Cargo Business Newswire ArchivesSummary for September 8 through September 12, 2014:
Monday, September 8, 2014
U.S. and China to meet on proposed Maersk-MSC alliance
The U.S. probably won’t approve the proposed 2M alliance between shipping giants Maersk Line and Mediterranean Shipping Co. until the Federal Maritime Commission consults with their Chinese counterparts, according to one of the agency's commissioners.
FMC Commissioner William Doyle told The Wall Street Journal that he wants to consult with Chinese regulators before reaching a decision on the so-called 2M vessel and route sharing alliance submitted by Maersk and MSC.
Earlier this year, Beijing shocked the shipping industry when it nixed the similar but larger P3 alliance, a prospective tie-up between Maersk, MSC and CMA CGM.
Maersk and MSC, the globe’s two top container-shipping companies by capacity, filed a request for approval of the 2M alliance with the FMC last week.
If approved, 2M will move about 30 percent of all cargo between Asia and Europe and across the Atlantic and Pacific oceans. The agreement is expected to save the two companies hundreds of millions of dollars annually.
The wider alliance that included CMA CGM required formal approval from the FMC and Chinese and European regulators. For this one, Maersk and MSC officials say they only need to file their operational plans with the European and Chinese watchdogs, but formal clearance is only needed by the FMC.
"I want to see if China's regulatory authorities have any concerns," Doyle said. "The 2M partners can say whatever they want, but what's important is what China comes up with. Let's not forget the trade to Europe from Asia comes from Asia."
City approves $848M Port of Long Beach budget for new fiscal year
The Long Beach City Council voted approve an $858 million budget for the Port of Long Beach for the upcoming fiscal year starting October 1, with much of it being slotted for port upgrades.
The Harbor Department plans to spend $579 million on capitol projects, including the ongoing Desmond Bridge Replacement Project and the redevelopment of the Middle Harbor Terminal.
The Port projects operating revenue of just over $346 million for the new fiscal year.
The funding will come from terminal leases and cargo fees charged to companies and shipping lines. Grants from state and federal agencies for roadway, rail and security projects also add to the port’s annual operating budget.
The newly approved budget provides for the creation of almost 30 new full-time positions, including 20 in engineering, which is key with all of the construction projects the port is undertaking, according to Art Wong, the port’s assistant director of communications.
"Because we’re moving ahead with a capital program that includes a lot of construction, it’s important that we add those positions," Wong said. "Working on $4 billion in projects, it’s very important to have the people to manage and direct that work."
The budget sets aside $30 million for environmental programs like barge-based pollution control systems for ships at berth and the e-highway, a demonstration of how catenary-style systems can steer the port move toward zero-emissions.
Wong said the Port’s aim is to eventually be zero-emissions and that "it’s important that the Port continues to move forward and foster ideas and technology that will help us to get to zero emissions."
BNSF-Tacoma Rail contract could give Port of Tacoma a boost
A new contract between BNSF and Tacoma Rail, Tacoma’s Tide flats shortline railroad could give the Port of Tacoma an edge over rival ports.
Under the new contract, Tacoma Rail is refueling, doing minor maintenance and stocking the locomotives with supplies to allow them to get back on their transcontinental runs more quickly. The short line railroad has provided similar services for Union Pacific for several years.
The new maintenance and fueling contract for BNSF locomotives could trim one to three hours from the turnaround time for trains leaving the port headed for the Midwest, according to Dale King, Tacoma Rail’s superintendent.
Prior to last month, BNSF locomotives that hauled unit trains of oil, autos and containers to the port were disconnected from the trains they powered and sent across the Puyallup River for servicing at a BNSF facility.
Hapag-Lloyd and CSAV merger to receive conditional EU approval, insiders say
Two inside sources told Reuters that Hapag-Lloyd and Compania SudAmericana de Vapores would win conditional European Union approval for their merger, which will form the world's fourth-largest container shipping company.
The companies received approval from U.S. regulators last month.
EU approval depends on the elimination of some overlapping routes between the consortia in which the companies are members. This would assuage concerns that the deal could reduce competition, said two individuals who declined to be named because the EU decision is not yet public.
Hapag-Lloyd is a member of the G6 alliance along with APL, Hyundai Merchant Marine, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Orient Overseas Container Line. The G6 operates on the Asia-Europe and Mediterranean trades.
CSAV, majority-owned by Chile’s billionaire Luksic family, is a member of another smaller group.
An anonymous shipping industry source predicted more mergers in the pipeline, saying the Hapag-Lloyd and CSAV deal could be a model for future deals.
"The container industry needs to keep its cost structure low but there is not much flexibility compared with other shipping segments like dry bulk where you can alter fuel consumption and change the way deals are done more easily." the person said. "On that basis, we will see consolidation in the container market out of necessity."
The European Commission is scheduled to decide on the merger by Sept. 11. The EC, Hapag-Lloyd and CSAV all declined to comment on the matter.
Drewry: Container growth on Asia-to-Europe trades outpaces economy
Container flows from Asia to Europe came out strong in the first-half of 2014, which is at odds with macro-economic data coming out of Europe, according to this week’s Container Insight from Drewry Maritime Research.
The analysts note that recent disappointing economic news coming out of Europe regarding GDP does not align with the robust growth reported for some of the big ocean container markets.
Eurozone GDP was static in the second quarter, as the economies of its three biggest economies— Germany, France and Italy—faltered. Germany, which accounts for roughly one-third of the entire Eurozone economy, dropped 0.6 percent in the second quarter, due to weaker exports. France posted a 0.1 percent fall, triggering the government to admit it will not reach its annual growth or budget deficit targets. Italy backslid into recession as the economy contracted for the second consecutive quarter, this time falling by 0.8 percent.
In Asia, China experienced strong second quarter GDP growth of 8.2 percent, but the Japanese economy fell by 6.8 percent, its worst performance since the tsunami in 2011.
Even though the above data would suggest a similar drop in the container sector, the first-half growth in the Asia-to-Europe and the Mediterranean (including North Africa) trade routes reached 8 percent year-over-year.
Drewry said although GDP is a broad measure of economic health as one of the drivers of long-term aggregate growth in trade, it is less useful for short-term trade forecasts. GDP also reflects changes in domestic economic activity not related to exports and imports, just as container growth is influenced by factors other than GDP, including the multiple physical transport of parts, intermediate goods and finished goods and the increasing containerization of certain commodities.
Also, trade statistics are inclined to large growth swings and year-over-year contrasts can be distorted by a range of factors, from movable national holiday dates in China to shipments being transported early to avoid general rate increases or potential port labor disruptions, as seen recently on the U.S. West Coast.
Drewry concludes the growth experienced in the Asia-Europe trades in the first-half was inflated by weak year-over-year comparisons, yet reports it is also true that the strength of the container volume growth is beyond predictions despite weak GDP economic indicators. The researchers say they expect the rate of container trade growth to slow and for the economy to catch up.
Port of L.A.-Long Beach truckers say they were fired for filing wage claims
Truck drivers who haul goods to and from container terminals at the ports of Los Angeles and Long Beach said they were fired by trucking company Total Transportation Services this week after refusing to withdraw their wage claims against the company.
At least 33 truck drivers allege that they were let go by Total Transportation Services Inc. (TTSI) after they engaged in strikes and maintained their wage claims with the California Division of Labor Standards Enforcement (DLSE).
A TTSI representative said the company did not fire or terminate anyone.
"Some owner operators decided not to renew their contracts with the company and those contracts have now expired," said Alex Cherin, a representative for the company. "A vast majority of the owner operators—including some with pending claims—chose to renew their agreements with TTSI."
At least 29 of the 33 drivers who say they were let go have pending DLSE claims totaling roughly $4.8 million in back pay and damages. The other four drivers were each awarded an average of $68,211 in back pay last week after the DLSE ruled that the company had misclassified employees as "independent contractors."
Drivers said when they met with TTSI on Sept. 2, they were told at first that they did not have to drop their wage claims. Some were allowed to sign new lease agreements and returned to work. But not all drivers received the same deal.
"While we were waiting, the company changed their mind and told us that if we didn’t withdraw our DLSE claims we would not be allowed to sign the new contract," Elmer Chacon, one of the drivers let go, said in a statement. "The drivers that did sign the new contracts and were back at work were sent a message on the QUALCOMM saying that they should return to TTSI and they are ‘out of service.’"
This action comes after truck drivers and their supporters demonstrated last week outside TTSI headquarters, alleging that TTSO, Pacific 9 Transportation and Green Fleet Systems continued to retaliate against them despite a truce struck by Los Angeles Mayor Eric Garcetti.
XPO Logistics completes acquisition of New Breed logistics firm
XPO Logistics announced it has completed the acquisition of logistics firm New Breed Holding Company for $615 million.
New Breed offers logistics services to industries with "high-growth outsourcing opportunities," including aerospace, defense, telecom, technology and e-commerce, XPO said.
XPO said it now expects to achieve full-year EBITDA earnings of at least $150 million and revenue of $3 billion.
The buy adds about $597 million in revenue to XPO and $77 million in earnings before interest, taxes, depreciation and amortization, according to the statement.
New Breed’s former chief executive, Louis DeJoy, used $30 million of proceeds from the transaction to purchase restricted stock from the company, according to XPO. As chief executive of XPO’s new contract logistics business, DeJoy will continue to lead operations.
Third Irishman arrested in Tilbury container death
A third Irish man was arrested Friday in connection with the death of an Afghan immigrant found in a shipping container at U.K.’s Tilbury Docks, according to police.
The man was arrested in connection with the death of Meet Singh Kapoor, 40, who was found with 34 living people at Tilbury Docks in Essex on August 16.
He was held at Liverpool Ferry Port on suspicion of manslaughter and facilitating illegal entry into the United Kingdom, police said.
Two Irish truck drivers have already appeared in court in connection with the case, and were charged with conspiring to facilitate illegal entry into the UK.
CMA CGM announces Ocean Three alliance with China Shipping Container Lines and United Arab Shipping Company
French shipping giant CMA CGM announced the signature of three major agreements with CSCL and UASC to form the Ocean Three vessel sharing agreement, to collectively ply the Asia-Europe, Asia-Mediterranean, TransPacific and Asia-U.S East Coast trades.
"We are very pleased to have signed these three agreements with such reputable partners, whom we both know and appreciate," said Rodolphe Saadé, CMA CGM vice chairman. "This will allow us to propose to our clients a high quality and reliable alternative to existing services on the market. CMA CGM will continue its global development."
CMA CGM reports the deals involve vessel sharing, slot exchange and slot charter agreements that will complete its services on the four biggest trade routes. On the Asia-Europe trade, Ocean Three will offer 4 weekly services, which complete 2 existing services, thereby offering 6 departures per week.
On the Asia-Mediterranean trade, the new alliance will offer 4 weekly services, 2 to the Mediterranean, 1 to the Adriatic and 1 to the Black Sea—the only one on this market, according to the statement. On the trans-Pacific, the prospective group will offer 4 weekly services to California and 1 service to the Pacific Northwest (U.S and Canada), and on the Asia-U.S. East Coast trade, 1 service will be offered via the Suez Canal and 1 service will be dedicated to the Gulf of Mexico.
CMA CGM's new deal would not need regulatory approval from China or the European Union as the partners would have less than 30 percent market share on Asia-Europe and Asia-Pacific routes, Vice Chairman Rodolphe Saade told Reuters, but it will need approval from the U.S. Federal Maritime Commission.
"It is going to be possible to implement the agreement very swiftly, with a launch planned for week 49, or early December," Saade said by telephone to Reuters.
CMA CGM said agreements on the trans-Atlantic trade are being finalized and will soon be announced.
Ocean Three rotations will be optimized with calls in all the biggest Asian, European and North American ports, the statement said, using transshipment hubs common to the three partners.
"I think this phenomenon (of alliances) is going to grow. People talk a lot about east-west but we also have partnerships on north-south routes even if it's not yet on the same scale," Saade said.
Port Authority head says S.C. ports must improve faster to compete
South Carolina Ports Authority head Jim Newsome said Monday that although the Port of Charleston has bounced back from recession levels, the authority must increase revenue at a faster pace than competing ports in order to succeed.
"We are, as I see it, in the second inning of a nine-inning baseball game. We scored in the first two innings but we have a long game to play," said Newsome, the authority's president and CEO, during his annual State of the Port address.
South Carolina is the country’s ninth-busiest container port by volume, but earnings are low compared to competitors. Newsome said between 2015 and 2020 the port will need above-market revenue growth and investment, and that its return on capital expenditures will have to hit about 6 percent over the next few years if the port is to achieve long-term success.
Newsome sees opportunity for growth in current South Carolina and regional markets in automobile and tire exports, as well as in plastics and agricultural products. He expects imports to pick up as well, particularly in e-commerce.
He also said he expects the Charleston Harbor to be dredged to at least 50 feet by 2019.
The authority is undergoing a 10-year, $2 billion series of capital improvements. In addition to the harbor deepening, the SCPA list includes a new container terminal in North Charleston, the inland port that opened in Greer last year, improvements at the Wando Terminal in Mount Pleasant to handle the mega container ships and a new intermodal rail yard in North Charleston.
Challenges, according to Newsome, include the expectation of slower market growth and tougher competition from Southeast ports.
Bechtel in talks with U.S. about funding East Coast offshore port
On Sunday, U.S. engineering, construction and project management firm Bechtel announced its plans to substantively alter the container trade in the U.S.
According to a report by Bechtel, they are in talks with the U.S. government about funding an offshore port on the East Coast that would reduce overall shipping costs in the U.S. by 30 to 40 percent. The offshore port would reduce inland transport distances and negate the need to upgrade existing ports on the West and East Coasts.
"Currently up to 70 percent of West Coast containers move east by rail and road," says Bechtel's ports sector manager, Marco Pluijm. "If these containers shifted from overland transport to all-water direct import via the Suez Canal to an offshore port, significant savings would be possible."
Bechtel makes a case that the majority of imports to the U.S. make landfall on the West Coast from Asia, with 70 percent of containers needing to be shipped overland to the East Coast region, which has the greatest demand. Further, the mega-sized Post-Panamax vessels are pressuring ports to significantly expand their infrastructure and facilities, including increasing channel depth through dredging and buying more expensive container handling equipment to handle the bigger ships and their higher volume.
The idea is new to the U.S., but has proved successful in Abu Dhabi where Bechtel developed the Khalifa Port.
Pluijm says a six-berth offshore port would be built where freight would be offloaded and then re-loaded onto smaller ships capable of using the existing port facilities on land, negating the need to upgrade port infrastructure and cutting transport times and costs significantly.
Shipping through the Northern Sea Route, which cuts transit times in half for vessels sailing between North Europe and Asia, will be delayed this year due to the ice situation, according to the NSR Office.
No ships have transited the NSR this season, according to the Norway-based NSR Information Office.
"Due to ice conditions, active transit navigation on NSR starts later this season," said Sergey Balmsov, the head of the NSR Information Office in Murmansk, Russia. "We will see more vessels in September and October."
The Northern Sea Route is typically open from July through November, and approximately 71 ships made the voyage last year, according to South Korea’s Yongsan University.
"The guys most likely to use it would be people shipping LNG cargoes from Snohvit in Norway or possibly reloads from Zeebrugge, Belgium," said Tony Regan, an energy consultant at Tri-Zen International Inc. in Singapore.
Shipping from Murmansk in northwest Russia to Japan through the Arctic spans 6,010 miles and takes about 18 days, compared to the 12,291 miles and 37 days it takes to go through the Suez Canal, says the NSR Information Office website.
The UPS Foundation has committed $400,000 worth of in-kind logistics services to get crucial supplies to health care workers fighting the Ebola outbreak in West Africa.
The lion’s share of the contribution is a sponsored chartered flight from Belgium carrying 55 metric tons of disinfectant to Monrovia, Liberia, where 40 percent of deaths from the outbreak have occurred.
Assistance also includes expediting the trucking of 10 pallets of supplies from MedShare’s Decatur, Ga., warehouse to New York’s John F. Kennedy International Airport, plus $75,000 worth of ocean freight services.
NRF: U.S. retail imports remain up as West Coast labor talks continue
Photo credit: Reuters
Retailers continued to bring goods into the U.S. at an above-average rate this month—spurred by the lack of a West Coast dockworker contract—but volume will drop from the record set in August, projects the latest Global Port Tracker report from the National Retail Federation and Hackett Associates.
"The negotiations have made progress and retailers have been stocking up, but there’s still cargo that needs to arrive before the holiday season kicks off," said Jonathan Gold, NRF vice president for supply chain and customs policy. "Retailers are making sure that consumer demand during the holidays will be met."
Import volume at U.S. ports covered by Global Port Tracker is expected to total 1.47 million TEUs this month, down from August’s record 1.53 million TEUs.
West Coast dockworkers have been working without a valid contract since their former agreement expired July 1. Since then, retailers have been worried about potential labor disruptions that could affect the flow of back-to-school or holiday merchandise.
The tentative agreement on longshoremen’s health benefits announced in August was an encouraging sign for shippers, but the PMA and the ILWU continue to parlay on other contract issues.
U.S. ports followed by Global Port Tracker handled 1.5 million TEUs in July, up 3.7 percent year-over-year. August was forecast to be up 2.9 percent at 1.53 million TEUs, September up 2.4 percent at 1.47 million TEUs, October up 5.5 percent to 1.51 million TEUs, November up 3.8 percent at 1.39 million TEUs and December up 4.1 percent at 1.37 million TEUs.
In 2014, U.S. container ports tracked by the report are expected to achieve collective imports totaling 17.1 million TEUs, a 5.3 percent increase over 2013’s 16.2 million. The first half of 2014 totaled 8.3 million TEUs, up 7 percent over the first half of 2013.
NRF is forecasting 3.6 percent sales growth in 2014.
"The North American economy is certainly growing, but at lower rates than one would expect coming out of a deep recession," said Ben Hackett, Hackett Associates founder. "It remains hesitant, growing in spurts rather than in a sustained pattern."
Global Port Tracker covers the U.S. ports of Los Angeles/Long Beach, Oakland, Seattle, Tacoma, New York/New Jersey, Hampton Roads, Charleston, Savannah, Port Everglades, Miami, and Houston.
Drewry: U.S. interest rates will spur procurement of port assets
The expectation of higher U.S. interest rates will trigger a boost in the acquisition and refinancing of port assets over the next year, according to Drewry Maritime Advisors, Drewry’s port consultancy division.
The analysts project the target rate of the U.S. Fed will increase from its all-time low of 0.25 percent, and the prospect of higher borrowing costs will drive more acquisition activity sooner as investors seek to secure low financing rates before costs begin to rise. Port operators will want to refinance outstanding loans prior to any potential rates increase.
"We have already noticed this trend within our own portfolio of consulting projects," said Tim Power, director of Drewry Maritime Advisors. "Over 70 percent of our current consultancy workload relates to due diligence of port asset acquisition and refinancing assignments. Three years ago this activity represented less than 30 percent, indicating the growth in the scale of such transactions. We expect this trend to accelerate over the next 12 months as investors seek to lock into low rates."
The researchers project that port operators will try to get the jump on any upcoming hike in interest rates by engaging lenders to refinance or seek out new capital now. Meanwhile, potential investors will take advantage of the opportunity to evaluate port assets that may not otherwise have been available.
U.S. energy agency: Demand for petroleum to rise 38 percent by 2040
The global consumption of petroleum and other liquid fuels will increase 38 percent by 2040, triggered by increased demand in the developing nations of Asia and the Middle East, according to "International Energy Outlook 2014" (IEO2014), a new report released by the U.S. Energy Information Administration.
"The growth outlook for liquid fuels use will be largely driven by demand in the developing world, especially in Asia and the Middle East," said EIA Administrator Adam Sieminski. "Those two regions combined account for 85 percent of the total increase in liquid fuels used worldwide over that period."
The IEO2014 report projects that worldwide use of liquid fuels will grow from 87 million barrels per day in 2010 to 119 MMbbl/d in 2040. Increasing demand for liquid fuels is focused on the emerging economies of China, India, and the Middle East, while demand in the U.S., Europe, and other areas with established oil markets seems to have peaked.
OPEC oil producers will continue to be the largest source of additional liquid fuel supplies between 2010 and 2040, the report forecasts, assuming OPEC producers will incrementally invest in production capacity, letting them maintain a share of between 39 percent and 44 percent of total world production. OPEC crude and lease condensate accounts for 14 MMbbl/d of the 33 MMbbl/d increase projected in total liquid fuel supply.
Non-OPEC crude and lease condensate production is forecast to increase by 10 MMbbl/d, according to IEO2014. Potential new supplies of oil from tight and shale resources have raised optimism for large, new sources of global liquid supplies to meet growing demand.
Compared to previous reports, IEO2014 incorporates larger new supplies of tight oil from the U.S. and Canada. However, it projects that other nations, including Mexico, Russia, Argentina, and China, will begin producing substantial volumes of tight oil between now and 2040.
China Merchants Holdings to develop $11B Tanzania megaport
Tanzania has announced a successful negotiation with Chinese officials that has paved the way for work to start on the $11 billion Bagamoyo megaport this year, rather than January 2015 as originally scheduled.
China Merchants Holdings International will develop the port. The first phase of work, to be completed by 2017, includes the quay, the container yards, the cargo terminals and all dredging work.
The facilities will be expanded in stages over a period of 30 years, to give an ultimate capacity of 20 million TEUs a year, which will likely make it the largest port on the east coast of Africa. It will be able to handle RoRo ships and container vessels with a 10,000-TEU capacity.
Lost Northwest Passage expedition ship discovered after 169 years (video)
One of two sunken British ships from Sir John Franklin’s 1845 expedition to the Arctic has been found in the Canadian Arctic, according to Canadian Prime Minister Stephen Harper, who confirmed its authenticity in a Sept. 7 statement.
Visit the Business Week story link below to view the side-scan sonar image and the underwater video of the shipwreck that is provided by Parks Canada, a federal government agency.
Her Majesty’s Ship Erebus and the HMS Terror departed England in May 1845 on an Arctic expedition that sought a Northwest Passage to Asia. The vessels became trapped in ice in late 1846, according to a message found on King William Island in 1859.