Cargo Business Newswire ArchivesSummary for October 6 through October 10, 2014:
Monday, October 6, 2014
TSA carriers announce 2015 cost recovery program
As members of the Transpacific Stabilization Agreement prepare for a new round of service contract negotiations, these shipping lines working the Asia-U.S. trades are considering cost and operational challenges in 2015-16, including sharply higher fuel costs and inland rail and truck capacity shortages, according to a TSA statement.
Changes adopted by TSA member lines would include rate objectives for 2015-16; rates for TEU and high-cube FEU containers that reflect the cost of loading and handling; recovery of intermodal costs due to inland transport capacity and congestion issues; a revised bunker surcharge formula; and recovery of low-sulfur fuel costs as new emissions standards take effect in January 2015 for ships operating in North American coastal waters.
Rate-wise, TSA recommends its members negotiate 2015-16 contract rates at levels at or above $2,000 per-FEU to the West Coast and $3,500 per-FEU to the East Coast from all North Asia ports. For Southeast Asia, the objective will be to achieve rates at or above $2,150 per-FEU to the West Coast and $3,650 per-FEU to the East Coast.
Intermodal base rates vary by destination, but as an example TSA is proposing 2015 CY rates to Chicago-area ramps to be at least $3,900 per-FEU from North Asia and $4,050 per-FEU for Southeast Asia.
Member lines have also modified TSA’s formula for other equipment sizes with respect to minimum rates. Base rates for TEUs will be 90 percent of FEU rates.
High-cube FEU base rates will be charged a premium of at least $50 over the FEU standard rate for the West Coast and $100 over the FEU rate for all other destinations. The changes reflect the greater cost of handling different container sizes as port load and discharge patterns in port become more complex and time-sensitive.
"Rate minimums are an effort to better reflect actual costs of service, rather than simply recommending a specific increase to whatever baseline rate is in the tariff based on short-term supply-demand conditions." said TSA executive administrator Brian Conrad. "Rates will continue to fluctuate with the market according to origin-destination pairs, service requirements, routing and so on, but a common base guideline is essential for lines to maintain basic service levels and, beyond that, expand their offerings based on customers’ needs."
The new recommended contract rates will also be subject to the addition of a low sulfur fuel cost recovery to reflect new MARPOL sulfur oxide emission rules that take effect on January 1 2015.
"We are studying the various fuel components very closely," Conrad explained. "The stricter 0.1 percent emissions mandate, requiring a shift to costlier marine gas oil, is of special concern because it will hit the trade all at once and no one can predict just yet where prices will settle. That in turn makes it difficult to adapt our existing formula, but we expect to have a clearer picture closer to January 1, in time to announce a charge with the necessary advance notice."
UPS, FedEx ask e-retailers to change their ways this holiday season
Last year UPS and FedEx had a hard time in terms of package deliveries during holiday season, and are working hard to avoid that scenario this year by trying to convince retailers to change their ways.
Last Christmas was a perfect storm of buyer procrastination, bad weather, a compressed calendar and retailers who overpromised shipping results, causing millions of gifts that arrived too late.
This year, UPS is trying to persuade e-commerce companies to hold their big sales in mid-December instead of in the countdown to Dec. 25. It also wants them to alternate special offers by geographic region—so merchandise that might be on sale one day in Texas would be on sale a different day in Florida.
UPS is especially lobbying retailers to get rid of any and all free overnight-shipping offers on Dec. 23, as well as promotional emails going out that day. If all else fails, UPS executives say they can’t guarantee they will ship anything that exceeds what retailers projected.
UPS CEO David Abney says his company is more focused on providing retailers with options than cutting them off. "But you can’t just encourage everyone to say, ‘Hey, just wait and ship the last day,’" he said.
U.S. DOE: Coal shipments down on low EU demand, high world supply
U.S. coal exports in 2014 have continued their fall from record volumes in 2012, according to the U.S. Department of Energy.
During first-half 2014, coal exports totaled 52.3 MMST, 16 percent less than the same period in 2013, according to the DOE’s Energy Information Administration. Most of these exports go to countries in Europe and Asia.
Lowered exports mirror decreased European demand for steam coal and increased steam coal supplies from Australia and Indonesia, the EIA reports. Metallurgical coal supply from Australia, Canada, and Russia has also increased. These influences have resulted in a decline of 9.0 MMST in coal exports to Europe and Asia in the first-half 2014.
EIA says the two categories of coal exports are metallurgical coal, used in the production of steel, and steam coal, commonly used to fuel boilers that generate steam to produce electricity.
Metallurgical coal production, primarily from the Illinois and Appalachian coal basins, represented less than 8 percent of production but 56 percent of total U.S. coal exports in 2013, according to the EIA. Europe and Asia are the top importers, and together, accounted for nearly 80 percent of U.S. metallurgical coal exports in the first half of 2014.
Steam coal accounted for more than 90 percent of domestic coal production in recent years, the statement said. During the first half of 2014, Europe received 8.8 MMST of U.S. steam coal exports, a drop of 7.4 MMST year-over-year. Asia's share of U.S. steam coal exports increased in 2014, but export tonnage to Asia decreased 2.4 percent from the first half of 2013.
In 2013, six U.S. ports shipped 89 percent of U.S. coal exports—Eastern ports Baltimore and Norfolk represent 55 percent and southern ports Houston, Mobile, and New Orleans make up 30 percent, the statement said. Seattle accounted for 5 MMST, or 4 percent, all of which was steam coal exports.
Eastern and Southern ports are used to export metallurgical coal that is produced in the Illinois and Appalachian Basins, according to the EIA.
MOL and El Baraka form joint venture shipping firm in Egypt
Mitsui O.S.K. Lines and El Baraka have formed a joint venture company in Egypt to support MOL’s container division, according to a company statement.
MOL said the new company, which started operations on October 1, 2014, would have new offices located in Cairo, Port Said and Alexandria.
Jochen Veldmann, Area Director for MOL, said the decision to move to a joint venture arrangement is to have customer service people solely dedicated to MOL, to benefit their customers.
"We will be much better positioned to respond to customer needs, improve service quality, and offer full-network coverage in the region," Veldmann said.
Veldmann also said MOL had enjoyed a strong and long-lasting relationship with Inchcape Shipping Services and thanked the company for being an excellent partner over the past years.
MOL, El Baraka and Inchcape will work closely together during the transfer of operations to ensure a smooth transition and Inchcape will continue to support MOL’s business in East Africa in Kenya, Tanzania and Uganda, the statement said.
Port of L.A. dockworker seriously injured after fall
A longshoreman who fell 15 feet onto a breakbulk ship at Pasha Terminal on Thursday suffered head trauma and was taken to St. Mary Medical Center in Long Beach.
The accident occurred while the dockworker was working on the ship, the Aliki P. When he fell into the hold, he became wedged in the cargo.
Firefighters conducted a rope rescue to free him, said Katherine Main, a Los Angeles Fire Department spokeswoman. The injured dockworker was reported in serious condition.
On Friday the European Union approved the merger of Chiquita Brands International with Irish fruit producer Fyffes, providing that Fyffes terminate its exclusivity clause with Maersk Line.
The European Commission said neither firm should make any exclusive deals with shipping companies or provide them with incentives for refusing to carry their competitors’ fruit. The duration of the commitment is 10 years.
Chiquita made a deal in March to purchase Fyffes for more than $500 million in an all-stock deal that will create the world’s largest banana company.
The merger was delayed after Brazilian companies Cutrale Group and Safra Group offered to buy Chiquita for $600 million in August, which Chiquita rejected.
The European Commission found that while the Chiquita-Fyffes merger would create the world’s largest banana company, it wouldn’t hamper competition in the EU because consumers would still have a significant number of other banana suppliers to choose from.
Chiquita is expected to start its shipping operations out the Port of New Orleans later this month, and will ultimately relocate its operations from Gulfport, Miss, to New Orleans.
VPA’s Portsmouth Marine back in service, receives first container ship
Eight months after taking the helm as CEO of the Virginia Port Authority, John Reinhart held a small celebration at Portsmouth Marine Terminal, which handled its first container ship since being decommissioned four years ago.
"This is an important day for us at the Port of Virginia," Reinhart told public officials and others who gathered for the occasion. "We had an idle facility here that can create capacity, flexibility and volume through this port - now - not 10 years from now, not five years from now, but today."
More than 40 dockworkers unloaded the MSC Panama at Portsmouth. The workers were directly hired by Virginia International Terminals, the operating arm of the port authority, rather than by stevedoring companies.
Since he was hired, Reinhart has strived to get the port back into the black after six straight years of fiscal losses, even as Virginia port cargo surged to record levels. The former Maersk Line Ltd. president pushed to reopen Portsmouth Marine as a relief valve for the port's two often-congested terminals in Norfolk and Portsmouth.
At Portsmouth Marine, Reinhart decided to forego using the stevedoring companies that hire the longshoremen at Norfolk International Terminals and Virginia International Gateway, the former APM complex in Portsmouth. He said taking over stevedoring functions directly "would allow us to make some money that we could reinvest."
For the fiscal year that ended June 30, the port handled more than 2.3 million TEUs, almost all of it at Norfolk International Terminals and the former APM facility.
Shenzhen plans $32M rebate program to promote low-sulfur fuel
The Shenzhen government plans to spend $32 million a year on cash rebates to encourage shipping lines to switch to low-sulfur fuel while at berth, echoing measures taken by Hong Kong, as both cities attempt to cut emissions from ship exhausts.
Shenzhen will subsidize 75 to 100 percent of the extra costs incurred by shipping lines that volunteer to the at-berth switch to fuel with a maximum 0.5 percent sulfur content, which is more expensive than typical marine bunker fuel with 3 to 3.5 percent sulfur. The rebates will take effect next month and last for three years.
"We are learning from the experiences in Hong Kong, where companies have volunteered to switch to low-sulfur fuel and the government provides subsidies for extra costs incurred," said Dong Yanze, director of the Construction Management Office of Shenzhen municipality's Transport Commission.
In 2011, 19 shipping firms came together in Hong Kong to voluntarily switch to low-sulfur fuel at berth, bearing all of the extra bunker costs at an average of $2 million a year. Known as the Fair Winds Charter, the shipping lines started receiving cash subsidies from the Hong Kong government in September last year, with a grant covering 50 percent of the extra costs.
While mooring at ports, cargo ships contribute to 66 per cent of sulfur dioxide emissions in Shenzhen. Shenzhen is lobbying for a sulfur emission control area that would cover the Pearl River Delta by 2018, said Li Shuisheng, deputy director of Shenzhen's Human Settlements and Environment Commission.
For more of the South China Morning Post story: www.scmp.com
Kuehne + Nagel breaks ground on Singapore logistics hub
Kuehne + Nagel has launched the construction of a build-to-suit logistics center in the West Singapore. Karl Gernandt, chairman of Kuehne + Nagel International AG, was on hand for the groundbreaking ceremony.
"Singapore is an important logistics hub for global trade thanks to its world-class infrastructure and excellent connectivity," Gernandt said. "Our investment in this modern facility is one of the largest outside Europe and it reflects both the importance of Singapore as a business location and its significance for the Kuehne + Nagel network. It will house over 500 Kuehne + Nagel specialists and is designed to serve Kuehne + Nagel’s customers across multiple industry sectors."
The new high tech facility, located near manufacturers and ports, will have 55 loading bays and five floors dedicated to storage, with a total warehouse area of more than 495,000 square feet. Of this, 215,000 square feet will serve as a cold storage zone to manage temperature-sensitive goods for pharmaceutical and healthcare customers. The remainder of the space will be used aerospace, spare parts and hi-tech products, and a further 43,100 square feet will be allocated for office space.
The facility will be equipped with advanced technology, automation and robotic solutions to help improve workflow processes, and reduce the time required to pick, pack and ship items to expedite orders.
Officials try to ID body found floating near Port of Long Beach
County officials need the public’s help to identifying a man found floating in the ocean near the Port of Long Beach last month, according to the Los Angeles County Department of Medical Examiner-Coroner.
The man, described as Caucasian and at least 55-years-old, was found in the water by a kayaker around 7:30 a.m. on Sept. 6. He is about 6 feet tall and 187 pounds, balding with grey hair, and missing a right upper tooth, according to the coroner’s office.
Ports of Seattle and Tacoma form Seaport Alliance, unify terminal management
In a move to strengthen trade in the Puget Sound region and respond to fierce competition, the ports of Seattle and Tacoma announced their plan to unify the management of the two ports’ cargo terminals and related functions under a single Seaport Alliance.
"This is one of the best things we could have done right out of the gate," said new Port of Seattle CEO Ted Fick to the Seattle Times. "It allows us to enjoy the benefits of a merger without the entanglements of that kind of structure."
The Seaport Alliance between the two largest Washington ports will manage marine cargo terminal investments and operations plus planning and marketing for both ports, while the individual port commissions will retain their existing governing structures and asset ownership, according to the joint statement.
The alliance does not include Seattle’s airport, cruise ship terminal, Fisherman’s Terminal or waterfront properties, according to the Seattle Times.
"Where we were once rivals, we now intend to be partners," said Stephanie Bowman, co-president of the Port of Seattle Commission. "Instead of competing against one another, we are combining our strengths to create the strongest maritime gateway in North America."
The Seaport Alliance was conceived during talks held under the guiding eye of the Federal Maritime Commission. Subject to further FMC review and approval, the two port commissions say they will enter into an Interlocal Agreement intended to provide the ports with a period of due diligence to examine business objectives, strategic marine terminal investments, financial returns, performance metrics, organizational structure, communications and public engagement.
During the due diligence period, John Wolfe, Port of Tacoma CEO, and Kurt Beckett, Port of Seattle Deputy CEO, will lead the planning work and coordinate with both port commissions. Once the period has ended, the ports plan to submit a more detailed agreement to the FMC by the end of March 2015.
Marine cargo operations at the ports collectively support more than 48,000 jobs regional jobs and serve as a critical gateway to export of Washington state goods to Asia.
"The ports of Seattle and Tacoma face fierce competition from ports throughout North America, as shipping lines form alliances, share space on ever-larger vessels and call at consolidated terminals at fewer ports," said Port of Tacoma Commission President Clare Petrich. "Working together, we can better focus on financially sustainable business models that support customer success and ensure our ability to reinvest in terminal assets and infrastructure."
Baltimore port opens new auto terminal
The Port of Baltimore announced the opening of a new auto berth Tuesday at its Masonville/Fairfield Marine Terminal that replaces one that has been in operation for 70 years. Maryland Transportation Secretary James T. Smith Jr. and the Maryland Port Commission were on hand to mark the occasion.
Standing at 1,175 feet long and 130 feet wide, the new wharf can support 1,000 pounds per-square-inch in contrast to the 100 pounds per-square-inch supported by the old berth. The new structure is also equipped to handle rail transport.
The Port of Baltimore handled more than 750,000 cars last year, more than any other U.S. port, the statement said.
"This new auto berth will further bolster the Port of Baltimore’s already strong reputation as the leading auto port in the U.S. and is welcome news for the nearly 1,100 direct jobs that are generated by the Port’s auto business," said Smith.
The Port of Baltimore touted its role as the reigning U.S. port for handling autos and light trucks, farm and construction machinery, imported forest products, imported sugar, imported aluminum and imported gypsum.
China to upgrade logistics system by 2020
China wants to revamp its logistics system to ease congestion by 2020 by addressing issues such as poor connectivity and expensive toll roads that hamper economic development.
The country’s rapid trade growth has meant that transport facilities still get backlogged, even though billions of dollars have been poured into its intermodal infrastructure over recent years.
Logistics growth has reportedly slowed after surging an average of 20 percent per-year over the past decade. Combined goods value grew 8.6 percent year-over-year in the first quarter, according to the China Federation of Logistics and Purchasing.
Last year, logistics costs were 18 percent of gross domestic product—double that of the developed world—with an industry made of too many small entities and a dearth of modern warehouses, according to a government statement.
Beijing wants to create an upgraded logistics model that stresses quality and efficiency, according to a development program proposal for 2014-2020 released Saturday by China’s State Council, reports Xinhua. The plan emphasizes the sector's connection with the manufacturing industry and newer opportunities presented by e-commerce.
The plan prioritized 12 projects, including farm produce, recyclable materials and manufacturing, Xinhua said.
Transportation Secretary visits Seattle, highlights $20M for port terminal
On Monday Transportation Secretary Anthony Foxx visited Seattle to tout a $20 million Transportation Investment Generating Economic Recovery Grant (TIGER) awarded to the port last month.
The TIGER funding will be utilized to modernize Terminal 46, a container terminal critical to Washington exports, according to the office of Senator Patty Murray.
Murray took Foxx on a Washington State Ferry ride in hopes of securing funding for the nation’s biggest ferry system, according to the News & Observer. She said the ferries could be in danger as Congress considers funding for the transportation bill.
"The biggest challenge we have coming forward with the new transportation reauthorization is there are people who do not want to include ferries," Murray said. "If we just incorporate funding as part of the state grants we're going to lose out a lot."
Foxx said called the ferry system a "lifeline" for working commuters.
Vietnamese oil transport ship disappears, feared hijacked
A Vietnamese cargo ship carrying more than 5000 tons of oil and 18 crewmembers vanished in waters between Malaysia and Indonesia, say officials.
The ship went missing from radar and lost radio contact about 180 nautical miles northeast of Singapore, and 360 nautical miles southeast of Ca Mau Cape in Vietnam, according to Luu Duc Tung, deputy director of Vietnam Maritime Rescue Co-ordination Center.
The vessel departed Singapore Thursday and was expected to arrive at a port in central Vietnam on Sunday.
"We are considering many possibilities, including pirates," Tung said.
Member container lines in the Transpacific Stabilization Agreement Westbound section, which serve U.S. export trade to Asia, say they have seen freight rates drop below breakeven levels in recent months as demand weakens and costs rise.
To offset losses, TSA shipping lines recommend minimum rates of $300 per-FEU from Los Angeles/Long Beach, and $750 per-FEU for all-water U.S. East and Gulf Coast shipments, for shipments of waste paper, hay, and metal and plastic scrap to China base ports. The new minimum rates are to take effect November 1, 2014.
Low-value, low margin base cargoes such as recyclables and hay account for up to 40 percent of the entire market, according to TSA, and are moving at rates that don’t cover the variable transport or voyage costs.
TSA-Westbound lines added that the specified minimums still do not restore rates to sustainable levels for the commodities and port pairs in question, and it is expected that these, along with rates for other origins and other destinations will need to be higher. The Agreement indicated that further increases are likely in December and in early 2015.
"Many base cargo rates in the Westbound trans-Pacific market are approaching levels that do not justify carriage, especially when you take into account offsetting destination costs such as equipment cleaning and repair and local delivery," said TSA-Westbound executive administrator Brian Conrad.
"That’s bad news for shippers in a market with strong headhaul Asia-U.S. demand for repositioning of empty equipment on westbound ships, as well as for carriers for which recyclables and hay represent a large share of the market. We need to bring those rates up and we believe the market can support the higher minimums."
Drewry: Alliances and lower unit costs may spur container industry recovery
The recovery of the container industry, possibly by late 2016 or 2017, will be based around the new mega alliances and the continued reduction of unit costs, rather than supply and demand at the trade route level, according to the latest Container Annual Review & Forecast by Drewry Maritime Research.
The maritime analysts think a different recovery is emerging that probably won’t be built on any improvement in freight rates.
Newbuild orders indicate that at least 53 and 45 ULCVs will be delivered in 2015 and 2016, respectively, paired with the delivery of 100 ships of between 8,000-TEU and 10,000-TEU from the yards—at the same time as a similar number of ships being cascaded from the Asia-North Europe trades—will mean both reductions in unit costs and the potential for excess capacity on some routes, the researchers predict.
Drewry forecasts that freight rates will decline in 2015 by as much as 3 to 4 percent year-over-year, so the focus is more on costs than revenue, which is beginning to yield results for carriers.
Drewry’s Container Annual Review & Forecast 2014/15 says three new trends have emerged: carrier revenue is increasing again (due to more rapid growth), costs are falling faster than rates, and some carriers are coming out of the red. Despite the fact that unit revenues are down by an estimated 4 percent year-over-year for the first six months of 2014, unit costs have been reduced by 6 percent.
New alliances formed in the next 3-6 months may help a number of container lines reduce their cost base further, but Asia-to-North Europe spot rates have dropped 54 percent since the beginning of August to around $1,300 per-FEU.
"The possibility of matching supply and demand to a degree acceptable for carriers in 2015, especially at the critical trade route level and in key North-South trades is probably out of reach," said Neil Dekker, Drewry’s director of container research. "The strategy of course is to drive down unit costs, but this will not necessarily result in considerably better utilization (since all lines upgrading), nor in freight rates."
"The question we should be asking is not about when a recovery will happen, but what form the so-called recovery will take. In essence, the industry is merely continuing to adapt as best it can. Recovery, in whatever form it takes, will not simply be in the traditional manner of matching supply and demand. This is about survival and the long-term management and sharing of costs."
Corps advises that Port of Charleston channel be dredged to 52 feet
A new Army Corps of Engineers study released Tuesday recommends that the main navigation channels should be deepened to 52 feet at the Port of Charleston, which would give it the deepest shipping lanes on the East Coast.
The deeper harbor could give the port a huge edge as shipping lines deploy more supersized container vessels.
"The entire project is economically justified," said the Army Corps in its preliminary environmental impact report.
Based on the recommendations in the study, the port would gain an extra 7 feet of draft for its Wando Welch Terminal in Mount Pleasant and a new container port it's building on the old Navy base in North Charleston.
The estimated cost of the dredge is $509 million, well above the latest previous estimate of around $350 million that was based on dredging to 50 feet. Federal and state government would fund $166 million and $343 million, respectively.
"I believe it's a signature day for our port in terms of our competitiveness. It's a signature day for our region," said Jim Newsome, president and chief executive officer of the S.C. State Ports Authority. "We are the only port that will have 50 feet or deeper in the Southeast."
The final version of the report will be released in September 2015. Engineering and construction work would follow.
United Parcel Service of America has acquired i-parcel, a company that helps U.S. and U.K. e-retailers send products to overseas customers. The purchase price was not disclosed amount.
"The acquisition complements UPS's international cross-border logistics capabilities from the U.S. and U.K., to over 100 countries," said UPS. "As e-commerce merchants in the U.S., U.K. and other countries grow, UPS continues to strengthen its logistics and technology capabilities to meet the demands of its global customer base."
Will Gensburg, i-parcel's CEO, will remain with the company.
Founded in 2005, i-parcel serves three merchants in the Internet Retailer Top 500 Guide. UPS provides shipping for 176 Top 500 retailers and 232 Second 500 retailers, according to data at Top500Guide.com. By comparison, rival FedEx Corp. serves 144 merchants in the Top 500 and 172 in the Second 500.