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Summary for September 30 through October 4, 2013:
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Monday, September 30, 2013 Top StoryDrewry: Sailing cancellations to increase on P3 uncertainty
So far, Maersk, MSC and CMA CGM have only announced how many East-West services they will provide starting in the second quarter of 2014, said Drewry in its latest issue of Container Insight. The P3 group won't confirm port rotations or how shared services with other lines will run until the fourth quarter of 2013. Consequently, rival carriers don't' want to hurt market share in any way before then by launching capacity reduction programs, and sailing cancellation announcements are increasing every week, said Drewry. Vessel capacity will be reduced by approximately 2.8 percent in September, Drewry said, and by at least the same amount in October. This will help to get average vessel use back up to around 90 percent, putting ocean carriers in a better freight rate negotiating position. When sailings are seriously curtailed, freight rates usually increase. Due to the cancellation trend, Drewry advises that shippers need to pay more attention to strategic planning over the next six months, rather than assume that a contracted carrier will usually have a ship offering the right port pairs on the right berth at the right time. September Credit Manager's Index upThe National Association of Credit Management's CMI went up in September from 56.4 to 56.6, continuing an upward trend begun in May of this year, driving the CMI to its highest level in more than three years. September's growth was mainly driven by increases in the index's unfavorable factors, according to NACM Economist Chris Kuehl. The overall unfavorable reading jumped from 53 to 53.8, driven by big improvements in accounts placed for collection, which increased from 52.5 to 54.3, dollar amount beyond terms, up from 51.1 to 52.2, and filings for bankruptcy, from 58.7 to 59.8. "When times are tough, debtors begin to take advantage of what leverage they have and start to test those that have given them credit. There are more slow pays and many of the negative indicators get progressively worse as companies try to hang on to their cash and test the patience of the credit manager," Kuehl said. "There comes a point when these companies want access to credit again, prompting them to try to catch up and get back in the good graces of those from whom they seek credit. This could explain why the data within the unfavorable categories has improved." Much of this decline in the favorable factors springs from a slide in sales, which slipped from 63.1 in August to 62.7 in September. New ship orders double, limiting overcapacity recoveryShipyards received contracts to build 72.7 million deadweight tons of new carriers in the first eight months of 2013, up 101 percent year-over-year, according to London-based Clarkson Plc, the globe's largest shipbroker. The increase could stall a recovery from the industry's severe overcapacity glut that has occurred since a boom in new ship orders just preceded the 2008 economic crisis and the ensuing worldwide recession. Demand has increased this year for dry bulk Capesize ships, which are commanding the highest rates since 2010, according to Bloomberg. But the increased ordering threatens the recovery, said London shipbroker Hartland Shipping Services Ltd. "There's a perception that by the time ships are delivered in two years, the market will be better," Nigel Prentis, head of consultancy at Hartland, said by telephone today. "Hopefully the surge in ordering is going to abate, because it's not in anyone's favor if it goes much further and is in danger of tipping the balance and restraining the recovery." MSC announces GRI on North Asia to Australia trade routeMediterranean Shipping Company will impose a general rate increase on all shipments from North Asia to any Australian port, the container operator said in a statement. The increased rate from Korea-China-Hong Kong-Taiwan to Australia is effective as of October 24 and will be $400 per-TEU. MSC's fleet, which operates in all major ports of the world, comprises 444 vessels and has a capacity of 1,925,000 TEUs. Ship sinks after cargo ships collide off Tokyo, 6 missingAfter two cargo vessels crashed into each other on Friday in waters south of Tokyo, the Coast Guard has been searching for six missing crewmembers from the smaller ship. The Japanese-flagged Eifuku Maru No. 18 sank after the crash, and rescue boats and helicopters were deployed to search for the missing, according to coast guard spokesman Yoshiyuki Terakado. The 2,962-ton Jia Hui, registered in Sierra Leone, was on its way to Busan, South Korea when it hit the 498-ton Japanese ship. For more of the India TV story: indiatvnews.com
Tuesday, October 1, 2013 Top StoryVaried impacts to supply chain from U.S. Govt. shutdown…so far
The Food and Drug Administration announced it would suspend most of its food-safety operations, including: "routine establishment inspections, some compliance and enforcement activities, monitoring of imports, notification programs (e.g., food contact substances, infant formula), and the majority of the laboratory research necessary to inform public health decision-making." Customs and Border Protection announced: "CBP Port of Entry Operations, including CBP Cargo Security and Revenue Collections, as well as Border Security programs, including Border Patrol and CBP Air and Marine Operations, will remain operational under a government shutdown because they have been deemed law enforcement necessary or necessary for the safety of life and protection of property." However Canada's Globe & Mail reported the: "partial U.S. government shutdown…could hit demand for imports and lead to bottlenecks at the Canada-U.S. border [which] is bad news for a Canadian economy that is struggling to find traction." David Bradley, the CEO of the 4,500-member Canadian Trucking Alliance told the Globe & Mail that the high Canadian dollar and slow economy there won't be helped by the U.S. Govt. shudown. "We need this like a hole in the head," he said. Federal highway construction and truck safety programs will remain open at full staffing, according to the Department of Transportation due to funding from the Highway Trust Fund that remains intact. The shutdown has reportedly already had some impact on at least one major global shipping company, as shares of the owner of the world's largest containerized ocean carrier, A.P. Moeller-Maersk, dropped the most in a week in the Copenhagen exchange over concerns that global trade will suffer from U.S. government shutdown and waning Chinese economic growth. "We're seeing the Maersk shares reacting sensitively to world macro news these days," Jacob Pedersen, a shipping analyst at Aabenraa, Denmark-based Sydbank A/S, said by phone to Bloomberg Businessweek. TUI expected to sell stake in Hapag-Lloyd in 2014TUI, Europe's largest travel company doesn't expect to sell its 22 percent stake in Hapag-Lloyd AG, Germany's biggest container carrier, through an initial public offering before the second half of 2014, according to CEO Friedrich Joussen. To place the stake on the market now would "waste value," Joussen told reporters, adding that they're waiting until new CEO Rolf Habben-Jansen assumes his role at Hapag-Lloyd next year. Habben-Jansen will join the board in April and become CEO in July. "Even if a good moment for an IPO would be in 2015, I wouldn't have a problem with that," Joussen said, adding that the desire for an IPO among Hapag-Lloyd's shareholders has grown in the last six months. TUI has repeatedly said that its wants to sell its stake in Europe's fourth-biggest shipping line through an IPO or a sale once the market improves after a prolonged freight slump. An IPO is much more likely than a sale, said Joussen, who took over from Michael Frenzel in February. Talks to merge Hapag-Lloyd with local rival Hamburg Sued failed in March. "But I don't think we need two, three good quarters before we can do a good IPO," Joussen said. Container shipping is a cyclical business, so "we have to act as soon it is getting better." For more of the Bloomberg story: bloomberg.com Retailers turn stores into distribution centers to compete with AmazonSome of the world's biggest retailers, including Wal-Mart, Best Buy and Gap are using their stores as small distribution hubs to help them compete better against online retail giant Amazon.com. Instead of fulfilling online orders from warehouses hundreds of miles from customer's homes, orders are routed to stores nearby. Brick and mortar store employees take stock from the shelves, pack them into boxes and drop them into waiting FedEx and UPS trucks that deliver to the homes of nearby shoppers. The "Ship from Store" trend saves costs through shorter delivery routes and makes deliveries faster, avoiding markdowns because of sales that have been lost to Amazon. "This is the most important thing that will change physical retailers over the next five years," said Matt Nemer, a retail industry analyst at Wells Fargo Securities. More: wtsp.com/news Georgia Ports Authority volume up in AugustIn August, Georgia ports container volume went up 3.8 percent to 280,873 TEUs, according to a statement from the George Ports Authority. Total tonnage in August rose 8.5 percent to 2.5 million tons. The Garden City Terminal saw 180,572 truck moves at the Port of Savannah. Bulk cargo in August was up 37.8 percent at 188,872 tons. "Although we set new records in many categories during August, challenges remain in many of the global markets important to future trade volumes," said GPA Executive Director Curtis Foltz in the statement. Union hopes movie based on pirate attack will raise awarenessAfter Navy SEALs killed three Somali pirates during the rescue of Capt. Richard Phillips off the Horn of Africa in 2009, the merchant mariner became an overnight star, hailed for sacrificing himself to save the crew of his cargo ship. Officials at the International Organization of Masters, Mates & Pilots, the union that represents licensed merchant mariners, hopes that Phillips' story and the Oct. 11 release of the feature film "Captain Phillips," based on his high-seas ordeal, will help raise awareness about their work in Baltimore. Phillips and many other ship captains from around the world train at the IOMMP in two massive, $30 million simulators that teach them how to navigate and dock large cargo vessels, and also how to handle terrorist attacks and attempted pirate hijackings, union officials say. "We see [the film] as a vehicle to promote an industry that in many areas around the country is invisible," said union president Donald Marcus, seated in his office at the union's hotel-like headquarters and training complex near BWI Thurgood Marshall Airport. Phillips, who will be played by Tom Hanks when the new Sony film "Captain Phillips" hits screens Oct. 11, trained at the facility many times, officials said. For more of the Baltimore Sun story: articles.baltimoresun.com
Wednesday, October 2, 2013 Top StoryEfforts to raise container rates falling flat
"The main cause of freight rate volatility stems from the weakest of the Asian container lines, which are cutting prices the most when they lose market share," Maersk CEO Nils Smedegaard Andersen said in a Sept. 26 interview. "There will be overcapacity in the market for a long time" and "this market will remain very tough and very volatile." After fees on the Asia-Europe trades dropped to an 18-month low in June, Maersk, the largest, announced four increases in five months. Maersk said Monday it plans to increase its rate between Far East Asia (excluding Japan) and northern Europe and the Mediterranean by $950 per-TEU on Nov. 1, compared to an announcement last month to raise it by a minimum of $600. The company had already increased rates on July 1, Aug. 1 and Sept. 1. The world's biggest container lines, including Maersk Line, CMA CGM SA and Mediterranean Shipping Co., have been trying to push up freight charges. Even their proposed P3 multi-carrier alliance, a number of mergers and a move to put older ships out of commission are not bringing the industry back into alignment amid lower global demand and a glut of new ships. Shipping lines seemed to be turning things around in July, when the rate to ship an FEU from Asia to Europe jumped 165 percent from the low on December 2011, according to World Container Index data. But conditions have worsened since then, with the average global FEU rate falling 7.9 percent to $1,665 for the week ending Sept. 26, WCI data indicates. The third quarter is the peak season when retailers stock up for the holidays and many shipments are sent to prepare for ahead of China's "Golden Week" holiday, from Oct. 1 to Oct. 7 "There hasn't been a peak season," said Rahul Kapoor, a Singapore-based analyst at Drewry Maritime Equity Research. "Normally, around the Golden Week, you see wide scale capacity restructuring, but we haven't seen that this year. I think that is taking its toll on rates." For more of the Bloomberg story: bloomberg.com Federal Maritime Commission shuts downThe Federal Maritime Commission closed down and all regular employees were furloughed October 1, part of the federal government shutdown that ensued after Congress failed to fund federal agencies due to a political standoff over Obamacare. The FMC will not accept filings during this period for ocean carrier or marine terminal operator agreements or amendments, applications for certification of financial responsibility for cruise lines embarking from U.S. ports, or agreement-monitoring reports, minutes, or transcripts. The commission's website will be available during the shutdown, but won't be updated until the government reopens. Its online databases, including SERVCON, the VOCC and NVOCC Tariff List will not be accessible. CTP members testify before Congress for truck weight reformMembers of the Coalition for Transportation Productivity, a group of 200 shippers and associations that support increasing the federal vehicle weight limit on interstate highways, testified in front of the House Transportation and Infrastructure Committee's Panel on 21st Century Freight Transportation, according to a coalition statement. CTP member International Paper testified that the Safe and Efficient Transportation Act would securely modernize federal truck weight requirements by letting states grant interstate access to six-axle trucks weighing up to 97,000 pounds, which would the number of truck trips and emissions. If Congress passes of SETA and the state of Oklahoma opted into the configuration, according to an example in the testimony, one Oklahoma IP mill could eliminate more than 5,000 annual truck trips. "Allowing heavier loads to move on safer and more appropriate six-axle trucks will give states the ability to optimize road networks, while allowing trucks to incorporate safer Interstate highways into their routes" said Tom Kadien, senior vice president of consumer packaging for International Paper. "Six-axle trucks with weights equal to or more than those allowed by SETA are in wide use by our global competitors in Canada, Europe, Asia and Australia. Heavier trucks are supported by a wide body of research from state, federal, international and academic institutions." WWL buys SRO vehicle manufacturing companyWallenius Wilhelmsen Logistics has purchased the SRO Group Vehicle Manufacturing Division, according to a company statement, expanding WWL's technical services offerings in Australia. "WWL is excited about the new specialized services we can offer," said Rob Lord, regional director for Oceania. "It will allow us to explore new and innovative ideas to provide our customers greater value in Australia." The current SRO Manufacturing site based in Newcastle, Australia, will become WWL's new center for solutions and advanced accessorizing services. Truck driver killed in Port Newark accidentOfficials report a truck driver who had just exited his vehicle was hit by another truck and killed at Port Newark. The Newark Port Authority said the driver, identified only as an Elizabeth, N.J., man, had parked and got out of his truck at around 7:05 p.m. The accident occurred a short time later, and he was pronounced dead at the scene. The driver of the other truck was unharmed. For more of the Republic story: therepublic.com
Thursday, October 3, 2013 Top StoryMaersk invests in Latin American ports as it eyes drilling opportunities
Maersk CEO Nils Andersen said the firm is closely observing the progress of Mexico's legislation to open up its oil industry to private sector investors. "At the moment, we're discussing deep water drilling. We think there is a big market for that," he said. In 2011, Maersk's APM Terminals won a bid to build and run a new container terminal at Mexico's Lazaro Cardenas. The CEO said the first phase of the $900 million project, which will be constructed over three phases, will be completed in 2015 at a cost of $500 million. "What we are investing in is facilities that will enable Mexico to trade with the rest of the world," said Andersen. The first phase at Lazaro Cardenas will create a capacity of 1.2 million TEUs. When fully constructed, the terminal capacity would reach 4.3 million TEUs, Maersk says. The chief executive added the company is currently "pursuing" a new container terminal at the major Gulf coast port of Veracruz. "We proposed to the government that we should take an interest in Veracruz," he said, without giving more details. Andersen said the company was also investing in Peru and Costa Rica and building a port in Brazil. "Latin America as a whole is very interesting, and Mexico within that area is clearly more interesting," he added. A.P. Moller-Maersk's total Latin America investment and committed capital total about $8 billion, committed over the last five years, according to Andersen. For more of the Reuters story: reuters.com Port of Portland makes deal to ship Fords to ChinaThe Port of Portland has made a deal with China to export 30,000 Fords annually, part of the Asian government's plan to open up to imports from Ford factories in the U.S., Canada and Mexico. The first car shipment is expected by mid-October and the extra work is expected to create jobs for 50 additional workers at Portland's Terminal 6, which has just undergone a $2.8 million expansion funded by a state grant and the Auto Warehousing Company. For more: opb.org World Shipping Council elects new board membersThe World Shipping Council recently elected six executives from some of the largest container lines in the world to its board of directors. The executives, voted in for new two-year terms at the WSC September 2013 meeting in Chile, are Morten Engelstoft of Maersk Line, Ottmar Gast of Hamburg Süd, Ulrich Kranich of Hapag-Lloyd AG, Andy Tung with Orient Overseas Container Line, Xu Minjie of COSCO Container Lines, and Randy Chen from Wan Hai Lines. Hong Kong confiscates $1M in elephant tusksOver $1 million in elephant tusks were confiscated by Hong Kong customs, found hidden under bags of soybeans in container shipments from West Africa, officials said. Chinese border control agents found 189 tusks in three containers, which arrived from Cote d'Ivoire in separate shipments, according to Customs. For more of the International News story: thenews.com.pk
Friday, October 4, 2013 Top StoryOakland port chief: Trucker strike won't shut down port
Oakland's top port administrator vowed Thursday that the port will continue operating even if a reported truck drivers' strike planned for Monday becomes reality. The pledge from Chris Lytle, the port's executive director, drew enthusiastic applause from the roughly 300 attendees at a Oakland luncheon sponsored by a trio of freight-sector organizations — the Pacific Merchant Shipping Association, the California Trucking Association and Women in Logistics Lytle, who moved up the West Coast from Long Beach to take the port's helm in late July, also said that the federal government shutdown would have little or no effect on cargo flows and that the port must improve services while minding community concerns, particularly the environment. He was convinced, he said, that the effort to organize Monday's strike "has a very small following" but acknowledged the concern that drivers in the produce-rich Central Valley might stay away from the port to avoid trouble. Port and local law enforcement are prepared to ensure a safe, secure environment for all those working in and around the port, he said. In earlier remarks, Lytle said pay and working conditions were a sore point for drivers, especially for owner-operators who handle much of the haulage in and out of the port. They face persistently slow turn times, perceive a lack of respect from many of the people they deal with in the port, and want higher pay, he said. Many of them drive rigs with exhaust filters that don't meet state-prescribed cleanliness standards due to take effect on Jan. 1, and between 800 and 1,000 of them could be forced out of business at the new year, he said. The port leader noted the Los Angeles and Long Beach port authorities each gave about $56 million to subsidize purchases of new, clean trucks, but said that the Port of Oakland "does not have that kind of money in its piggy bank." He said a way should be found for terminal operators to discuss driver pay with one another without violating antitrust laws for trucking companies to be assured that compensation levels are fair. Lytle said that proximity to the Central Valley presents an opportunity to move more agricultural products but that the port has to make itself more attractive to shippers. He noted that truck turn times are an important service component, as well as productivity in moving containers on and off vessels. Asked about potential effects from the federal government's shutdown, Lytle said he foresees none for the port because customs operations are continuing at full strength. Geraldine Knatz, director of the Port of Los Angeles, to retireGeraldine Knatz, the leader of the country's busiest port, announced her retirement Thursday through Mayor Eric Garcetti's office, amid rumors that she was being forced out. Knatz, who lives in Long Beach, is the first department head to leave under Garcetti, who required all general managers to reapply for their jobs when he took over as mayor in June of this year. Garcetti told reporters at the time that he anticipated some general managers would not be rehired. Reportedly, as of Thursday, some general managers said they had been invited to stay in their current jobs, while others said they haven't been told anything. The mayor's office said that Geraldine Knatz, Harbor Department General Manager, would continue to lead the Port of Los Angeles until the end of the year. Gary Lee Moore, city engineer and general manager of the Bureau of Engineering, will take on the role of acting general manager until a permanent replacement is found. Knatz was named to run the city Harbor Department in December 2005 by then-Mayor Antonio Villaraigosa, who praised her as the first woman to run a major port complex. Knatz came to the Port of Los Angeles after 24 years with the Port of Long Beach, where she was managing director of development and the second in command. She is known for the port's Clean Truck Program and for efforts to revitalize the Wilmington and San Pedro waterfronts. She was criticized for her support of the port's BNSF railway project by environmentalists and by other critics for the lower cargo numbers that resulted after business left L.A. for the Port of Long Beach. Her departure has reportedly been rumored for months. For more of the Press-Telegram story: presstelegram.com Trade at Northwest ports declines in second quarterPacific Northwest ports saw a decline in trade in the second quarter. Overall container volume to North American West Coast ports dropped by 2.3 percent year-over-year while overall market share also declined, according to a Journal of Commerce report. But the loss for Pacific Northwest ports was particularly acute. Container volume at the Port of Los Angeles dropped 9.9 percent, which was offset by 10.1 percent growth at Long Beach. Port of Tacoma container volume surged 34.3 percent due to the Grand Alliance and Hamburg Sud lines moving from the Port of Seattle, where traffic dropped 28.8 percent. Portland dropped container traffic fell 13.8 percent. Thus, the Northwest overall fell to 11.7 percent market share from 12.1 percent in the second quarter of 2012. Market share in Vancouver and Prince Rupert grew to 13.8 percent vs. 13.4 percent in 2012 and 12.6 percent in 2011. For more of the Seattle Times story: blogs.seattletimes.com Investors form new shipping bank to fill funding gapHenning Oldendorff, chairman of the largest charterer of dry-bulk vessels, and a team of Norwegian investors are forming a shipping bank to start in 2014 designed to fill a funding gap in the shipping industry. The bank will target small and medium-sized shipping companies that have seen lower returns and are perceived as higher risk. Maritime & Merchant AS, based in Oslo, will offer secured lending and plans to apply for a banking license later this year. The organization wants to start operations in the second quarter and will raise about $300 million in equity to fund operations and satisfy regulatory requirements on ownership, it said. The bank will fill a funding gap in the shipping industry where tighter capital standards have squeezed financing, says CEO Halvor Sveen. Shipping rates will gradually "come back on track and then the values will improve but it will take time," Sveen said. "If we get a protracted recovery of the world economy and that industrial production will recover in the most important areas for seaborne trade, we will have a much more balanced and better exchange ratio in seaborne trade between the continents." For more of the Bloomberg story: bloomberg.com NYK container carrier rescues 3An NYK container ship, the Pacific Islander II, rescued three people on September 26 from a yacht in trouble in the South Pacific Ocean, according to an NYK release. The cargo ship was sailing from the Tongan port of Nuku'alofa to Noumea, New Caledonia. On September 26, the ship responded to a request from New Zealand's Maritime Rescue Coordination Centre to assist the crew of a stranded yacht. Pacific Islander II moved in and rescued all three crewmembers, who were uninjured.
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Drewry expects container carriers to substantively increase sailing cancellations over the coming winter season rather than service withdrawals, as they await the plans of the P3 alliance.
Food safety operations will be drastically reduced, while Customs and Border Patrol operations will be operational, as the first partial U.S. Government shutdown in 17 years began its first day, with President Obama and the U.S. Senate at loggerheads with the House of Representatives over funding for the Affordable Health Care Act.
The efforts of Maersk and other top container carriers to higher freight rates are failing to catch on in an industry overcome by overcapacity and weak demand.
A.P. Moller-Maersk is expanding its investment in Latin American, especially in Mexico, where the company is pursuing deep-water oil and port projects. 
By Richard Knee