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Summary for December 2 through December 6, 2013:
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Monday, December 2, 2013 Top StoryDrewry: EC price fixing investigation of ocean carriers will take time
Drewry noted that container carriers will claim they are doing what they have always done, namely notifying customers of future price increases in good faith, and that the practice hasn't benefited them unduly given the overall downward spin in freight rates over the past four years. The EC can say that since the practice of announcing GRIs started, the lack of fiscal justification for them has grown, suggesting that the increases now being implemented are solely motivated by supply and demand, and should be less "orchestrated," Drewry said. The EC's evidence was reportedly gathered during dawn raids made on several shipping line offices in Europe during May 2011, including those of APL, Cosco, Evergreen, Hanjin, Hamburg Sud, OOCL, Maersk Line, MOL, NYK and MSC. The EC issued revised guidelines on horizontal cooperation agreements in May 2011, guidelines that encompasses communication of information among competitors that could constitute an agreement, a concerted practice, or a decision with the object of fixing prices. In other words, the EC can claim that ocean container lines were warned against "price signaling" more than two years ago, but may have chosen to ignore it. However, Drewry says the EC's warnings were only issued at the same time as its dawn raids, giving them less credence, although the way that ocean carriers have since escalated the use of GRI's might have tipped the balance in favor of further legal action. Drewry says the EC's legal case against ocean carriers will not be resolved quickly, since regulators outside of Europe don't seem to see a need for change, and the shipping lines would appeal any adverse decision. However, if the EC had evidence that carriers were actually talking to each other about GRI levels, that could all change. Drewry's view is that the EC's legal case against container lines is "blown out of all proportion." They say, based on the data released so far, clearer guidelines on price signaling would seem to be a sufficient remedy, unless more damning evidence is produced. U.S. manufacturing hits 2.5 year highThe Institute for Supply Management's index of national factory activity rose to 57.3 in November, hitting the highest level since April 2011 and besting predictions of 55, a positive indication for the U.S. economy at the year's end. The new orders index surged to its highest level since April 2011, increasing to 63.6 from 60.6. The employment index rose to 56.5 from 53.2, its highest level since April 2012. Production rose to 62.8 from 60.8. The ISM reading echoed the index released by financial data firm Markit, which showed manufacturing jumping to a 10-month high in November. A report from the Commerce Department showed construction spending increased 0.8 percent in November to an annual rate of $908.4 billion, the highest since May 2009. For more of the Reuters story: reuters.com Shanghai port requests $1.6B terminal expansionShanghai has asked the central government to approve a $1.6 billion container terminal expansion to help develop its free trade zone. The city plans to start construction of the fourth phase of the expansion of Yangshan Port once the National Development and Reform Commission gives the okay. Sources with the knowledge of the proposed expansion said the development of new berths would cost approximately $1.6 billion and will add annual capacity of 4 million TEUs. Shanghai began a test run in late September of its free-trade zone, which Premier Li Keqiang wants to use as a proving ground for further economic reforms. Shanghai has been the world's busiest container port for the past three years, and the Yangshan deep-water port accounted for about 40 per cent of the container volume the port handled in 2012. For more of the South China Morning Post story: scmp.com Malaysian billionaire says shipping lines can invest in Port Klang expansionMalaysian shipping-line clients will be able to invest in Westports Holdings terminals as it expands capacity at Port Klang, says billionaire G. Gnanalingam, Westports founder and chairman. But as the company expands, the P3 Alliance of shipping giants CMA CGM, Maersk Line and MSC has investors concerned that it could lead to fewer port calls at the Malasian port. Westports operates six container terminals at the Malaysian Port Klang and plans to spend $619 million to build three more and double its capacity, Gnanalingam said. "We won't sell equity in the port but will welcome joint-venture terminals," he added. "The advantage is that the customer will stay." CMA CGA is Westports' biggest customer, and as it plans to share vessels with P3 partners to offset overcapacity and low freight rates, it is estimated that Port Klang, Hong Kong and Rotterdam will suffer the greatest loss of port calls, according to a report from HSBC Holdings. "The P3 alliance is concerning and the company will need to show in the second half of 2014 that there has been little impact to operations," said Alan Richardson, a Hong Kong-based money manager at Samsung Asset Management, who isn't invested in Westports shares. "It's not the number of calls you need but the volume per ship," Gnanalingam said yesterday. Westports plans to up capacity to about 15 million TEUs annually by 2020, from 7.5 million TEUs, he said, saying its seventh terminal may be ready by the end of next year. For more of the Bloomberg story: bloomberg.com Zim slapped with going-concern warning on debtZim Integrated Shipping, the cargo-shipping arm of The Israel Corporation, was forced to append a going concern qualification to its third-quarter financial statement. The warning signals that the company's auditors are not sure the company can survive as it struggles with $2.4 billion in debt. Zim, in talks with creditors, expressed confidence that it would reach an agreement. "There has been no deterioration in the company's performance," the company said in a statement, adding "once the arrangement is completed and approved, there will be a significant improvement in the capital structure." Zim, the world's 17th-largest shipping company with a 2 percent market share, lost $44 million in the third quarter, compared to a $16 million profit a year earlier. However, many of its financial indicators have improved in Q3. Zim recorded an operational profit of $17 million, coming back from a loss of $29 million in the second quarter, while earnings before interest, taxes, depreciation and amortization, grew to $56 million from $12 million. The shipping line carried about 2 percent more cargo than in the second quarter, although revenues fell 15 percent to $900 million due to lower freight rates. Zim said the going concern warning required it to reclassify some $1.5 billion of long-term debt to short-term debt. For more of the Haaretz story: haaretz.com Four die in NYC commuter train derailmentAfter commuter train derailed in the New York City borough of the Bronx on Sunday, four people died and dozens were injured, according to investigators. All seven passenger cars and the locomotive jumped the tracks about 10 miles north of Manhattan's Grand Central Terminal, the National Transportation Safety Board said. Three of the dead were thrown out of the train as it "came off the track and was twisting and turning," reported New York Fire Department Chief Edward Kilduff. The train was on its way to Grand Central from Poughkeepsie when it derailed about 7:20 a.m., said NTSB member Earl Weener. At least 67 people were injured, said Joe Bruno, New York's commissioner of emergency management, and 11 remained in critical condition Sunday evening, Gov. Andrew Cuomo said. For more of the CNN story: cnn.com
Tuesday, December 3, 2013 Top StoryContainer shipping fleet continues shift to mega-sized vessels
"Despite the challenge they face, the second tier carriers continue to have a strong appetite for new capacity," shipping newsletter Alphaliner wrote on Tuesday. Alphaliner said the order book of the three largest carriers, Maersk Line, Mediterranean Shipping Company and CMA CGM currently stands at 15.6 percent of their current fleet. Nine of 17 carriers reported positive operating earnings in the third quarter, but performances of individual carriers were mixed and operating profits ranged from negative 5.1 percent for Regional Container Lines to positive 8.1 percent for Maersk Line. "The largest carriers continue to enjoy significant scale advantages, with Maersk and CMA CGM, the first and third largest carriers, continuing to outperform the rest of the industry," Alphaliner reported. Maersk Line has take delivery this year of five mega ships, each with a capacity of 18,270 TEUs, and another 16 sister ships will be finished by DSME shipyard and delivered within the next year and a half. The average size of container ships on the trades between Asia and Northern Europe topped 10,000 TEUs earlier this year. For more of the Reuters story: reuters.com Port of Long Beach engineering arm may need more staffA consulting firm hired by the Port of Long Beach, PMA Consultants, presented five organizational restructuring options for the port's engineering bureau, along with a list of proposed goals, during a board meeting on November 18. PMA's Bruce Stephan presented a list of goals for a new engineering bureau structure to include enhanced collaboration within the bureau, forecasting cost overruns as early as possible, enhancing the timeliness and accuracy of project performance data, and developing a relationship of trust between the board of harbor commissioners and engineering staff. With two major development projects underway – the Gerald Desmond Bridge Replacement project and the Middle Harbor Redevelopment project – Noel Hacegaba, the port's deputy executive director, said the consulting firm was hired to determine if there was enough staff within the engineering department to handle these projects and whether they could deliver the projects efficiently. "We believe that it is important to address these issues because that's what is going to help us deliver these projects in a timely and safe fashion," Hacegaba said. "The port has an outstanding engineering team, which has been severely stretched as these projects have rolled out simultaneously. This capital improvement program is unprecedented." For more of the Long Beach Business Journal story: lbbusinessjournal.com Garment workers in Bangladesh get 77 percent wage increaseBangladesh raised the minimum wage December 1 for its garment workers by 77 percent after workers shut down factories seeking better pay and conditions, according to Labor Minister Rajiuddin Ahmed Raju. Workers' protests forced about 250 garment factories to close recently in Ashulia factories account for 35 percent of Bangladesh's garment output and supply retailers including Hennes & Mauritz and Wal-Mart Stores, said Abdus Salam Murshedy, president of the Exporters Association of Bangladesh. Prime Minister Sheikh Hasina urged factory owners to accept the pay recommendation made by a government-appointed panel. In September, thousands of workers demanding higher wages forced the closure of 400 of the nation's 5,000 clothing factories. The protests reflect the rising labor tensions in Bangladesh, which has the lowest wages in Asia after Myanmar. For more of the Bloomberg story: bloomberg.com Port of Olympia begins dredging projectPort of Olympia is dredging its harbor for the first time in more than 30 years, deepening and improving the port's marine terminal and the Swantown Marina area, where boats are lifted out of the water for repairs. Tacoma's Orion Marine, the winning bidder for the $5.2 million project, started dredging last week and the team resumed work Monday. Dredging crews will work around the port's shipping schedule. When a ship is in port, the crews will move back and forth between Swantown Boatworks and the marine terminal shipping berths, according to Alexandra Smith, the port's environmental programs director. The crews will remove 40,000 cubic yards of sediment from two port sites, with the bulk of it coming from the marine terminal berth area, using two barges. The dredging equipment is on one barge and the dredged materials, which include contaminants, go onto the second barge, drain overnight, and then are loaded into trucks and transported to a disposal facility in Castle Rock. For more of The Olympian story: theolympian.com 85 injured in Hong Kong ferry crashDozens of people were injured Friday in a high-speed ferry boat accident off of Hong Kong's coast. The boat struck an unknown object near Sunshine Island around 1:20 a.m., a government spokeswoman said. About an hour and a half later, it returned to the Hong Kong-Macau Ferry Terminal, where emergency crews rushed injured victims to hospitals, she said. At least 85 people were injured -- six seriously, according to Hong Kong's Fire Services Department. There were 107 passengers and 10 crewmembers aboard the ferry at the time of the incident, officials said. It was not immediately clear what caused the crash. For more of the CNN story: edition.cnn.com
Wednesday, December 4, 2013 Top StoryLos Angeles major's office to begin search for new seaport leader
"Mayor Garcetti is engaging a recruiting firm to lead a national search to find the best possible executive director for this critical economic engine," said Garcetti spokesman Jeff Millman. Knatz, who went to the Port of Los Angeles after 24 years at the Port of Long Beach, became the first woman to run a major port complex when she was appointed head of the city Harbor Department in December 2005. She retires on Jan. 31. Gary Lee Moore, the city engineer and general manager of the Bureau of Engineering, will serve as acting director while the search is launched for a new leader to manage the port's 7,500 acres and 43 miles of waterfront. More: presstelegram.com GE and Shell invest in LNG-fueled shippingRoyal Dutch Shell, General Electric and Clean Energy Fuels Corp., a company co-founded by T. Boone Pickens, are planning to invest in shipping powered by natural gas, as record U.S. production gives the merchant fleet incentive to use the new fuel. Clean Energy Fuels Corp. will begin construction in 2014 on the first U.S. fuel station for cargo ships running on liquefied natural gas in Jacksonville, Fla. Shell said in March it's planning LNG plants for the Great Lakes and Gulf Coast. "We truly believe the age of gas is here," said Mike Hosford, GE's general manager for unconventional resources. "The industry needs bigger players to step in and start helping to build out the infrastructure." Although the maritime industry still relies on oil-based products for almost all its fuel, stricter emissions rules and abundant natural gas are convincing ship owners to switch. The global fleet of 42 LNG-powered ships will almost triple by next year and increase 42-fold to almost 1,800 vessels by 2020, according to DNV GL, the largest company certifying the merchant fleet for safety. For more of the Bloomberg story: buffalonews.com Foss Maritime launches joint venture with ASRC oil spill response firmTug and barge operator Foss Maritime Company and ASRC Energy Services Response Operations (ARO), an offshore spill responder in Alaska, are joining forces to pursue marine service opportunities throughout the state. The joint venture, called AES-Foss Marine, LLC, will be headquartered in Anchorage, Alaska. "We strive to partner with companies that believe in responsible development and will protect our resources through safety and environmental stewardship," said Jeff Kinneeveauk, president and CEO of ASRC Energy Services, parent company of ARO. "And in that regard Foss certainly is a maritime industry leader. They are also a good partner because they share, respect and understand our Iñupiat cultural values." One of the attractions for both partners is the prospect of a program to train Iñupiat people for jobs in a growing north coast maritime industry. ASRC is one of the Alaska'a leading corporations, with revenues in excess of $2.6 billion, and has five distinct businesses in several sectors that include energy and oilfield services. For more of the Reuters story: reuters.com China cracking down on U.S. GMO corn shipmentsAfter several U.S. corn shipments were rejected by China for containing an unapproved genetically modified variety, almost 2 million tons of U.S. corn bound for China will face heightened scrutiny by state authorities. Since mid-November, China, the third biggest customer of U.S. corn, has turned away several containers of corn that tested positive for Syngenta AG's Agrisure Viptera, since it has not been approved for import by China. U.S. exporters had hoped Chinese officials would look the other way as the GMO corn variety known as MIR 162 has been in the U.S. supply chain since 2011. Trade sources said no cargoes had been rejected for containing the trait until this year. "A lot of us in the trade knew that the Chinese had not moved this approval along with the hope that they would look the other way," said Dan Basse, president of AgResource Co. Crop experts estimate that up to 10 percent of the 14-billion-bushel U.S. corn crop carries the MIR 162 trait, designed to offer enhanced protection against crop-damaging insects. China Inspection and Quarantine Services officials appeared to be checking incoming cargoes more closely for the unapproved strain, Basse said. For more of the Reuters story: reuters.com North Korean crew continue to be held in PanamaA Panamanian prosecutor who reported the release of all but three of 35 crewmen of a North Korean ship seized for carrying Cuban weapons reversed his story Wednesday afternoon, saying all were still being held. Organized crime prosecutor Nahaniel Murgas had said only the ship's captain, first mate and a Korean official who watched the crew would continue to face charges of arms trafficking. Later in the afternoon at the base where the crewmembers were being held, Murgas changed his story, saying only the ship was legally free to go. Officials with the independent Panama Canal Zone say the ship cannot move until the North Koreans pay a $1 million fine for threatening the canal's security by not declaring the weapons. For more of The Olympian story: theolympian.com
Thursday, December 5, 2013 Top StoryCalifornia exports hit record $15.35B in October
Exports totaled $13.78 billion in September this year. "With the surge in California's export trade in recent months, the state's exporters ought to be feeling a pretty healthy endorphin rush," said Jock O'Connell, Beacon's international trade adviser. Beacon said California's autumn jump was led by a $727 million boost in manufactured exports, which increased nearly 8.2 percent to $9.66 billion from $8.93 billion in October 2012. Meanwhile, exports of non-manufactured goods, mainly agricultural produce and raw materials, totaled $2.35 billion, up about 19 percent, from $1.98 billion a year ago. Re-exports rose from $2.96 billion last year to $3.34 billion this year, an increase of 12.8 percent. Computer and electronics products remained the single largest category of California exports, accounting for $10.77 billion in shipments in the latest August-October period. "Europe saw a modest positive uptick in the second and third quarter of this year, and the rest of the world economy seems to be gaining traction as well," said Christopher Thornberg, founding partner of Beacon. "This shouldn't imply that Europe's problems are fixed, but at least the drag they were creating on global growth and trade is gone, and clearly this is good news for local exporters." For more of the Fresno Bee story: fresnobee.com Chilean shipping line Vapores in merger talks with Hapag-LloydChilean container line Compania Sud Americana de Vapores, the largest shipping company in Latin America, said late Wednesday it was in merger talks with German container shipping company Hapag-Lloyd. Vapores has posted steep losses in recent years as it deals with low shipping rates, high fuel costs and expensive leases, and has sought ways to become more competitive. "In recent years Vapores has adopted a series of measures to confront the difficulties facing the shipping business, among these are the implementation of joint operations with other shippers and agreements to combine cargo," the shipping company said in a statement. "Vapores currently is in talks with diverse actors in the industry, including negotiations with German company Hapag-Lloyd" for a possible tie-up in the container-shipping business, it added. No agreement has been reached yet, Vapores said. Top executives of both companies met last month in Miami to explore a number of options, including a merger, German daily Die Welt previously reported without naming sources. Earlier in 2013, the owners of Hapag-Lloyd canceled a merger with rival German shipper Hamburg Sud because terms could not be agreed. For more of the Reuters story: reuters.com Chinese investor to lead $3B Ukraine port projectWang Jing, a Chinese investor who has a concession to build a waterway in Nicaragua to compete with the Panama Canal, announced he is also heading a $3 billion project to build a deep-water port in Ukraine. "The strategic and cooperative partnership between China and Ukraine has moved a step forward," Wang said in Beijing Thursday. "Even though this project is relatively big, you can say we fell in love at first sight." A senior Ukrainian official told Reuters, however, that she had not heard about the project. "I can say that such project did not pass through our ministry," she said. The 300-hectare port project is to be located about 60 kilometers north of Sevastopol on the Black Sea. A memorandum of understanding was signed today between Wang's Beijing Interoceanic Canal Investment Management Co. and Kievgidroinvest, a hydrogeology research firm registered in Sevastopol. The port project, to be built on a dried-out lake on the Crimean coast, would require a $3 billion investment in its first phase, Wang said. For more of the Reuters story: reuters.com Investment bank: Neptune Orient Lines likely to recover in 2014According to ASEAN investment bank CIMB Group, despite coming losses in in the fourth quarter after a huge fall in spot rates over the past few months, the worst may be over for Neptune Orient Lines a modest turnaround should be expected in 2014. By the end of 2014, CIMB said, NOL would have completed the vast majority of its vessel charters that were entered in the days before the global financial crisis. "We believe the group will largely achieve its desired cost base next year," reported CIMB, "and we expect it to turn a small profit of less than 1% net margin." The bank said that despite expectations of better earnings for NOL in 2014, its near-term share price upside would likely be capped by the possibility of outsized losses in 4Q13. For more of the Singapore Business Review: sbr.com.sg Stolen cargo truck with radioactive material found in MexicoA stolen truck carrying radioactive material, the kind used in hospitals but also potentially as a dirty bomb, set off a two-day hunt in Mexico before both the vehicle and its contents were found Wednesday at nightfall. The cargo truck had been carrying the material, cobalt 60, from an outdated radiotherapy machine at a public hospital in Tijuana to a storage repository in central Mexico. It was in a sealed container on the bed of the truck when armed men hijacked it at a gas station on Monday. For more of the New York Times story: nytimes.com
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The European Commission is investigating price fixing among shipping lines, intending to discontinue the use of GRI announcements that indicate rate strategies to rivals, but the outcome of the antitrust proceedings is far from certain according to the latest issue of Container Insight from Drewry Maritime Research.
Shipping association Bimco forecasts the total container shipping fleet capacity to grow by 5.9 percent in 2013, although estimates for the amount of container capacity being scrapped are at a record high.
The City of Los Angeles will hire a company next month to conduct a nationwide search for the next head of its seaport to replace retiring executive director Geraldine Knatz, according to Mayor Eric Garcetti's office.
California businesses shipped merchandise valued at $15.35 billion, an all-time record for October and up 10.7 percent year-over-year, according to a review of Wednesday's U.S. Commerce Department figures by consulting firm Beacon Economics.