CN chief doesn’t think cargo diversion debate is “well informed”
The president and chief executive of Canada’s biggest freight railroad responded to the recent announcement by the U.S. Federal Maritime Commission that it has launched an inquiry over potential “disparities that may be causing U.S. -bound cargo driven to Canadian and Mexican ports.”
In an interview with CBN at the Southeast Freight Conference in Memphis, Tenn. last week, Claude Mongeau, CN’s chief since January 2010 when he took over for Memphis native, Hunter Harrison, said of the FMC inquiry: “I don’t think the debate is well informed. More traffic lands in the U.S. then Canada, [where it is] less than 5 percent.”
The CN has invested $150 million to date in its Memphis rail hub and is reportedly in negotiations to develop a $300 million logistics park there as part of a freight rail pipeline that runs from Canada, down through Chicago, and continues into the U.S. Southeast.
The FMC announced it is responding to requests by a group of eight U.S. representatives from Washington State and California over the possibility that some containerized cargo is diverted to British Columbia and Mexico away from their U.S. West Coast counterparts in order for shippers to avoid paying a harbor maintenance tax, and whether Canada and Mexico provide unfair subsidy to their freight networks.
"Canadian and Mexican ports are free to compete with U.S. ports for U.S. cargo. But they should do so on a playing field that is not artificially tilted by governments’ policies. So the primary question is: are we handicapping our own ports in international competition?"
"Canada's ports and railways are competing fairly…We will defend Canada's competitive advantage routes wherever they are threatened," said Canada’s International Trade Minister Ed Fast as reported by the Vancouver Sun.
“Hopefully the debate will come out,” Mongeau told CBN.
“You [the U.S.] cannot shield yourselves and close your borders,” and instead “should be seizing the moment” on clearing out supply chain roadblocks, service issues and recognizing the discussion should be about a “North America trade network,” Mongeau said.
The Harbor Maintenance tax is levied, ostensibly, for U.S. seaport dredging and maintenance, with the reported average tax to be about $137 per container.
In its statement on the cargo diversion inquiry, the FMC said: “So the primary question is: are we handicapping our own ports in international competition?"
CMA CGM denies $2 bil ship order at China shipyards
France’s container-shipping giant, CMA CGM, issued a statement on Friday denying a news report in a Chinese newspaper that it was interested in ordering $2 billion worth of new vessel orders at shipyards there.
"CMA CGM clarifies that it currently has no plan for the purchase or long-term chartering of ships,” the Marseilles-based shipping group announced.
"In the current economic environment, reducing debt and boosting its financial situation remain a priority for CMA CGM," the company said.
Media outlet Ta Kung Pao reported that according to its sources CMA CGM was in negotiations with State Shipbuilding Corp and China Shipbuilding Industry Corp to build 20 container- ships of 9.000-10,000-TEU capacity based on a more favorable bank loan environment via the Export-Import Bank of China.
Obama intervenes in U.S. railroad-labor issue
President Barack Obama intervened late last week in
a contract negotiations dispute between U.S. railroads and locomotive engineers.
Rising healthcare costs are reportedly at the center of the stalled talks between Burlington Northern Santa Fe, CSX, Norfolk Southern, Union Pacific and several smaller railroads, and the Brotherhood of Locomotive Engineers and Trainmen representing close to 25,000 members, with the latter having authorized a walkout.
Ten other rail unions representing another 65,000 rail workers had reportedly not authorized a strike due to the faltering contract negotiations that have been under the oversight of the National Mediation Board for over a year.
"It's in our national interest to make sure our freight rail system runs smoothly, since a disruption could affect businesses across the country and cause unnecessary damage to our already-fragile economy," President Obama said in a statement.
The President named an emergency board of five individuals that have been given up to 30 days to arrive at recommendations on how to resolve the labor contract issue, as the U.S. government can intervene by law if airline and railroad disputes, including a potential strike, can adversely impact commerce.
Freight train derails, explodes in Illinois (incl. video link)
Twenty-six rail cars derailed in Illinois on Friday, causing explosions and a fiery scene near a small town approximately 115 miles west of Chicago, according to several news reports.
The 131-car Iowa Interstate Railroad freight train was on its way to Chicago early Friday morning when the 26 cars went off the tracks, with 9 of those cars carrying ethanol.
There were no reported injuries or damage to property and many residents were able to return to their homes Friday night.
Fourteen of the derailed rail cars reportedly contained mash, an ethanol byproduct, and one contained sand. Three of the ethanol cars reportedly remained upright.
According to a Chicago Tribune report, the train was carrying freight that included ethanol and animal feed for Archer Daniels Midland.
Economists: U.S. recession unlikely but recovery faces “headwinds”
The U.S. might not be headed for a double-dip recession after all, “but it is a crummy recovery,” said Allen Sinai, president of New York-based Decision Economics Inc. in a Businessweek report.
Indicators, including an uptick in last month’s 103,000 more jobs added to U.S. payrolls has caused Goldman Sachs Group Inc. and Macroeconomic Advisers LLC to revise economic growth for the third quarter to 2.5 percent from around 2 percent, Businessweek reported.
However, Europe’s debt crisis and the U.S. Federal government’s budget wrangling are aiding on what economist Chris Rupkey told Businessweek is a recovery that faces “a lot of headwinds.”
Christopher Hine, vice president of technical analysis at Credit Suisse Securities in London said in a recent conference call with customers that with regard to U.S. stock futures: “The bull trend is still there.”
S&P 500 futures have climbed marginally as well as the euro over the announcement that German Chancellor Angela Merkel, along with other European leaders, will do “everything necessary” to make sure banks there have enough capital.
Back in the U.S the decline in gas prices, and rise in jobs, construction and manufacturing, could be cause for some cautious optimism.
“The continued forward momentum in private job growth should ease concerns that the U.S. will slip into recession in the second half of this year,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co.
Gross domestic product is growing “very slowly”, Feroli said.
Westbound trans-Pacific rate hike to average $200-FEU
The discussion group representing ten major trans-Pacific container-shipping lines servicing the westbound trade lanes announced an array of rate hikes across a spectrum of commodities at an approximate average of $200 per-forty-foot container.
The Transpacific Stabilization Agreement said in a statement that its member carriers “have completed their sector-by-sector assessment of freight rates from the U.S. to Asia, and have confirmed their intent to implement guidelines calling for increases aimed at recovering costs and restoring rates for key moving commodities to sustainable levels.”
The majority of the rate increases are supposed to be in effect as of November 1, the WTSA said.
The rate adjustments include:
Wastepaper: $50/FEU rate increase from all origins to all destinations.
Metal scrap: $100/FEU rate increase via PSW ports; $200/FEU for all other origins.
Plastic scrap: $100/FEU rate increase ex LA/LB; $200/FEU rate increase for all other cargo.
Hay: $100/FEU rate increase.
Hides: $200/container rate increase.
Forest products: $200/FEU rate increase.
Protein cargo (refrigerated beef, pork and poultry):
Agri-products (peas, beans, lentils, grains, soybeans and related products): $200/FEU rate increase.
Chemicals: $200/FEU rate increase.
Clay: $200/FEU rate increase.
Cotton: New minimum port-to-port rates, inland add-ons; rates subject to bunker, IFS, DTHC (except PRC), doc fees, Alameda Corridor, port security, other accessorial charges as applicable; provisions for equipment substitution. Minimums effective through 12.31.11, but subject to further increases as warranted.
Freight all kinds (FAK) cargo: $100/FEU rate increase ex LA/LB; $200/FEU rate increase for all other cargo.
Refrigerated “NOS” cargo (miscellaneous dairy products, baked goods, prepared foods): $150/FEU rate increase from the W. Coast; $200/FEU rate increase for all other cargo.
“Rate erosion over time has been dramatic for many of the highest-volume cargoes moving in the U.S.-Asia trade,” said WTSA Executive Administrator Brian M. Conrad.
“After various postponements of these increases, lines could not wait any longer and they want to avoid any confusion in the marketplace – they intend to apply the recommended increases and reverse the downward trend in freight rates, beginning November 1,” Conrad said.
The WTSA is composed of: APL, Ltd., Hyundai Merchant Marine Co., Ltd., COSCO Container Lines, Ltd., Kawasaki Kisen Kaisha, Ltd. (K Line), Evergreen Line, Nippon Yusen Kaisha (N.Y.K. Line), Hanjin Shipping Co., Ltd., Orient Overseas Container Line, Ltd., Hapag Lloyd AG, and Yang Ming Marine Transport Corp.
Retail group supports Hatch amendment to China currency valuation
The Retail Industry Leaders Association announced its support today for an amendment proposed by Senator Orrin Hatch (R-Utah) that the group said in a statement “is a more responsible and effective alternative to the Schumer-Brown Currency Bill (S. 1619).”
The S. 1619 bill is, in effect, aimed at formally labeling China as manipulating its currency and having the U.S. Department of Commerce impose countervailing duties on Chinese imports.
“We agree that China needs to move more rapidly toward a market-oriented exchange rate. At the same time, there are more pressing issues in the U.S. -China trading relationship that should be considered,” said RILA Vice President of International Trade Stephanie Hatch.
“The unilateral approach of S. 1619 is the wrong strategy,” She said.
“Senator Hatch’s proposal to use multilateral negotiations and plurilateral agreements on currency– an approach that has seen progress on other issues with China – makes sense if we truly want to see currency valuation addressed constructively and effectively," she said.
PDX completes runway reconstruction
Portland International Airport recently commemorated the final phase of its runway reconstruction with the project completion of its 11,000-foot south runway that has been officially re- opened for business.
The Port of Portland which operates PDX said the south runway project was the third and final phase of a three-year runway improvement program that included completely removing the old asphalt runway and replacing it with a new, 19-inch deep concrete runway surface over a 4-inch deep asphalt base.
Previous to the south runway project, the port said it rehabilitated the north runway, and in 2010, extended the north runway from the former 8,000 feet to 9,825 feet.
Oil spill from ship is New Zealand’s worst-ever
Salvage crews were trying to reach a cargo vessel in difficult weather conditions today off the coast of New Zealand as the South Pacific nation attempts to stave off further oil leaks from a spill disaster that is already being called the worst ever there.
The 775-foot, Liberian-flagged Rena reportedly ran aground October 5 on the Astrolabe Reef approximately 14 miles from the Port of Tauranga.
The reef’s location is reportedly well documented and to date New Zealand’s authorities are unclear as to why the incident occurred in calm weather conditions.
It has been reported that as much as 350 metric tons of heavy fuel leaked from a rupture in the freighter’s hull on Tuesday, which is five times more than the vessel’s initial spills. So far, 53 birds have been found dead from oil saturation, while another 17 were being treated.
“This event has come to a scale where it is New Zealand’s most significant environmental maritime disaster,” said New Zealand’s Environment Minister, Nick Smith, to a gathering of reporters.
The adverse weather conditions are reportedly keeping salvage crews from boarding the vessel in order to pump the oil out.
Just one day after the U.S. Senate voted to penalize China for it currency valuation, Congress passed three pending free trade agreements with Columbia, Panama and South Korea that possibly signals momentum is building towards the regional Trans-Pacific Partnership Agreement that Japan might now reportedly join.
The Obama Administration says the three-country trade deal will bolster U.S. exports to the tune of $13 billion a year and the trade pact with South Korea alone, the largest-such deal since the North American Free Trade Agreement of 1994, would support 70,000 jobs in the U.S. as numerous export duties on a variety of products would be removed over the next five years.
South Korean President Lee Myung-bak was in Washington D.C. today on a visit with President Obama to commemorate the big trade deal.
In related news, Japan's Chief Cabinet Secretary Osamu Fujimura has reportedly said his country has agreed to launch more serious discussions over possibly joining the TPP Agreement at the next Asia-Pacific Economic Cooperation summit to be held in Honolulu in mid-November.
The TPP is a multi-lateral free trade agreement that initially sought to drastically reduce and eventually eliminate trade tariffs between the trading partners.
The current members in the Agreement are the U.S Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.
Slowdown in Asia?
Global economic uncertainty means Asia's growth will moderate in the coming months according to the Organization for Economic Development's latest Asian Business Cycle Indicators.
"Global uncertainty casts a shadow over Asian economies with deterioration in business and consumer sentiments and a negative reaction in financial markets," the OECD said in its quarterly report on Asia.
The "composite leading indicators" for the U.S Germany and Russia are still above 100, a key level of positive economic health in the OECD's point system, while "growth momentum in China and India will become weaker than in ASEAN countries," the report said, with China skirting the CLI's 100 level.
However, China is enjoying "robust domestic consumption under slightly easing inflationary pressure," while India has a high level of inflation with softening domestic demand, according to the report.
Chances of an economic slowdown for Southeast Asian countries are more mitigated due to strong domestic demand, and Japan's CLI indicates "a potential turning point in economic activity," with "no strong signs of a slowdown," the report said.
Link to video of grounded ship losing its cargo off New Zealand
The grounded containership MV Rena is reportedly starting to break up on the Astrolabe Reef 12 nautical miles from the Port of Tauranga, New Zealand after a still unexplained incident on October 6.
Over 100 containers have reportedly been lost thus far and the ship's captain has been arrested.
By Peter Hurme, senior editor, Cargo Business News
The chairman of the House Transportation and Infrastructure Committee said "we need big money" for improving U.S. transportation infrastructure and the outgoing Secretary of Transportation said "we need a big plan," because "America is one big pothole," but both discussed differing ways of getting there at a transportation infrastructure summit held in Washington D.C. today.
Representative John Mica (R-Florida) said he "inherited a deck of cards" as the transportation chair with regard to getting a transportation authorization bill passed two years and seven extensions later.
"We have to do something about the process," Mica said, after he displayed a complex-looking process flow chart that illustrated the federal-level political journey of how one mode of transport arrives at funding for a "shovel-ready" project that he said can take 7-8 years per project.
"I have billions of dollars I've already authorized.that is sitting there.[but there are] different political bodies needing to approve it [and those] bodies are changing."
Mica said he favors a long-term transportation authorization bill.
"Here we are, we don't have a long-term bill," referring to a six-month extension to March of 2012.
In terms of where to find critical transportation funds, Mica said: "I think we have a base of money to start with," from resources like Railroad Rehabilitation & Improvement (RRIF) and Transportation Infrastructure Finance and Innovation Act (TIFIA) funding.
"We have more FRA (Federal Railway Administration) administrators than we have RRIF loans. We have the funds and an agreement to move forward," he said.
However, Mica cautioned: "We have to stay within the means we have - the trust fund only has $35 billion a year coming in."
"We don't need to increase taxes.there won't be a gas tax increase."
The latter point was one of the few issues the speaker that followed Rep. Mica agreed with.
U.S. Transportation Secretary Ray LaHood, who let it slip on Thursday that he is stepping down from his post after 2012, agreed the gas tax is a dead issue for now.
"The President is opposed to raising the gas tax," LaHood said.
The federal gas tax hasn't been raised since 1993.
"For now we need to look for other areas [of funding]," LaHood said.
Pushing President Obama's American Jobs Act and a Transportation Authorization bill, LaHood defended what the Department of Transportation has accomplished thus far.
"What we did with $48 billion in two years is we created 65,000 jobs and 15,000 projects [with] no boondoggles." under the aegis of Economic Recovery Act.
Now, "Congress needs to pass a transportation bill. Congress needs to pass a jobs bill," LaHood said.
"I served in Congress 14 years. I served on the transportation committee. We passed two transportation bills" in bipartisan efforts, LaHood said.
He referred back almost 30 years for an example of a bipartisan transportation funding effort.
"Forty-eight days after Reagan's first election, a transportation bill was passed. President Reagan recognized the only way to help the nation get out of a sluggish economy at that time was to pass a transportation bill."
"Do what President Reagan did.work with an opposition party and put people back to work," LaHood said.
"We need a big plan," he said.
"We want thousands of people working a year from now during the construction season, so, this is not rocket science. Passing the jobs bill would result in $50 billion for roads, transit and high-speed rail," LaHood said.
One area of current contention between the two primary U.S. political parties is over an "Infrastructure Bank" that is supported by President Obama that would essentially be composed of borrowed federal funds and private investment.
The "Infrastructure Bank leverages a lot of other money," Lahood said.
Mica has declared that I-bank bill would "dead on arrival" in the House.
LaHood responded to Mica's well-publicized comment.
"In my opinion, the reason Congress is lowest in the polls since anyone can remember is because they haven't done anything."
"If you don't like it (passing a transportation bill and American jobs act); come up with a better idea," LaHood said in a pointed reference to the Republican-controlled House of Representatives.
"You can't put people back to work with the same old slogans.tax cuts for small businesses.that only goes so far," he said.
The D.O.T. Secretary said he still holds out hope for a transportation bill getting passed.
"I'm optimistic Congress will do something by the end of the year," he said.
In a panel discussion that followed between transportation experts, Peter Ruane, the
president and CEO of the American Road and Transportation Builders Association said he favors a big, bold move on transportation funding at the federal level.
"We need to hit the reset button. We need to hang the person in effigy who [coined the term] 'shovel ready.' Congress needs to pass a long term transportation bill."
Improving public-private relationship in transport infrastructure financing discussed at D.C. summit
Cities, states, the federal government and the private sector in the U.S. need to find better ways to work together in order to effectively finance necessary transportation infrastructure projects was the mantra preached by a panel of experts at a transportation and infrastructure summit held today in Washington D.C., organized by the Washington Post.
"The trick to figuring out public-private partnerships is figuring out what each side is best at," said Roy Kienetz, the Under Secretary for Policy for the U.S. Department of Transportation.
He said one roadblock to getting infrastructure developments off the ground faster is not just environmental permitting, but project delivery.
He said the current Administration recently fast-tracked just 14 infrastructure projects in states around the U.S. because "you have to have your financing in place" and as a consequence that issue has excluded a huge number of projects from moving forward.
Kienetz said the D.O.T. is "honing in" on a master list of what is needed to move projects through faster.
Other panelists talked about a disconnect between private expertise and a perceived lack thereof on the governmental side.
"There is a large amount of private investment out there that can't find a way to get in to federal funding programs [but there is] a lack of understanding at the federal level on how transportation financing works. [There is] no good business modeling. [Private investors] will have serious questions about areas like lifecycle costs, and returns on investment," said John Flaherty, a principal at the investment firm, the Carlyle Group.
Undersecretary Kienetz agreed.
"Terms like 'internal rate of investment' are commonly understood in the business world but not necessarily within the government," he said.
A similar thread was shared regarding state government.
"When the private sector might come to a particular state with a financing plan, the expertise is generally not there on the state side," said Robert Puentes, a senior fellow with the Brookings Institution Metropolitan Policy Program.
However, Puentes said the Federal government needs to follow the lead of local and state counterparts on infrastructure development and revenue-raising ideas, pointing municipalities like Salt Lake City and Los Angeles going to their voter base to raise taxes in order to get transportation needs funded.
Carlyle's Flaherty said states should look to the federal government for rewards for their innovative solutions.
"You don't need a transportation authorization bill or infrastructure bank to do this," he said.
Governmental regulation was another issue taken to task by Ed Hamberger, the president and CEO of the Association of American Railroads.
"Today, 31 years ago, Jimmy Carter signed the Staggers Rail Act that deregulated the rail industry and rail lines."
"The reason U.S. Class One railroads are the best in the world is because we've spent $481 billion in the past 31 years," Hamberger said.
D.O.T. Secretary LaHood to step down after 2012
The U.S. Department of Transportation's Secretary Ray LaHood let it slip at a luncheon with members of the media on Thursday that he intends to step down from his post at the end of President Obama's current term.
Subsequently, later that day, LaHood released the following statement:
"I serve at the pleasure of the president and it is an honor to look out for the safety of the American public when it comes to planes, trains, automobiles and more. Throughout this term, we have also focused our efforts on creating jobs as we rebuild our roads, rails and runways, and I look forward to working with Congress to pass the American Jobs Act so we can put Americans back to work."
Prior to his appointment as transportation secretary, LaHood served 14 years as a Republican congressman from Illinois.
Rail carloads up 2.1 percent last week
The Association of American Railroads reported a 2.1 percent gain was posted for U.S. rail traffic for the week ending October 8 at 302,500 carloads compared to the same week last year.
The AAR said intermodal rail volume for trailers and containers was up 2.4 percent over the same period last year.
Leading carload commodity groups for the week included petroleum products, up 28.3 percent; non-metallic minerals, up 19.6 percent; and motor vehicles and equipment up 11.1 percent.
Farm products excluding grain were down 14.6 percent; and waste and nonferrous scrap was down 11.5 percent, the AAR reported.
Cumulative U.S. railroad volume was 11,631,650 carloads, up 1.8 percent over the same period last year, and 9,123,225 trailers and containers, up 5.4 percent.
Combined U.S., Canadian and Mexican rail volume for the first 40 weeks of 2011 totaled 15,205,489 carloads, up 2.1 percent compared with the same point last year, and 11,380,714 trailers and containers, up 5.2 percent, the AAR reported.
Cruiseship sinks after launch in China
A newly constructed $2.68 million cruiseship sank in China's Yellow River right after it was launched in Lanzhou, according to the Shanghai Daily.
The incident on September 29 was reportedly due to a handling error and miscalculation of the water level.