Cargo Business Newswire ArchivesSummary for September 7 through September 11, 2015:
Monday, September 7, 2015
Feds to review Port of Oakland "OakPass" program
Photo credit: Bloomberg News
A Port of Oakland plan to charge container cargo fees during peak times will probably be delayed, according to The Wall Street Journal, since federal regulators said they needed more information to make sure the proposal won’t unreasonably raise costs for importers and exporters or reduce the port’s efficiency.
The Federal Maritime Commission voted unanimously Wednesday to issue the request to the five marine terminal operating companies at the port who jointly proposed the OakPass program reduce congestion during peak hours. Under the plan, the funds generated would pay for terminals to operate an additional shift on Saturdays.
The FMC said it had concerns about the OakPass program, "based on an initial review and comments received from various stakeholders who would be impacted by the program." Many stakeholders complained that the proposal was put forth with minimal details and without first consulting the industries that would be directly affected.
John Cushing, who leads the OakPass program, said in a statement Wednesday that the FMC’s request could delay the start date, which was originally expected to be sometime in the fourth quarter. Once the terminal operators have provided the required information, the FMC will have an additional 45 days to decide whether to allow the agreement to go into effect.
U.S. trade deficit drops in July to lowest level in 5 months
The U.S. trade deficit dropped to its lowest level in five months in July as exports increased, indicating underlying strength in the economy amid concerns about weakening global growth.
The Commerce Department said the trade gap narrowed 7.4 percent to $41.9 billion, the smallest since February. June's trade deficit was revised to $45.2 billion from the previously reported $43.8 billion.
When adjusted for inflation, the deficit fell to $56.2 billion in July from $59.0 billion in the prior month.
The smaller deficit implied a modest contribution to gross domestic product from trade early in the third quarter. Trade contributed 0.3 percentage point to the economy's 3.7 percent annualized growth rate in the second quarter. In July, exports increased 0.4 percent to $188.5 billion.
Data ranging from consumer spending to employment and housing have suggested the economy retained much of its momentum from the second quarter and was on solid footing when global financial markets experienced turbulence due to worries over China's economy.
CMA CGM to replace Asia-to-Europe services FAL2 and FAL3
CMA CGM and its Ocean Three partners have decided to replace FAL2 and FAL3 services between Asia and Europe. FAL23 will offer a new optimized rotation.
The new FAL 23 service will provide faster transit times, especially between Asia and Le Havre, Rotterdam and Antwerp, according to CMA CGM. Vietnam will be directly served with a new call at Cai Mep Deep Sea terminal in Ho Chi Minh City.
A new export call will be added at Felixstowe, and a new import call at Chiwan.
Starting October 13 in Asia, twelve 12,000- to 15,000-TEU vessels will sail the new rotation: Shanghai, Ningbo, Yantian, Cai Mep, Port Kelang, Le Havre, Rotterdam, Antwerp, Hamburg, Felixstowe, Rotterdam, Le Havre, Jeddah, Port Kelang, Chiwan, and Shanghai.
The new rotation will start in the Eastbound from Antwerp on September 28 with the CMA CGM La Perouse.
FAL1 and FAL8 services are also being updated, according to CMA CGM.
A new call at Qingdao has been added on the FAL1 service as of mid-August 2015.
Transit times from Ningbo, Shanghai, Yantian and Port Kelang to Algeciras, Southampton, Dunkirk and Hamburg will be reduced by 3 days, the statement said.
The FAL1 rotation will be: Tianjin, Dalian, Pusan, Qingdao, Ningbo, Shanghai, Yantian, Port Kelang, Algeciras, Southampton, Dunkirk, Hamburg, Rotterdam, Zeebrugge, Le Havre, Malta, Khor Fakkan, Yantian, and Tianjin.
Starting October 13th, CMA CGM said it will add Xiamen to its FAL8 service. The new rotation is: Qingdao, Shanghai, Ningbo, Xiamen, Yantian, Port Kelang, Felixstowe, Rotterdam, Hambourg, Zeebruge, Rotterdam, Port Kelang, Yantian, and Qingdao.
Pelindo II to start building $250M canal in Jakarta
In November, Pelabuhan Indonesia (Pelindo) II, Indonesia's state-owned port company, will begin construction of $250 million canal and terminal in Jakarta, according to the Bisnis Indonesia newspaper, quoting CEO Richard Joost Lino.
The project, which includes a 24.6-km canal linking the terminal to Tanjung Priok, is designed to reduce congestion at Indonesia's main international seaport and is expected to be operational by 2017.
Maersk Group asked for more info in Petrobas corruption investigation
A.P. Moller-Maersk said one of its employees in Brazil received a request from authorities to provide additional information for a corruption investigation at the state-run oil firm, Petrobras.
Prosecutors say Maersk, which first met with Brazilian investigators in July 2014, is one of more than a dozen foreign companies being investigated for possibly paying bribes to former executives at Petrobras and several companies are collaborating with the investigation.
A Maersk spokesman said in a statement to Reuters the employee received the request on Aug. 10 and its external legal counsel is working with authorities to respond.
Maersk has argued that it is normal and customary to use brokers to promote tanker-operators' services to customers around the world and to pay brokers a 1.25 percent commission on earnings from charter contracts.
China Shipping Container Lines Co. intends to buy 10 ultra-large ships for $1.5 billion, according to the Wall Street Journal. The ships will help the company to fulfill capacity commitments for the Ocean Three Alliance, which includes CSCL, CMA CGM, and United Arab Shipping Co.
Shipyards Dalian Shipbuilding Industry, Shanghai Waigaoqiao Shipbuilding, and Hudong-Zhonghua Shipbuilding Group are potential candidates for the contract, to be announced at the end of this year. The ships would be delivered in 2018 or 2019.
The order would add to the estimated 30 percent capacity glut on the Asia-Europe trades, which is already causing rates to fall dramatically. The economic slowdown in Asia (especially China) is also contributing to a 10 percent drop on the trade route. Imports of European luxury items have decreased by up to 17 percent since the mid-August devaluation of the Chinese yuan.
CSCL currently operates 18 ships that can carry more than 10,000 TEUs, including two that move 19,000 each. Last week it reported a 97 percent fall in first-half net profit to $1.7 million compared with the same period in 2014, when earnings were higher due to asset sales.
It has been reported that two of China's state-run enterprises will merge—shipping company Sinotrans and China Merchants Group.
China Merchants Group and Sinotrans & CSC Holdings Co. will restructure and integrate, according to shipping-industry website ship.sh, citing unnamed sources close to the state-asset regulator and from the two companies.
The Chinese government wants to overhaul state-run companies to deploy more market-oriented reforms to boost their slowing economy.
The merger and restructuring between China Merchants Group and Sinotrans & CSC is "almost certain," the ship.sh report said. The two companies had earlier cooperated in a joint venture to set up a fleet of very large crude carriers (China Energy Shipping Company), according to the report.
China Merchants Group and Beijing-based Sinotrans & CSC couldn’t immediately be reached for comment.
Hyundai Heavy workers strike over pay, working conditions
Union workers at Hyundai Heavy Industries, South Korea's top shipbuilder, staged another partial strike Friday, demanding higher wages, better working conditions and other benefits.
The workers refused a proposal by management to freeze their base salary, and put down their tools at 8 a.m. The walkout lasted until noon.
The Hyundai Heavy union, jointly with other unions at rival shipbuilders, is planning more partial strikes on Sept. 9 and Sept. 17.
Hyundai Heavy suffered a net loss of more than $166 million in the second quarter of the year, its seventh consecutive quarterly loss, as it set aside massive funds to mitigate potential losses stemming from a delay in the construction of low-priced ships and money-losing offshore facilities.
China to open high-speed rail to North Korean border
China will open a high-speed rail line to the North Korean border on Tuesday, state news agency Xinhua said, in the latest effort to boost economic ties despite ongoing tension between the countries.
The line, under construction since 2010, will run 127 miles from Shenyang to the border city of Dandong, which faces North Korea across the Yalu River, and will shorten the train journey from 3.5 hours to just over one hour, Xinhua said.
The new link will "raise the region's economic competitiveness," the report cited an unnamed railway official saying.
China has encouraged the development of three special economic zones in North Korea, hoping to tap low labor costs and encourage the North to see the benefits of economic reform, even while publicly rebuking it over its nuclear weapons program.
The controversial Trans-Pacific Partnership free trade agreement will be a big deal for trade in the Pacific Rim, if it ever actually gets implemented in our lifetime.
It’s been nearly six years since the U.S., Australia, Brunei, Chile, New Zealand, Peru, Singapore and Vietnam launched TPP negotiations in March 2010. Malaysia, Mexico, Canada and Japan joined a bit later. Just when the goal seems in sight, things get blurry. The U.S., Japan and 10 other Pacific Rim countries held ministerial talks in Hawaii in July, but failed to reach a deal following marathon negotiations.
Now the situation is in limbo while the countries try to figure out when to reconvene the talks — they want to conclude the agreement "as soon as possible," according to the U.S. Treasury Department, but that’s diplomatic-speak for "who knows?"
There are concerns that the TPP talks have been shelved for the time being, as U.S. political attention turns to next year's presidential election cycle.
But despite the uncertainties, the importance of the TPP for ocean shipping and world ports is evident: for one thing, it would encompass about 40 percent of global output. Some 25 port complexes handle 85 percent of the volume of international goods in the U.S. But the largest four port complexes — New York, Los Angeles, Detroit and Houston — move a combined $1.1 trillion in international goods annually, about 37 percent of all U.S. exports and imports, according to a Maritime Executive article.
TPP is likely to increase the movement of goods at the few ports that move most of the country’s Asian trade. Trade deals like TPP and other international freight developments like the Panama Canal expansion "have the potential to increase the flow of exports and imports across the U.S.," says Brookings.
For Alberto Oltra, head of Spanish-speaking South America for DHL Global Forwarding, the TPP is down the road — he deals with the multiplicity of existing trade agreements every day.
"I would like it if the entire world had a free trade agreement among themselves, it would be much easier," he said in an interview. "Every single free trade agreement that is signed is very good news for the industry and for DHL because this promotes the exchange of trading in general in the countries or in the region," Oltra continued. He explained that DHL Global Forwarding’s job is to make sure that "once a country signs an agreement we understand the scope of the free trade agreement; we also do a kind of consultancy so that we understand the needs of our customers to make sure we can expand business with them."
For open economies such as Chile, Peru and Colombia, trade has increased drastically in the last few years, Oltra said. When a country has an open economy, "then DHL and the entire industry can benefit, (making sure) this volume increases." DHL has seen this in Latin America with Chilean fruit, which is now an allowed export in some Asian countries. Four years ago the country had six charters and last year that increased to 37 charters, or more than 3 million kilos of fruit, "just because the regulations are much more open and the knowledge base between the markets is higher." FTAs provide a clear framework that allows countries to become competitive, he noted.
Oltra said DHL’s "Global Connectedness Index" is an ongoing resource and guide that lists and correlates each country according to their different trading aspects.
Simply put, the GCI is a detailed analysis of the state of globalization around the world. The index — there have been three so far, with the most recent compiled in 2014 — "is pretty useful to us because we can check to make sure we are trading with countries with more openness and more connectivity, making it easier to trade," Oltra said.
Next: China’s economic struggles spill over into world markets
Capitol Watch: The Bell is Ringing – Recess is Over
By Anna Denecke, Associate, Blakey & Agnew, LLC
It seems like just yesterday we were waving Members of Congress au revoir as they set off for August recess. Suddenly it’s already September, and in just a few short days lawmakers will return to Washington. When they do, they’ll face a lengthy to-do list that includes, among many other big-ticket items, a must-pass long term surface transportation bill.
When lawmakers adjourned at the end of July, the Senate had just passed the DRIVE Act, a six-year reauthorization bill with $350 billion in contract authority. The House turned a cold shoulder on the legislation. The primary source of disagreement between the two chambers was the Senate Finance Committee’s decision to identify three years worth of funding for the six year bill, thereby putting off the question of how to maintain the solvency of the Highway Trust Fund once again.
Instead of embracing the Senate’s DRIVE Act, the House passed another short term extension to MAP-21. Then they left town, forcing the Senate to approve the short term patch, or risk taking blame for ceasing highway projects and unemployed construction workers.
The latest MAP-21 patch extends contract authority until October 29, but contains a large enough cash infusion to keep the Highway Trust Fund solvent until mid-December, if necessary. Because of this funding surplus, it would be relatively easy for the House to pass another MAP-21 extension until the end of the year, which would buy the chamber an extra two months to develop an answer to the DRIVE Act. Of course, the extended time-frame is contingent on the Senate agreement to sign onto another short term highway bill, which may be met with reluctance.
It’s not only the when of the surface transportation bill that’s still up in the air – it’s the how as well. Repatriation as a source of revenue for the Highway Trust Fund has a growing list of supporters in the House, but it remains a heavy lift.
On June 24, Ways and Means Subcommittee on Select Revenue Measures Chairman Dave Reichert (R-WA) held a hearing to the topic. Repatriation, or the process in which American companies bring foreign earnings back to the U.S., could serve as a viable source of funding for highway projects, witnesses at the hearing testified. However, there is widespread disagreement on how to structure repatriation. Congressional and Administration proposals have offered varying tax rates and differed on whether repatriation would be voluntary or mandatory.
Further complicating this process, especially considering the tight timeframe the House has to produce an answer to the DRIVE Act, is the likelihood that repatriation would take place in the context of a broader corporate tax code overhaul. While Ways & Means Chairman Paul Ryan (R-WI) was bullish on prospects, telling reporters in February "tax reform is a 2015 thing, for sure, and it’s got to be done by summer," summer has come and gone. In fact, the last time Congress successfully overhauled the corporate tax system was 1986.
As if the notion of coupling the highway bill with tax reform isn’t a Herculean task in itself, Congress also has a number of big-ticket items to attend to when they return from recess. None of the twelve appropriations bills that fund the federal government were passed this spring, meaning Congress will likely be forced to approve an omnibus by September 30. Additionally, the Ryan-Murray Bipartisan Budget Act, which eased sequestration two years ago, is set to expire this fall and a replacement is needed. Finally, lawmakers will need to increase the debt limit some time after the end of October as well as address year-end tax extenders.
The challenges facing Congress as they work to develop a long-term surface transportation bill are significant - but not insurmountable. The highway bill has a long tradition of bipartisan support in both the House and the Senate. Given the many contentious issues lawmakers must deal with this fall, working on a highway bill might be appealing after all.
Blakey & Agnew, LLC is a public affairs and communications consulting firm based in Washington, DC.
APM to buy 11 terminals from Spanish shipping group
Port operator APM Terminals, a division of A.P. Moller-Maersk, is buying 11 container ports from Spanish shipping and logistics group Perez y Cia to increase its footprint in emerging markets and to better serve its fleet of mega container vessels.
No details were given for the deal, which will increase the number of APM Terminals container ports from 63 to 74, including terminals in Colombia, Brazil and Mexico. However, Nordea Markets estimated an enterprise value of around $1.5 billion, based on similar deals.
APM Terminals Chief Executive Kim Fejfer said the deal would help the company better handle container shipping alliances and their massive new vessels.
APM Terminals is the world's third largest container port operator after Singapore state-owned operator PSA International and Hutchison Port Holdings, a unit of Hong Kong-based CK Hutchison Holdings Ltd.
EU truckers worry that refugee crisis will tighten border controls
Truckers caught up in Europe's migrant crisis say their work is increasingly being disrupted by long wait times and stowaways, but they are far more concerned that governments will implement stricter border controls.
If the border-free zone within Europe were to be scrapped, it would impact not only the trucking industry's time-sensitive business model, but also the supply chains of industries across the continent, they say.
Faced with an influx of migrants, the European Union's 28-nation members have accused one another of breaking the law with ad hoc measures and failing to join forces to agree to a common, workable solution.
For DSV, the third largest road freight operator in Europe with more than 17,000 trucks on the roads every day, that would have a serious impact that would end up fuelling inflation.
"If they start to stop all the trucks it will be costly for everyone and the bill will be passed on to customers and in the end, goods will be more expensive," said Soren Schmidt, head of DSV Road.
More than 40 containerships operated by Nan Tsing Container Lines have been detained at several major ports in China, following the company’s announcement to suspend operations at the end of August due to debt issues.
Shippers are reportedly having difficulties getting their cargo from more than 10,000 boxes also in detention.
The Shanghai Maritime Court made a ruling to freeze 1,367 containers stored at SIPG’s Yidong Container Terminal, although the judgment evidently only applied to the containers, not the cargo inside. However several BCOs have complained that Shanghai Port has refused requests to release the cargo, and have had to seek help from the court.
Record Long Beach traffic shows growing U.S. demand
The Port of Long Beach — which is poised to unseat the Port of Los Angeles next year as the No. 1 shipping gateway in the country — had a record month in July, with cargo volume up 18 percent year-over-year.
Figures being released later this month will show unprecedented traffic again in August, and early signs in September are "very very encouraging," said Jon Slangerup, the port’s CEO, in a Bloomberg article.
Overall, the two ports are handling 4 percent more cargo this year than last, Slangerup said. With consumer demand strengthening, he predicted a record year for Long Beach in 2015. He said West Coast ports would likely regain any share lost earlier in the year, when cargo backups led clients to divert cargo to East Coast destinations like Savannah, Georgia.
"When you look at the macros, you look at unemployment, consumer confidence, savings, available discretionary spending, all of those numbers suggest that we have more to spend," Slangerup said. "The economy here is super strong relative to the rest of the world, and the strongest I’ve seen it in a very long time."
Traffic at the Port of Los Angeles has been less impressive; after the second-best month ever in March, volume was down in three of the next four months. Still, the overall trend is encouraging, and orders for next year suggest volumes will pick up late this year, said Gene Seroka, executive director of the Port of Los Angeles.
"It’s not just a big one-time spike during the peak season," Seroka said.
In the interview last week Long Beach CEO Slangerup said he realized that labor had "very little to do" with four months of disruptions and cargo logjams that began in the last months of 2014 — that the difficulties had more to do with organizational glitches and inefficient cargo-handling practices.
Since March, truckers, shippers and terminal operators at the ports of Los Angeles and Long Beach have been meeting to better coordinate operations and speed cargo through the port complex. Union representatives have also joined the conversations.
To keep their lead and regain earlier losses, the Southern California ports are spending a combined $5.8 billion to expand capacity, replace a bridge and dredge harbors to accommodate the biggest vessels, and automate unloading, warehousing and other activity.
Slangerup downplayed the threat of East Coast ports capturing West Coast market share after the Panama Canal expansion, noting that to accommodate mega container ships, East Coast ports will have to dredge their harbors after major storms year-round.
"They may not be able to operate at certain times of the year," Slangerup said. "They can dredge all they want, but they’re fighting Mother Nature because every time a storm comes in, they have to dredge again."
Maersk Line says its market share will drop a bit in 2017
Maersk Line expects its capacity market share to slip to approximately 14 percent in 2017 from its current level of 15.9 percent, according to presentations it gave to investors on Wednesday.
Between now and 2016, Maersk Line says it expects to keep up with market growth and repeated it would spend about $3 billion a year until 2020 for new ships, as well as new containers and on maintenance.
"Due to our size, we need 425,000 TEUs delivered between 2017 and 2019," Maersk Line Chief Executive Soren Skou told analysts.
Maersk Line, which contributed the largest portion of underlying profits for parent company A.P. Moller-Maersk last year, also expects to save $350 million a year from its shipping alliance with its nearest rival, Mediterranean Shipping Company. Maersk Line earned $1.5 billion in profits on $26.2 billion of revenues.
It controls around 20 percent of transported goods on the world's busiest route between Asia and Europe and has a global market share of around 15 percent. Its profit margin has been 5 percentage points higher than its rivals for almost two years.
CJ Korea Express Corp, South Korea's largest logistics firm, said on Friday it is in final talks to acquire China's Rokin Logistics.
CJ Korea Express submitted a bid of a little above $420 million for Rokin, while more than 10 bidders expressed interest in a round of binding bids late last month, according to the Korea Economic Daily, which cited an unnamed investment banking source.
CJ Korea Express declined to comment on the price.
MOL signs deal for joint ownership of two LNG carriers
Japan’s Mitsui O.S.K. Lines announced long-term charter contracts for two newbuilding LNG carriers with Chubu Electric Power through a joint ship owner company formed by the two companies.
The joint company signed contracts to build the two vessels — one with MI LNG Company, and the other with Kawasaki Heavy Industries, according to the MOL statement.
The new ships will reportedly transport LNG that Chubu Electric Power is procuring from the Freeport LNG Project in Texas.
Ship goes missing in the South China Sea
A cargo ship was reported missing in the South China Sea on Saturday during its voyage from Kuching to Limbang.
First Admiral Ismaili Single Pit of the Malaysian Maritime Enforcement Agency said the cargo ship Sah Lian departed from Kuching Port on September 2 and was scheduled to arrive at Limbang Port on September 5.
The ship was reported missing by its owner when it failed to arrive at the Limbang Port on its scheduled arrival date, and he was unable to contact the crew.
MMEA Sarawak launched a search and rescue mission for the ship’s captain and 14 crewmembers.