Trans-Pacific lines plan for $400-per FEU minimum rate hike by New Year
In advance of next spring's signing of annual shipping contracts, the primary group of trans-Pacific container-shipping lines servicing the Asia-U.S. eastbound trade announced they each plan to raise "all-in" freight rates and charges by a minimum of $400 per forty-foot container as of the first of the year.
"Rate levels during 2011 have steadily eroded despite rising inland transport, cargo handling and other costs," said Brian Conrad, executive administrator for the Transpacific Stabilization Agreement collective of ocean carriers.
The chief executive of the parent company to the biggest container carrier member of the TSA, Maersk, said last week that an underperforming peak shipping season in the third quarter came about in part due to vessel overcapacity and low rates.
"It is just that the whole market had expected more growth so there's too much capacity so we're basically destroying the price level for ourselves," said A.P. -Moller-Maersk CEO Nils Smedegaard Andersen in an interview with Bloomberg Television.
Andersen said 2011 won't end up well financially for the shipping industry and he foresees a bumpy first quarter of 2012.
"We do expect the whole container industry to be…quite significantly loss-making for this year…we expect to do better than the average…but we also foresee the beginning of next year to be quite difficult," he said.
However, business in the eastbound trans-Pacific is improving, according to the TSA.
"Now, carriers are seeing stronger U.S. holiday season cargo volumes on the heels of positive economic GDP and retail sales data, as well as robust forward bookings leading into the early Lunar New Year factory holidays in Asia. As carriers look toward building a platform for the 2012-13 contract cycle, the feeling is that a correction is both imperative and overdue," said Brian Conrad in a statement.
As a result, the TSA says its member lines have "indicated that, rather than adopting a single formal guideline increase, they will pursue various approaches to interim cost recovery and revenue restoration, whether in the form of across-the-board general rate increases, peak season surcharges or other mechanisms, depending on each carrier's unique situation."
The TSA statement went on to say "the objective is to meet expected cargo demand growth and begin reversing 2011 revenue losses resulting from slower than expected demand, ongoing market uncertainty and the impact of short-term concessionary rates bleeding into 12-month 2011 service contracts."
Conrad said some lines could be seeking rate increases on an individual basis in order to restore "particularly hard-hit rates prior to January 1"
The ports of Los Angeles and Long Beach handle 40 percent of U.S. Asian imports. But this year will be a record year for exports, helping to partially offset a drop in overall cargo traffic. POLA saw a 28.1 percent increase in October compared to October 2010.
As the country's first and second-ranked container ports, POLA and POLB are national indicators of economic growth.
POLB's imports and exports have declined by approximately 20 percent year on year, according to October cargo figures, after experiencing a slight annual increase in both in September 2011. In part, declines reflect the Hyundai terminal moving to POLA, taking 10 percent of POLB's cargo.
POLA imports increased by 5.5 percent in October compared to a year earlier. As of October, POLA's overall cargo traffic has increased 0.7 percent compared to 2010, moving 6.6 million containers.
Maersk plans to outlast rivals through overcapacity crisis
As the industry contemplates four more years of overcapacity, AP Moeller-Maersk A/S, owner of the world's largest container line, is betting it can outlast rivals in what will be an increasingly competitive market.
Holding 16 percent of the worldwide container market, Maersk Line thinks it will be able to hold out longer than rivals such as Mitsui O.S.K. and Nippon Yusen K.K., which will need to cut capacity to deal with plunging freight rates.
Maersk can survive while others fail because its size keeps costs down and its parent company can help to absorb its losses, according to a financial analyst. It can afford to lose money in the short term to reap long-term rewards. In 2009, the first year of the downturn, Maersk idled ships, but the company reports it won't do that anymore, preferring to accept reduced prices to keep its market share. Maersk's freight rates fell 12 percent in the third quarter.
Port of Hamburg sees 15% rise in container volumes
The Port of Hamburg displaced Antwerp as Europe's second largest container port when it increased container volumes by 15 percent in the first nine months of the year on trade with Asia and Eastern Europe.
The port handled 6.8 million TEUs through September 2011, and total trade volumes increased by 11 percent to 99 million tons. In the same time period, Antwerp's container volumes rose by 3.1 percent to 6.5 million TEUs.
Angeliki Frangou, who heads three Navios shipping companies with more than 100 vessels, plans to exploit bankruptcies within the industry as lending declines, and purchase vessels that will take a nosedive in value.
The chief executive officer of Navios Maritime Holdings, Navios Maritime Acquisition Corp. and Navios Maritime Partners LP says Navios will work with banks looking to sell vessels to get rid of problem loans on their balance sheet, since Asian shipyards will need to sell ships built for owners no longer able to pay for them.
The economic crisis in Europe has made lenders wary, while there is an oversupply of ships, with ship prices plunging by as much as a third since 2009. Frangou said Navios has grown more during this recession in shipping than in more prosperous times.
Hidden pay for NY/NJ Port Authority public employees
The Port Authority of New York and New Jersey executives received more than $2 million in extra compensation over two years that was not publicly reported. Some executives made up to $70,000 more than what was released to the public, according to The Record newspaper in Woodland Park.
The extra compensation was delivered through a variety of packages that helped to increase pensions. 650 non-union employees with perfect attendance were able to trade in vacation days for pay through the Amended Vacation Exchange. Three "essential" current employees who wanted to retire after 9/11 were given a 5 percent bonus to stay.
Figures released by the Port Authority did not disclose the $2M in extra pay. The Record obtained the actual figures through the New York Comptroller's Office after waiting months for the data. In September a Port Authority attorney declined to produce information about the extra pay, citing a condition in the agency's Freedom of Information policy that allows it to keep information secret if it is an "unwarranted invasion of personal privacy."
Governor Chris Christie, who has agency oversight, called the extra compensation "inappropriate and excessive."
The Burlington Northern Santa Fe railroad, controlled by Warren Buffett's Berkshire Hathaway, is investing $700 million in terminal development to exploit the 29 percent rise in Asian specialty grain export shipments. Container shipments of grain accounted for 5 percent of U.S. maritime grain shipments in 2010.
Grains such as organically or genetically modified soy beans, which can't be shipped in typical hopper cars, are now being packed in shipping containers that used to be sent back empty after Asian imports were unloaded in the U.S. BNSF is taking advantage of the opportunity for the railroad to bring those grain-packed containers to American ports.
With the growing tide of Asia's middle class, carriers and farmers are working to meet the growing demand for exports. BNSF has spent $680 million on container yards, mainly in the Midwest where corn and grains are grown.
Oil tanker operator General Maritime, which has one of the largest tanker fleets in the world, filed for bankruptcy Thursday due to plunging freight rates and an overcapacity of ships.
The Chapter 11 filing in the U.S. Bankruptcy Court in Manhattan lists the New York company's assets at $1.71 billion, with debts totaling $1.41 billion. According to the company, operations will continue without interruption after it makes a deal with principal lenders.
General Maritime has a fleet of 31 double-hull tankers, and operates mainly between the U.S., the Caribbean, South America, West Africa and the North Sea.
The company announced two companies that will help it through its reorganization. Oaktree Capital Management plans to make an equity investment of $175 million and Nordea Bank Finland will provide up to $100 million in financing.
The water levels in the Rhine and Danube rivers have fallen to new lows, with cargo vessels sailing only 20 to 50 percent full. The low water levels stem from an unusually dry weather spell in Germany and Switzerland.
Because vessels are unable to load to capacity, fees are added to freight rates, resulting in increased costs for cargo owners. Some cargo owners have to pay for the full vessel even if it ships half full.
The Danube is a major route for Eastern European grain exports to West Europe. The Rhine is a key route for commodities such as grain, coal and oil.
The North Sea car terminal that handles more than 66 percent of car exports from Germany, Bremerhaven BLG, said demand from Asia should bolster business even if European demand collapses.
BLG projects that its auto shipments will rise by more than 20 percent in 2011 to 1.95 million, and will rise again in 2012 to 2.06 million. BLG handles the majority of cars from Porsche AG, Daimler AG, and Bayerische Motoren Werke AG.
BLG said its exports, which account for 80 percent of all shipments, will increase due to demand from China, India, Russia, Brazil, and the U.S., as the Euro market languishes.
Customs officers in Hong Kong have confiscated $2.2 million worth of illegal ivory in on container shipped from Capetown, South Africa.
It's the largest seizure of its kind in Hong Kong. Thirty-three horns from highly endangered rhinos along with hundreds of other ivory products were found, including 58 ivory chopsticks and 127 ivory bracelets.
Rhinoceros horns are used for medical purposes in Asia and used as talismans in some Middle Eastern countries.
The ivory was hidden under layers of plastic and tin foil to make it look like a container full of recycled materials in an effort to avoid detection by x-ray machines.
Obama stresses maritime security at East Asia Summit
The Obama administration may be setting a course of confrontation with Beijing over maritime dispute in the South China Sea.
President Obama is attending the East Asia Summit to discuss concerns over maritime security in the region, a subject China has avoided in international forums. He arrived at the summit Thursday from Australia, where he signed a pact to deploy U.S. Marines to help blunt China's rising influence in the area.
The gathering can be a prime place for the U.S. and China to work out issues like maritime security or nonproliferation, said Obama on Thursday at a meeting with Prime Minister Manmohan Singh in Bali.
When Southeast Asian leaders meet with Chinese Premier Wen Jiabao, the Philippines will push to resolve territorial disputes in the South China Sea, particularly disputed areas that contain oil and gas resources. Asean leaders will also meet today with Obama, who has promised to increase the Philippines' naval defense system.
China has claimed rights to a swath of disputed waters in the South China Sea that extends hundreds of miles. The Philippines proposes setting boundaries according to the United Nations Law of the Sea.
Sea Star Line pleads guilty in Puerto Rico price-fixing case
The U.S. Justice Department expanded its Puerto Rican shipping investigation with the announcement of a $14.2 million fine for Florida-based Sea Star Line and a criminal charge against its former president.
Seat Star agreed to pay the fine and pled guilty in court to one felony count of conspiring to fix prices on cargo moving in and out of Puerto Rico, a U.S. territory.
Frank Peake, Sea Star Line's former president and C.E.O., was indicted by a federal grand jury in San Juan on the charge of fixing prices on the company's Puerto Rico routes from late 2005 through April 2008.
In April the same Department of Justice investigation resulted in a $15 million fine for Horizon Lines of Charlotte, N.C.
House GOP pushes oil drilling to support transportation
House Republicans on Thursday proposed to tie the funding of a long-term transportation bill to an expansion of domestic oil production, setting up a confrontation with Democrats.
House Speaker Boehner said he hopes to pass a multi-year surface transportation bill by the end of the year as the keystone of the Republican jobs plan. Details of the plan were not released.
This bill is the Republican solution for replenishing the decreasing Highway Trust Fund, which depends on the 18.4 cents-per-gallon federal gas tax.
Senator Barbara Boxer, whose Environmental and Public Works Committee recently approved a rival surface transportation bill last week, said the proposed GOP bill would fall billions short and threaten thousands of fishing, tourism and recreation jobs.
The Senate plan can shore up Highway Trust Fund monies from the General Fund. However, the House plan is limited by a rule, passed at the start of the Congressional session, which stipulates that any transportation spending be funded by trust fund revenues unless new revenue can be found.
There is a $12 billion shortfall between the trust fund revenues and the $80 billion Senate bill. The gap needs to close before the bill can win approval.
Both the Senate bill and the House plans fall below the levels of funding needed to maintain and restore our nation's crumbling infrastructure, according to industry experts.
Russia's new Baltic oil terminal at Ust-Luga will load its first crude oil cargo between December 15 and 20, according to the head of Transneft, the country's oil pipeline monopoly. The terminal is expected to ship 20 million tons of crude next year.
Industry insiders say that problems with infrastructure at Ust Luga may delay the terminal's first crude load.
It is expected that Russia, the world's number two oil exporter, will divert oil flows to Ust-Luga at the expense of the Polish port of Gdansk and Russia's Baltic Sea port of Primorsk. Russia wants to bypass countries like the Ukraine and Belarus, which have recently argued over the transit terms of sending Russian oil to customers in Europe.
Navy makes eco-friendly inroads with algae-based fuel
The U.S. Navy's largest test of alternative fuel passed a major milestone Thursday with the safe arrival of a destroyer powered by a mix of algae-based fuel and petroleum.
After a 17-hour maiden trip from San Diego, the Paul F. Foster ship arrived at the Naval Surface Warfare Center Thursday morning at Port Hueneme.
The military branch aims to cut its carbon footprint in half over the next 10 years, including the incorporation of a "Great Green Fleet" run entirely on alternative fuels by 2016.
