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Summary for September 17 - September 21, 2012:
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Monday, September 17, 2012 Top StoryMaersk chief: "Can't afford" price war
Because Maersk Line's rates are not covering costs on the Asia-to-Europe trade corridor, the industry leader will likely be hiking its rates on that route, said Andersen, and will strive to maintain its market share rather than increase it. He noted shipping rates on most of the world's shipping routes are stabilizing. Andersen didn't quantify the prospective rate hikes. "It may be a little new to industrial thinking, but we just can't afford to go into a price war because the general market is going down," he said. "We see the U.S. actually being in recovery ahead of Europe, though that doesn't mean it will return to the glory days. People are worried and there's good reason for that, because the economies are over-leveraged." Andersen reported that industry shipping volume from Asia to Europe fell by about 8 percent in June and by 14 percent in July. He said the uncertainty in the short-term regarding the economies of the large western nations will weaken growth in developing markets, but added he believed a growing middle class in emerging countries would encourage consumer demand and exports from the U.S. and Europe. "China is still by far the most important country for manufacturing but a lot of the cheaper textiles have moved out of China or never got there," and are made in other nations, such as India or Bangladesh. For more of the Reuters story: reuters.com Virginia sorts out port's rail jam; pushes out proposal deadline for private terminal operationsExecutives from the Virginia Port Authority and port operator Virginia International Terminals recently met with Norfolk Southern and CSX, the two big East Coast freight carriers that serve APM's facility, along with officials from Commonwealth Railway, the shortline railroad whose locomotives pull Norfolk Southern and CSX trains in and out of the Hampton Roads' APM terminal. They were discussing the rail traffic back-up on the weekend of Aug. 11-12, when APM's major container facility in Portsmouth was hit with an unprecedented railroad backup. The Monday after the weekend, a two-and-a-half-mile-long empty intermodal train still sat unmoving on one of the two tracks along Va. 164 and nothing near APM's terminal was moving by rail. In fact, CSX had to reroute a train to Portsmouth Marine Terminal in order to unload it and truck the containers to APM. "It's the first time we reached a point of gridlock," said Joe Harris, a Port Authority spokesman. Rail is paramount to the Hampton Roads terminal's potential growth, vital for transporting cargo to and from inland markets such as the Ohio Valley and Chicago. APM is the sole terminal at the port with on-dock rail connections to both Norfolk Southern and CSX, via Commonwealth. One of the solutions to come out of the meeting is Commonwealth's strategy to store Norfolk Southern and CSX locomotives at an offsite location, freeing up an 8,000-foot stretch of railcar storage track. The growth of APM's facility, including increasing its railyard to twice the size it is now, is one of the provisions in an unsolicited proposal APM submitted to the state in the spring, offering to take over the operations of the port for 48 years. APM is just one proposal the Virginia Port Authority is considering. Several private companies are bidding to take over Virginia's port operations. Although a decision was originally expected in mid-October, Gov. Bob McDonnell and Secretary of Transportation Sean Connaughton have decided to extend the deadline so they can properly evaluate the proposals instead of rushing to choose the preferred operator. Detailed proposals, expected from APM, VIT, the Carlyle Group, a private equity firm, and RREEF, a unit of Deutsche Bank, are due Nov. 1. The preferred operator or operators will be recommended at a port authority meeting on Nov. 27, and the final deal, which could be with one or a combination of providers, won't be cemented until next year. For more of the Virginia-Pilot stories: hamptonroads.com State bank lends $457M for infrastructure at Brazil's northeast portBrazil wants to bring more trade to its Northeast region, and intends to upgrade infrastructure around the area's port to the tune of $457 million via a loan from state development bank BNDES. The loan, announced on Friday by BNDES, will be issued to the state of Pernambuco, where the Port of Suape is located. "To attract investment and new business, earthwork, paving, drainage, road lighting and signaling in the Industrial Zone are planned," the BNDES statement said. "The loan will also be used to build bridges, viaducts ... and upgrade roads." The Port of Suape is at the center of a new energy, petrochemical and shipbuilding center near the city of Recife. State-controlled oil company Petrobras, Bunge, Unilever, and Quebecor are companies with manufacturing or distribution facilities at the port complex. For more of the Reuters story: reuters.com Manitoba port could gain from "Northwest Passage" route as Arctic ice recedesAs the ice in the Arctic recedes to new lows, Canadian ports in the province of Manitoba may get a huge boost in traffic. The Northwest Passage between the Atlantic and Pacific is opening to huge ships as the ice melts and may become an attractive option to container shipping concerns looking for more efficient ways to haul goods. The shortcut is a big draw, although the icy, stormy route with temperatures that can drop to minus-20 has heretofore been thought too risky for the tanker trade. "Even if the sea ice has melted," University of British Columbia Prof. Michael Byers says, "you might still be dealing with air that's minus-10 or minus-20. When water sprays up, that water will freeze almost instantly when it hits the structure of the ship." Despite the dangers, the shortened route is an attractive option. Going through the Panama Canal, a trip from Tokyo to London would be about 14,000 miles. Going through the Mediterranean Sea and the Suez Canal is a bit less, down to 13,000 miles. But using the Northwest Passage, the same trip would be only around 10,000 miles, translating into two weeks less travel time and a bigger profit for any shipping company willing to take the risk. "It's not something we're seeing a lot of yet, but we're always on the lookout," says Jeff McEachern, executive director of the Churchill Gateway in Manitoba, which runs the port on behalf of Canada and OmniTrax, the U.S. freight company that purchased the port in the 1990s. Much of Churchill's business is bound for destinations in North America, South America, Mexico, Europe or North Africa. "We primarily serve the Atlantic, not the Pacific," McEachern says. "But we always have our eye on that opportunity." For more of the Alaska Dispatch story: alaskadispatch.com Irish coast threatened by hazmat cargoContainers filled with hazardous chemicals fell off a ship and are headed for the Southwest coast of Ireland, and might present a danger to vessels on the transatlantic shipping lanes located there. The containers were the cargo of the German MSC Flaminia, which caught fire on Jul 14, triggering an explosion that forced the crew to abandon ship. One crewman is dead, one is missing and presumed dead, and 24 were rescued following the incident on the Atlantic. The 85,823-ton vessel was transporting 2,876 containers, and 149 were classed as dangerous goods. The Atlantic Towage & Marine Ltd-owned tugboat The Ocean has been contracted to recover the containers. For more of the Irish Examiner story: irishexaminer.com
Tuesday, September 18, 2012 Top StoryTPP Apparel Coalition lobbies for more trade flexibility
The TPP is a prospective regional free trade agreement between the United States, Australia, Chile, Peru, Singapore, New Zealand, Brunei, Malaysia, and Vietnam. Canada and Mexico are expected to enter the TPP negotiations in October. The contended "yarn forward" rule of origin denies duty-free status for clothes unless entirely manufactured in the FTA country. If any component of the item—thread, yarn, elastic strips, or fabric—originates in another country, duties are applied on the entire garment. Opponents assert the yarn forward rule undermines the benefits of free trade agreements. "Inflexible rules on apparel trade, like yarn-forward, don't work because they are not compatible with how business operates in the 21st Century. Without a more flexible approach, these rules will continue their record of failure in promoting new trade and investment, and will end up being a barrier to both U.S. imports and exports," said Matt Shay, president and CEO of the National Retail Federation. TPP stakeholder Vietnam's top export to the U.S. is apparel, but the country is unlikely to open the door to U.S. agricultural exports unless the trade rules loosen up. Forty-six organizations representing U.S. agricultural interests last week sent a letter last week to U.S. Trade Representative Ron Kirk and Secretary of Agriculture Tom Vilsack, stating that "Vietnam holds far and away the greatest market potential for the vast majority of U.S. food and agricultural products" and requesting that the Vietnamese agricultural market is fully liberalized" in the final agreement. Report: Inland ports vital for trade developmentOur nation's inland ports play an increasingly vital role in the U.S. trade, according to a new white paper by financial firm Jones Lang LaSalle, which specializes in real estate. "Inland ports are becoming a critical part of the nation's import/export cycle and the country's competitive position on the world stage," said John Carver, Head of Jones Lang LaSalle Ports Airports and Global Infrastructure (PAGI) group. The last two years have been the strongest ever for U.S. agricultural exports, said Carver, driven by China's demand for food products such as wheat, soybeans, corn and hay. Such exports will provide a long-term user base for inland ports and their outbound containers. "Shippers are beginning to take advantage of this glut of empty containers in the U.S. as a low-cost solution for shipping exports to China," said Rohan àBeckett, vice president, PAGI. "Not only does this contribute to economic growth by helping close the trade gap with China, but it will boost industrial real estate prospects as demand for storage and distribution space will rise." Many U.S. inland ports are located in the Midwest, including Chicago, Memphis, St. Louis and Kansas City. New locations in development include the 4,000-acre Florida Inland Port in St. Lucie, FL., and the 580-acre Inland Port Arizona in Casa Grande, AZ., which will be the first inland port to serve the ports of Los Angeles and Long Beach. Change in Hamburg Süd Chassis Provisioning Model in Pacific NorthwestHamburg Süd will revise in its chassis provision policy in major Northwest cities starting November 1, 2012. Currently, Hamburg Süd sources chassis from the SSAT Pool (soon to be Trac Chassis Pool) for merchant's haulage and carrier conducted intermodal moves. Moving forward, in and around the cities of Portland, Seattle and Tacoma, Hamburg Süd has a new chassis provisioning policy. As of November 1, the company will no longer serve as a chassis provider to shippers for cargo moving under merchant's haulage through terminals in the Pacific Northwest area. From November on, shippers can procure equipment either directly from Trac Intermodal or other chassis vendors. Carrier-provided intermodal moves will be unaffected by this change. Virginia port stakeholders worried about rush to privatizationThe Port Authority of Virginia is considering proposals this fall from private companies that want to take over the operation of its ports. The move is drawing criticism from the maritime industry, a legislative panel and others who have concerns that the process was moving forward without stakeholder input and serious consideration of the issues involved. More tensions were stirred when Transportation Secretary Sean Connaughton failed to attend Monday's House Appropriations Committee meeting, where discussions centered on the privatization of the ports. Connaughton, who is a key figure in the privatization effort, had a scheduling conflict, according to the chair of the committee, Del. Lacey Putney. The packed meeting proceeded without him. "Before the commonwealth considers privatization, any specific problems at the port should be formally identified and recommendations should be made as to why privatization is the appropriate solution to those specific problems," testified Arthur Moye Jr., executive vice president of the Virginia Maritime Association. At a public meeting last month, Gov, Bob McDonnell asserted the ports were badly in need of an overhaul and had been losing money. In May, APM Terminals submitted an unsolicited proposal to operate Virginia Port Authority facilities, offering about $4 billion for a 48-year deal. Three other bidders have submitted proposals since then - including Virginia International Terminals, which currently runs the state ports. A decision is expected by the end of the year, although its possible none of the proposals will be chosen. Several stakeholders, including cargo carriers, have expressed concerns about the change in operators. At the meeting, House Majority Leader Kirk Cox called for a presentation from VIT officials to examine the port financials and judge how the current operator is doing. Moye said the company returns its net to the state. Other officials were worried about provisions in APM's proposal in particular and how it would affect them. For more of the Virginia Pilot story: hamptonroads.com Mysterious death aboard cargo shipAn investigation is underway in Plymouth, U.K., regarding a mysterious crew death aboard the MV. Krempertor. The man, whose cause of death is currently unknown, died on board as the ship was en route to Spain carrying with a cargo of scrap metal. A representative of the Devon and Cornwall police said officers were looking into the death and the Krempertor has been brought to Cattedown Wharves. The vessel, owned by the German firm Reederei Erwin Strahlmann, is registered in Antigua and Barbuda. For more of the BBC News story: bbc.co.uk
Wednesday, September 19, 2012 Top StoryShipping industry confidence slips to new low
The company polls key players in international shipping in its targeted online survey. Responses were received from owners, charterers, brokers, advisers, managers and others in the UK and other European countries, the USA, Canada, Russia, China, India, Rest of Asia, Latin America, Africa and Australasia. The lowered expectations, which come after three consecutive quarters of heightened shipping industry confidence, was prompted by worries about the overcapacity of newbuildings entering the market and the sluggish global economy. In August 2012, the average confidence level expressed by survey takers in their specific markets was 5.3 on a scale of 1 (low) to 10 (high), compared to the figure of 5.7 recorded in the previous survey in May 2012. The survey was launched in May 2008 with a confidence rating of 6.8. The likelihood that respondents would make a major investment or significant development over the next year was stable at 5.3. The top factors respondents said were most likely to influence performance over the next year were demand trends, finance costs and competition. There was a 7-point fall (from 51 percent to 44 percent) in the number of respondents who expected finance costs to increase over the next year. Once again, charterers, unsurprisingly, differed from owners and managers in their views about rates in the three main categories of tonnage covered by the survey. In the container ship market 32 percent thought rates would increase over the next year. In the tanker sector, 34 percent of respondents thought rates would rise, (down by 6 points); and in the dry bulk sector 34 percent anticipated rate increases. "Clearly, tonnage supply – both actual and incipient – currently exceeds demand in most trades. Increased scrapping will help, but it will still be necessary to renegotiate commercial arrangements." Greiner said lower newbuilding costs do nothing to address the tonnage glut, but they provide an opportunity for those with access to cash and a secure level of demand to fill. He said respondents overall thought fuel costs would be less of a performance issue, probably due to the recent decrease in the price of crude. U.S. current-account deficit falls by 12 percentThe amount of the U.S. "current-account" deficit fell by 12 percent in the second quarter on lower oil imports and higher income transfers, such as U.S. earnings on investments overseas. The nation's current-account balance fell to $117.4 billion in the second quarter from a downwardly revised $133.6 billion in the first quarter, the Commerce Department said Tuesday. The current account primarily measures whether a nation is selling more goods and services to other countries than it buys from them. It also includes selective large money flows in and out of the country. The U.S. again purchased more goods and services from foreign nations, but even so the deficit in goods fell to $185.8 billion from $194.3 billion in the first quarter. The U.S. imported less oil. In services, the U.S. ran another surplus of $46.5 billion, up from $45.9 billion in the first quarter. Services include financial advice and Hollywood movies, areas in which the U.S. leads globally. When a nation runs a current-account deficit, it has to borrow more money from overseas or sell off more domestic assets. But the declining deficit in the second quarter reflected a reduction in the balance of payments in several key areas. Large current-account deficits tend to spark trade conflicts and may lead to trade wars. The large size of the U.S. current-account deficit has been a factor in the 2012 presidential election, with Republican contender Romney vowing to get tougher on China relative to its manipulative trade practices. Obama's administration has filed several suits about China dumping below-cost goods in the U.S., but is treading cautiously due to our slow growing economy, fearing a trade war that would do damage to American interests. In the second quarter, the current-account deficit fell to 3.0 percent of U.S. gross domestic product from 3.5 percent. The deficit is down sharply from the highest point of 6.5 percent of GDP in the fourth quarter of 2005, but up from a low of 2.4 percent in the second quarter of 2009. U.S.-owned assets in other countries, meanwhile, fell by $206.8 billion in the second quarter, following a $106.5 billion decline in the first quarter. The decline in U.S.-owned assets overseas is due to the deteriorating economic conditions in Europe and elsewhere. FedEx reports unexpected first quarter net boostOn Tuesday FedEx reported first quarter earnings of $1.45 per share compared to $1.46 per share one year ago. The figure was higher than the company expected, since on Sept. 5 FedEx had projected profits to be in the $1.37 to $1.43 per share range. Even though FedEx's ground and freight divisions enjoyed higher operating margins than last year, ECEO and chairman Fred Smith said the company would take "further actions to reduce costs and adjust our networks to match current and anticipated shipment volumes." FedEx projects an earnings-per-share range of $1.30 to $1.45 in the quarter two and $6.20 to $6.60 for fiscal 2013. The company also announced FedEx Express would increase shipping rates in 2013 by an average of 3.9 percent for U.S. domestic, export and import services. For more of the Memphis Business Journal story: bizjournals.com CAI container leasing stock on the riseCAI International, a freight container leasing company based in San Francisco, reported double-digit increases in revenue and earnings growth for the second quarter of 2012. CAI capitalized on stronger container demand and growth in global trade. The company has returned 25 percent on equity since January, and its stock is on the rise, increasing by 23 percent since June. Its long-term growth projection is 11 percent. CAI leases and manages freight containers internationally, including reefers, palletwides, roll trailers, swap bodies and rail cars. It's customer base shipping lines, freight forwarders and other transportation companies with both short and long-term agreements. Investments in the container fleet have resulted in increased benefits for the company. Strong trade growth, increased freight rates, higher demand and higher utilization have been key factors. Average fleet use increase marginally to 94.3 percent in the second quarter. As of the end of June, CAI International's own fleet accounted for 56 percent, while 44 percent were containers managed by the company but owned by third parties. CAI expects to get a boost from "strong container demand, improving utilization and growth in the Intra Asian and Latin American trades." The firm also buys railcars at discounts that gives it a competitive edge. The outlook for the company's growth potential is high, rising over the past two month. The Zacks Consensus Estimate for 2012 is up 6.7 percent to $3.19, while the Zacks Consensus Estimate for 2013 increased 10.1 percent to $3.71. For more of the Forbes story: forbes.com
Thursday, September 20, 2012 Top StoryCBN Labor News UpdateILA-USMX contract deadline extended to end of year
The Federal Mediation and Conciliation Service's director, George H. Cohen, said in a statement today that "progress has been made on several important subjects" and the extension will "provide the parties an opportunity to focus on the outstanding core issues in a deliberate manner apart from the pressure of an immediate deadline." The two sides resumed negotiations under the auspices of the FMCS this week after months of off-and-on negotiations and at times, contentious public bickering over issues such as terminal automation, benefits and wages. "The negotiations on the Master Agreement will be conducted during the same time frame as negotiations for local agreements," said Cohen. The news of the labor-management contract extension to year's end comes during the critical peak shipping season and could allay industry fears for now over what had been the potential for disrupted supply chains through East and Gulf coast ports. "Due to the sensitivity of this high profile dispute and consistent with the Agency's longstanding practice, we will not disclose either the location of the meeting or the content of the substantive negotiations that will take place," Cohen said. The FMCS is an independent U.S. government agency created in 1947 to operate as a conflict resolution buffer between contentious labor and management issues. MSC puts largest capacity vessel to work on U.S.-Asia routeMedterranean Shipping Co., the second largest global container line, added a 13,800-TEU vessel to its fleet to meet growing demand in Asia. It will be the largest ship to date on a U.S. route. Ships on the U.S.-Asia route are operating at 95 percent capacity, driving up the rates for cargo headed to the U.S. Rates for Europe-bound cargo have dropped, as ships on the Europe-Asia route are running 80 percent full, according to Credit-Suisse. The MSC Beatrix, scheduled to arrive at Long Beach from China on Sept. 26, replaced an 11,660-TEU ship on the route, reports Alphaliner. The Beatrix previously sailed the Asia-Europe route, but was switched after volumes on the route dropped 13 percent in July. "Demand from Europe is weak," said Lawrence Li, an analyst at UOB Kay Hian Holdings in Shanghai. "Peak-season demand is totally below expectations." Macquarie Group analysts forecast a 6 percent rise in 2012 trans-Pacific container volumes on recovery in the housing market and strong auto sales. Containerized imports by U.S. retailers could surge 8.5 percent this month year on year and by 12 percent next month, according to the National Retail Federation. For more on the Bloomberg story: bloomberg.com Norfolk Southern foresees third quarter profit dropThe Norfolk Southern railroad expects its third quarter profit to be $120 million lower this year than in 2011, according to a company statement. The railroad projects this year's third quarter profit to fall between $1.18 and $1.25 per share due to lower coal and merchandise cargo deliveries. For more of the Reuters story: in.reuters.com Truckers at New York Container Terminal reportedly pay exorbitant tollsTruckers using the New York Container Terminal must pay an average of $40.25 more in tolls than those who use New Jersey terminals, according to a Port Authority study cited by Assemblywoman Nicole Malliotakis. An average trip to Jersey City Terminal costs $43.09, 26 percent above the $34.12 average truckers pay for a 20-mile trip, according to the American Transportation Research Institute. However, the 20-mile trip to the NYCT costs $83.34, and means that New York Terminal truckers are paying 144 percent more than the national average, Malliotakis reported on Wednesday. The $40.25 paid in tolls is the difference. "That is the figure the Port Authority doesn't want the public to see, because it proves that their toll structure operates as a boon to New Jersey's economy while putting New York at a disadvantage," she said. Malliotakis, who has taken the Port Authority to court to compel the release of a study on the economic impact of bridge tolls on truckers headed to Howland Hook. "With these tolls scheduled to reach $18 per axle by 2015, the Port Authority has levied a death sentence." "According to the Port Authority's annual report, it is making a $157 million profit after maintenance costs of the three bridges, making the toll hikes unjust and unreasonable," said Malliotakis, who represents the East Shore/Brooklyn. For more of the Staten Island Live story: silive.com Port of Xiamen building global shipping hub by 2020The Port of Xiamen, located in a special economic zone in East China, is developing a global shipping hub to be in place by 2020. By then, the Southeast China International Shipping Center will be equipped to deal with a variety of businesses, such as international transit, purchase, allocation and distribution; ship leasing; customs clearance; and offshore outsourcing. The new shipping center is expected to strengthen connections with port cities in Taiwan, including Kaohsiung, Taichung and Keelong, said Cai Liangya, director of the Xiamen Port Authority. Sun Chunlan, party chief of Fujian province, said the shipping center promotes regional development. "The shipping center will not only involve shipping resources but also human resources, capital, technology and information," Sun said. "In addition to the tertiary sector of the economy, secondary industry will also be spurred by the creation of the shipping hub." According to the Xiamen Port Authority, inbound imported cargo will be duty free. The initial construction of the shipping center should be complete by 2015, when container throughput at the Port of Xiamen is expected to reach 10 million TEUs. For more of the China Daily story: chinadaily.com.cn Japanese logistics firm pleads guilty to price fixing chargeA Japanese company is pleading guilty in an investigation of price-fixing in the freight forwarding industry, according to the U.S. Justice Department. Japan's Yamato Global Logistics will pay a $2.3 million criminal fine. So far 14 companies have either pleaded guilty or have made an agreement to plead guilty and to pay more than $100 million in criminal fines. The probe focuses on fees on freight forwarding services for goods shipped by plane from Japan to the U.S. over a five-year period ending in 2007. For more of the Austin American story: statesman.com
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Tepid demand due to slow U.S. and European economies are driving shipping rates down, said Nils Andersen, top executive of Danish shipping giant A.P. Moller-Maersk, in an interview on Thursday.
The Trans-Pacific Partnership Apparel Coalition urged negotiators to revise "out of date" apparel trade regulations after the 14th round of talks of the Trans-Pacific Partnership in Leesburg, VA.
Shipping industry confidence in the three months leading to August 2012 hit the lowest levels in 12 months, according to the global Moore Stephens Shipping Confidence Survey. The figures are on par with the lowest confidence levels recorded since the survey launched in spring 2008.
A collective sigh of relief might be heard from the shipping industry over today's news that the International Longshoremen's Union that represents a labor force that works at ports from Maine to Texas, and its employer group, the United States Maritime Alliance, have both agreed to extend the deadline of their collective bargaining agreement from September 30 to December 29 in an effort to do so "for the good of the country" so as to avoid any work disruption, according to the federal mediator who is presiding over the recently jumpstarted negotiations.