24th of this year, when the family’s yacht was hijacked off the Horn of Africa.
"The foreign ministry has very clear traveling guidance, and there is a clear recommendation not to sail into waters that are characterized by hostage taking. So that should be a warning for all to think carefully," said Denmark’s Prime Minister Lars Lokke Rasmussen.
A pirate, who identified himself as Hussein, told Reuters: "We received a $3 million ransom (on Tuesday) afternoon."
"The Danish state has not been involved in the contacts with the pirates -- the contacts have been handled by the relatives of the seven Danes," said Charlotte Slente, director of Denmark’s consular services.
The APM terminal at the Port of Tacoma sits empty on Thursday, Sept. 8, 2011 while at least 500 longshore workers angrily stormed a private grain terminal at the Port of Longview, Wash. amid a dispute over the operator's use of another union's labor force. ILWU labor was reportedly back to work today at ports in the region.
Whether it was a day that will live in infamy or another in a continuing thread of labor discontent, a group of cargo-handling ports in the Pacific Northwest are reportedly back to work after at least 500 angry longshore workers converged threateningly on a private grain terminal in Longview, Wash. early yesterday morning over a hiring dispute that began in earnest earlier this summer.
The several hundred Longshoremen, many with baseball bats in hand, reportedly stormed the EGT terminal’s gates at the Port of Longview on Thursday morning, smashing windows, preventing six security guards from escaping and causing damage to BNSF railroad cars, in a standoff between International Longshore and Warehouse Union members and the owners of a new $200 million, privately funded grain terminal that has been trying to operate with a different contracted labor force – the International Union of Operating Engineers Local 701 based in Oregon.
EGT Development is a joint venture of Japan’s Itochu, Korea’s STX Pan Ocean, and St. Louis-based Bunge of North America.
U.S. District Judge Ronald Leighton issued a preliminary injunction on Thursday to try and head off further aggressive union activity in the region.
"The regard for the law is absent here…Somebody is going to be hurt seriously,” the judge said.
As a result of Thursday’s labor actions, two of the four ports that were reportedly shut down yesterday were Seattle and Tacoma, the biggest container-handling facilities in the Pacific Northwest.
Rail and truck movements were impacted with the absence of longshore labor according to the Port of Tacoma.
“For example, no trucks picked up or delivered cargo at port terminals,” said Rod Koon, senior manager, communications at the port.
“We had no ships at berth yesterday, so there was not an impact in that area. We do have ships at berth and working today,” Koon told CBN.
Longshore labor was back to work at the port this morning, he said.
No arrests have reportedly been made over yesterday’s labor unrest as of this story’s filing.
Obama’s infrastructure proposal gaining traction
President Obama’s $140 billion transportation infrastructure proposal outlined in his nationally televised speech last night is reportedly gaining momentum from a mix of business, labor, governors, mayors and House Republican leaders.
The new plan includes seeding an “infrastructure bank” with $10 billion with the intention of helping attract additional private capital, according to a report by the San Francisco’s Chronicle’s Washington D.C. bureau.
"The bank is a very good idea," said Rep. John Garamendi, D-Walnut Grove in Sacramento County.
The “I-bank” would be able borrow money at interest rates as low as 1 percent, providing loan guarantees "to projects that have cash flow: bridges, light rail, communications such as fiber optic, sanitation, water systems; these all have cash flow and can be used to pay back a loan," Garamendi told the Chronicle.
Republicans "believe in infrastructure spending. We know that our roads and bridges and highway networks are in need of repair, and we know that there are certain areas of the country that need additional roads," said House majority leader Eric Cantor, R-Va., this week.
PANYNJ girds for potential 9/11-related security threat
In the wake of news over “credible, but unconfirmed” intelligence of a possible terrorist threat on New York as the 10-year commemoration of the 9/11 al-Qaeda attacks on the World Trade Center, and other U.S. targets approaches, the Port Authority of New York and New Jersey has said it is beefing up security at all its facilities.
The port said it has increased law enforcement protection, including at its three airports, bus terminus and PATH train stations.
There will also be a higher level of vehicle checks at all its bridges and tunnels, according to the port agency.
German shipping company fined $800K for breaking environmental laws in Puerto Rico
A German shipping company must pay an $800,000 penalty for the attempt by the crew of one its containerships to cover up pollution spilled from the vessel in Puerto Rico’s waters.
The U.S. Attorney’s office confirmed the penalty against Uniteam Marine Shipping GmbH for falsifying statements in violation of the Act to Prevent Pollution from Ships after a year-long investigation that concluded oily bilge water was dumped into the sea through a hose that bypassed prevention equipment.
The shipping company will be on probation for three years, according to a statement issued by the Attorney’s office.
Bodies of three Indian crew members recovered after vessel explosion off Nigeria
The bodies of three previously missing Indian crew members were recovered in the waters off Lagos, Nigeria after an explosion rocked a cargo vessel there on Sunday.
The MT Jacksonville had been carrying 15 Indian crew, with 10 having been rescued on Sunday, and two still missing.
The cause of the explosion in the ship’s engine room is reportedly under investigation by the Nigerian Maritime Administration and Safety Agency.
The APM terminal at the Port of Tacoma sits empty on Thursday, Sept. 8, 2011 while at least 500 longshore workers angrily stormed a private grain terminal at the Port of Longview, Wash. amid a dispute over the operator's use of another union's labor force. ILWU labor was reportedly back to work today at ports in the region.