Cargo Business Newswire ArchivesSummary for December 14 through December 18, 2015:
Monday, December 14, 2015
China approves COSCO-China Shipping merger
China announced plans to reorganize China Ocean Shipping Group (COSCO) and China Shipping Group, with combined revenue of more than $40 billion, creating one of the world’s largest container lines and showing the country’s intent to create national firms that are globally competitive.
The two shipping lines will consolidate operations, according to a statement from the State Council’s state-owned Assets Supervision and Administration Commission. That involves the creation of four listed entities that will each focus on an aspect of the shipping business: container shipping, shipping financing, oil-and-gas shipping and the global terminal business, according to the official Xinhua News Agency. The various units have yet to make any announcements.
China is overhauling inefficient state-run companies to boost an economy headed for its slowest growth in 25 years. The plan intends to cut down sectors plagued by overcapacity while creating globally competitive companies in high-value sectors such as aerospace and advanced rail technology.
Bloomberg News reported the possible combination of the two Chinese companies Aug. 7. Three days later, at least eight listed units of China Shipping Group and COSCO Group suspended trading in Hong Kong and Shanghai, citing possible "major transactions" by the parent companies.
State of Logistics: Taking Collaboration to the Next Level?
By William DiBenedetto, CBN Feature Editor
Yes, the logistics industry is on the upswing, but there are some stubborn issues out there that could add a layer of uncertainty for even the top companies in 2016.
Those issues include pressures on margin and equipment performance due to environmental regulation, regional trade disparities, driver shortages, capacity issues, port congestion and the increasing and welcome realization that collaboration is a necessity—not just "nice to have."
According to the Council of Supply Chain Management’s 26th annual "State of Logistics Report," which was issued in mid-2015, the transportation sector of the logistics industry grew by 3.6 percent in 2014. "This is largely due to consistent new job creation, higher net income of individuals, and increasing household net worth, lower rates of inflation, and reduction in the cost of gas prices." As a result, "the link between the cost of crude oil, gas prices, and consumer spending comes back to the forefront of the transportation industry. As consumers spend less on personal and work-related travel, they have more money to spend on other items, which strengthens the logistics industry, especially the trucking sector."
If that sounds a somewhat fragile—due to the continuing "softness of the economy" said economist Rosalyn Wilson, who wrote the CSCMP report, and because faith in low gas prices seems to be a constant—it’s because it is. The message? Keep a tight and continuous rein on spending.
The 2016 20th Annual Third Party Logistics Study shows continued collaborative and positive relationships between shippers and third-party logistics providers. This survey suggests that 3PLs and their customers are becoming more proficient at what they do, individually as well as together, which is improving the quality of their relationships. Both parties—93 percent of 3PL users and 94 percent of 3PL providers—reported that their relationships are successful and that their work is yielding positive results.
The study revealed that 70 percent of those who use logistics services—shippers—and 85 percent of 3PL providers said the use of 3PL services has contributed to overall logistics cost reductions, and 83% of shippers and 94 percent of 3PL providers said the use of 3PLs has contributed to improved customer service.
In addition, the majority of both groups—75 percent of shippers and 88 percent of 3PL providers—said 3PLs offer new and innovative ways to improve logistics effectiveness.
That said, there’s a looming transportation capacity crisis, this has gone on for at least 20 years but could reach critical mass by 2017.
In addition, the truck driver shortage remains a major concern for the logistics sector. The American Trucking Associations has estimated the current shortage ranges from 35,000 to 40,000 drivers. A key indicator of is driver turnover rate, which is running at more than 95 percent on an annualized basis.
The recent spate of huge mergers and acquisitions, such the $3 billion XPO Logistics purchase of Con-way late this year, is already in the rear view mirror, but the focus is likely to shift to deals involving smaller 3PLs in 2016. The hunt is apparently on for companies with IT and process capabilities to support e-commerce. In an article in Material, Handling and Logistics magazine, Frank F. Mountcastle III, managing director of the middle market M&A advisory firm Harris Williams & Co., was quoted saying, "2016 will be very busy but it will be the year of the smaller deal" as companies seek out add-ons to fill gaps in their transportation management and e-commerce capabilities.
The continuing climate of 3PL consolidation is seen as a defensive posture to preserve market share, become more tech-savvy, and better manage risk. A major watchword in this mix is collaboration.
As noted in a recent Amber Road white paper, many companies have not explored effective collaboration with supply chain partners because of a lack of trust. The lack of trust and control "prevented retailers from collaborating closely with suppliers, causing friction and redundancy when both parties duplicated the same tasks," Amber Road said. "With the transparency of shared data and mutual collaboration, retailers are more comfortable sharing responsibilities with suppliers."
But recent trends toward more open and bi-lateral communication have made this challenge a non-issue, the paper continues. "The trust factor is no longer a barrier for developing and maintaining collaborative relationships and most retailers have dismissed this as a concern."
A growing percentage of enterprises are also rethinking their supply chain execution software portfolios, and adopting cross-functional platforms that support integrated, end-to-end business processes. That sounds a lot like collaboration.
Does consolidation help spur even deeper collaboration, or vice-versa? Actually, the two should go hand in hand. What seems certain is that an M&A can’t be very successful without the willingness to collaborate.
Moody’s: U.S. Ports to see modest growth in 2016
According to a report from Moody’s Investor Service, container volume growth through U.S. ports will slow in 2016 as demand for U.S. exports stays weak and U.S. retailers work through high inventories.
Moody’s said it expects container volume will rise 3 to 4 percent next year, down from 5 percent growth this year.
Strong growth in 2015 was due in part to a big influx of containers after West Coast dockworkers agreed to the terms of a 6-year contract in late February. During the long negotiation process, which began in May of 2014, the West Coast ports experienced periods of excessive delays with ships queuing to enter the ports of Los Angeles and Long Beach for weeks.
"The growth this year was inflated by the port gridlock and then the unwinding of that, which has really driven up inventories in the U.S.," said Moses Kopmar, a Moody’s analyst and who wrote the report.
Retailers attributed the lack of a traditional peak shipping season this fall to that excess inventory, but an industry group predicted this week that retail shipping would end the year on a positive note, bringing import growth at major U.S. ports to 5.5 percent over 2014.
The Moody’s report also lowered expectations for 2016 growth at U.S. ports due to weak global GDP, noting that "the ongoing gradual slowdown in China, which is a major participant in global trade and represents 30 percent of all container moves, continues to weaken demand across cargo markets."
Still, Kopmar said 2016 would likely bring some welcome stability to the U.S. port sector because, for one, "you don’t have the uncertainty about labor-related issues of the previous year."
Low oil prices and excess capacity in the ocean shipping sector will likely keep ocean freight rates low, in turn boosting cargo volume growth in the coming year. Combined with employment growth and healthy consumer spending in the U.S., Mr. Kopmar said, "Our outlook for the shipping industry is stable."
Over the longer term, he said, "our expectation is that container growth is going to grow relatively in line with GDP."
Port of Long Beach volume up 6.6 percent in November
Strong cargo volume continued at the Port of Long Beach in November with 6.6 percent growth year-over-year. It was the fifth straight month of increases and the second-busiest November in the port’s 104-year history.
A total of 619,699 TEUs moved through the port last month. Imports were up 4.3 percent to 306,654 TEUs, while exports fell 4 percent to 124,717 TEUs, reflecting the strong U.S. dollar. Empties tallied 188,328 containers, a 19.5 percent increase over November 2015.
The port statement said upcoming post-holiday sales planned by retailers across the country drove the strong numbers.
The National Retail Federation reported October sales were the highest in three months, according to the port statement. The Toy Industry Association reported healthy sales figures up by 6.2 percent, an increase of $1 billion. Toy sales were driven by merchandise from "Star Wars" and "Minions" movies, and those toys came through the Port of Long Beach.
"Thanks to our industry partners, we have had consistent gains throughout 2015 and are on track to move more than 7 million TEUs this year," said Port of Long Beach CEO Jon Slangerup. "Retailers have reported a modest but healthy holiday season, which keeps us busy and the economy growing."
Based on current projections for December, the Port expects to surpass 7 million TEUs in 2015, which would be only the third time in its 104-year history.
Sinking cargo ship rescued in English Channel
A cargo ship was towed to port in Southampton last week after it began taking on water and started to sink in the English Channel, according to the coastguard.
The EMS Majestic, which is registered in Antigua and Barbuda, issued a Mayday call from its position in the Dover Strait.
A number of vessels responded to the sinking vessel, according to the Maritime and Coastguard Agency.
Two of the ship's crew of seven were airlifted to land for safety reasons.
Drewry: Maritime mergers unlikely to continue at same pace
Now that CMA CGM is buying NOL/APL, and Cosco and CSCL are merging, is this a new rash of consolidation in the container industry?
Drewry’s latest issue of Container Insight notes the container shipping world is getting smaller after the announcements of CMA CGM’s successful $2.4 billion bid for NOL/APL and two major Chinese state-owned shipping entities — Cosco and China Shipping — being granted merger approval.
It has been almost exactly 10 years since the industry underwent its last bout of major M&A activity. Drewry says early signs suggest that these transactions may be one-offs rather than signaling another major M&A trend. The first clue comes with the price that CMA CGM will pay for NOL. For CMA CGM, at $0.92 per share they will purchase NOL at just below its book price, while NOL’s shareholders can be pleased with securing a 49 percent premium on the share price before the company announced it was engaged in sale talks in July.
The book price is low in comparison with the two major deals concluded in 2005 but is on the high side when set against the current industry average, according to Drewry Martime Equity Research. The relatively rich book price multiple of this deal is partly driven by NOL’s terminal asset portfolio in DMER’s view.
However, selling at below book value is hardly likely to encourage other owners to rush to sell and NOL’s peers have not seen any significant uplift in their share valuation, something that usually occurs when further M&A in a sector is anticipated.
The latest M&A activity will cause some operational headaches since alliance members face losing a partner. CMA CGM plans to move APL into the Ocean Three alliance from the G6 Alliance, while it is not yet known if Cosco/CSCL will reside in the Ocean Three (current home of CSCL) or the CKYHE Alliance (home to Cosco).
In conclusion, Drewry says consolidation will not do anything to improve industry profitability in the medium term since it only shuffles the excess number of ships into fewer hands. Further consolidation is a possibility as other lines decide they cannot keep up with the Jones’, but the analysts say the challenging outlook will subdue valuations, making them less appealing to potential sellers.
November imports up 8.7 percent at Port of Oakland
November container imports rose 8.7 percent year-over-year. It was the eighth increase at the Port of Oakland in the past nine months.
In November, container imports came in at 73,296 TEUs while exports were 1.5 percent less than for November 2014 and totaled 77,060 TEUs. Weaker demand in China for U.S. goods contributed to the export decrease.
Import volume for the first 11 months of 2015 for the Oakland port is up 0.4 percent from last year. The port says its performance is significant after a nearly 40 percent volume decline last winter.
"We’re finishing the year much stronger than we started," said port Director John Driscoll. "Our goal now is to keep the momentum up heading into 2016."
The port attributed the boost to healthy consumer demand. Container volume typically slows at year-end as retailers complete holiday inventory buildups.
Total container volume – imports, exports and empty containers – declined 0.3 percent in November.
Port of Houston surpasses annual container record
The Port of Houston Authority announced it has topped 2 million TEUs handled this year, setting a new record and its position as the leading container port on the U.S. Gulf Coast.
So far, container volume in 2015 has beaten the previous record of 1.96 million TEUs set for 2014.
"We are so pleased to witness this significant milestone in the port's history as we continue to strive to advance the Port of Houston and solidify its position as America's distribution hub today and for generations to come," said Port Commission Chairman Janiece Longoria.
The Houston Port Authority will invest approximately $700 million over the next decade, modernizing the Barbours Cut Container Terminal to increase efficiency, accommodate larger vessels and double its container handling capacity. Among other improvements, four new Super Post-Panamax ship-to-shore wharf cranes that were delivered this year are now in operation.
At the newer Bayport terminal, a high-tech truck entry gate has enabled truck processing, and a mobile app for truck drivers has increased efficiency.
Norfolk Southern declines revised offer from CP
Norfolk Southern formally rejected a revised offer from Canadian Pacific Railway, saying it was worth less than CP's earlier proposal.
The revised offer valued Norfolk Southern at $88.52 per share, based on Canadian Pacific shares' closing price on Friday, Norfolk Southern said.
The CP proposal "continues to be grossly inadequate" and "nothing in the revised, reduced proposal addresses the concerns of the Norfolk Southern board," the company said in a letter disclosed in a regulatory filing.
Canadian Pacific first made its offer for Norfolk Southern public on Nov. 17, valuing Norfolk Southern at about $94.94 per share, but met with an unenthusiastic response.
Canadian Pacific first offered $46.72 in cash and 0.348 of its shares for every Norfolk share. In the revised bid, Canadian Pacific slashed the cash component to $32.86 and offered 0.451 of a share in a new holding company that would own both Norfolk Southern and Canadian Pacific.
The derailment of a Canadian Pacific train in Edmonton, Alberta, which caused the spill of nearly 26,417 gallons of styrene into a ditch, has not impacted the company's operations, a spokesman for the railway said Wednesday.
Last Tuesday, four cars derailed at low speed in Edmonton's Scotford Yard, CP spokesman Martin Cej said. There were no injuries or fires or risk of further spilled styrene, a synthetic chemical used to make plastics and rubber.
The material in the other derailed cars has been transferred to trucks and moved, while the cleanup was still underway on Wednesday, Cej said.
The Transportation Safety Board of Canada is investigating the derailment.
Crown Prince Tweet: DP World to invest $1.9B in China
Dubai ports operator DP World DPW.DI will invest $1.9 billion in China, according to the Twitter account of the Crown Prince of Abu Dhabi.
The Twitter post did not elaborate and DP World could not immediately be reached for comment.
Sheikh Mohammed bin Zayed al-Nahayan, the Crown Prince, is on a three-day official visit to Beijing, during which a host of business deals have been announced between the United Arab Emirates and China.
DP World has three ports in China — Qingdao, Tianjin and Yantai — according to its website.
CMA CGM 18,000-TEU container ship to be largest ever to call L.A. port
The biggest ship to ever dock at a North American port will call the Port of Los Angeles later this month.
The CMA CGM Benjamin Franklin, which is expected to arrive at APM Terminal’s Pier 400 on Dec. 26, is one-third larger than the biggest vessels currently operating at port.
Port Executive Director Gene Seroka said the ship’s anticipated arrival "signals a new chapter in Pacific Rim trade flow and supply chain optimization."
The ship, launched on Dec. 10, has a carrying capacity of 18,000 TEUs. Most ships visiting the Port of Los Angeles have an average capacity between 8,000 and 11,000 TEUs, and the largest so far to visit the port was 14,000 TEUs, according to Port of Los Angeles spokesman Phillip Sanfield.
New Orleans Cold Storage expansion opens at Port of Charleston
New Orleans Cold Storage completed the Port of Charleston expansion project in late November, increasing blast capacity by more than 50 percent, and more than doubling the size of its previous storage space at the port.
"We are looking forward to offering even more services to our clients at the Port of Charleston, where we have been for almost 30 years," said Mark Blanchard, president and CEO of New Orleans Cold Storage. "This expansion will help us continue to be one of the largest logistics and cold storage suppliers to the poultry, pork, beef, seafood, vegetable, and international refrigerated food industries."
In addition to the blast capacity expansion which will help the export protein industry, the expansion will also further benefit the import meat trade that originally brought NOCS to the Port of Charleston in 1986, particularly that with Australia, New Zealand, Central America and South America.
For over 128 years, NOCS has been one of the world’s leading providers of comprehensive logistics services for the efficient handling of time and temperature-sensitive cargoes. NOCS expanded its services to include the port of Charleston in 1986. The NOCS South Atlantic Facility at the Port of Charleston was built in 1987, and has been an integral part of the NOCS operation ever since.
Greenbrier receives $170M in new railcar orders
The Greenbrier Companies announced its new orders received since September 1, amount to nearly $170 million for approximately 1,800 railcar units.
These orders cover a range of railcar types, including automobile carrying railcars, boxcars, large cube covered hopper cars, and non-energy tank cars for the North American and European markets. Additionally, the company said it expects fiscal 2016 to include deliveries of 20,000 to 22,500 units and revenue to exceed $2.8 billion.
Of the 1,800 units ordered, 500 units were received during the first quarter ended November 30, 2015 and 1,300 units were received subsequent to quarter end.
Houston Ship Channel reopens after tanker fire
The Houston Ship Channel was re-opened Monday after a tanker fire triggered a nearly three-hour shutdown of a two-mile-long section of the largest petrochemical port in the nation.
The fire was put out nearly 90 minutes after it started, but the channel remained closed for another 90 minutes as firefighters monitored the air to ensure no toxic fumes lingered, Coast Guard Petty Officer 1st Class Andrew Kendrick said.
"Initially it was a big fire, but it came down pretty quickly," he said.
Earlier on Monday, flames were seen shooting from the tanker Navigator Europa, moored outside the Targa LPG export terminal, according to a source and Reuters vessel tracking data.
A representative for Targa Resources Corp did not respond to a phone call seeking comment.
Port of L.A. waived "green" standards for China Shipping expansion
When China Shipping North America was granted permission to expand at the Port of Los Angeles seven years ago, port officials approved the construction on the condition that new "green" standards were met to reduce harmful emissions. In September, the port disclosed that it has failed to carry out several requirements.
New documents show that almost as soon as that agreement was reached, top port officials started waiving the requirements, according to the Los Angeles Times. Reportedly former port director Geraldine Knatz said then-Mayor Antonio Villaraigosa wanted the port to remain "flexible" with its tenants during the economic downturn.
As a condition of allowing the company to expand its terminal in 2008, the port pledged to transform it into a "green" operation through a series of measures to reduce harmful emissions from diesel trucks, container ships and cargo-handling equipment.
Port records obtained by The Times under the California Public Records Act show that just a few months after the city approved the expansion, Geraldine Knatz, executive director of the port at the time, assured China Shipping that it would face no consequences for violating a major requirement: Instead of idling diesel-powered engines while docked, at least 70 percent of its ships would have to plug into shore-based electricity, known as Alternative Maritime Power.
"The Port will not hold China Shipping responsible for any outcome as a result of not meeting the 70 percent AMP requirement," Knatz wrote in an April 2009 letter to the company.
Trucker association files suit against feds over electronic logbooks
The Owner-Operator Independent Drivers Association announced it has filed a lawsuit over a new regulation announced by the Federal Motor Carrier Safety Administration requiring electronic logbooks, known as ELDs.
"This rule has the potential to have the single largest, most negative impact on the industry than anything else done by FMCSA," said Jim Johnston, OOIDA President and CEO. "We intend to fight it with everything we have available."
FMCSA just announced the final rule that requires the use of electronic logbooks for all interstate commerce in trucks that are model year 2000 and newer.
Commercial truck drivers are restricted to a limited number of working and driving hours under current regulations. The FMCSA is mandating that truck drivers use ELDs to track their record of duty status and compliance with HOS regulations even though such devices can only track movement of a vehicle and approximate location.
OOIDA has previously challenged a similar mandate in the courts. In August 2011, the U.S. Court of Appeals for the 7th Circuit vacated a proposed electronic logbook rule based on the argument of harassment of drivers, according to the statement.
The Petition for Review that OOIDA has filed this time does not outline the arguments that will be used to challenge the final rule. Arguments will be provided in subsequent filings and during oral arguments in front of the court.
"This regulation is absolutely the most outrageous intrusion into the rights of professional truckers imaginable and will do nothing at all to improve highway safety. In fact, we firmly believe it will do exactly the opposite by placing even more pressure and stress on drivers than they already deal with," Johnston said.
Suez Canal revenue down to $408M in November
Egypt's Suez Canal revenue dropped to $408.4 million in November from $449.2 million in October, according to the Suez Canal Authority's website.
The canal is the fastest shipping route between Europe and Asia and is one of the country's main sources of foreign currency. The November revenue was the lowest since February.
Louis Dreyfus and Cargill to run grain terminal at Brazil port
Louis Dreyfus Commodities and Cargill have won an auction to operate a grain terminal at Brazil’s Santos Port for 25 years, while Fibria SA and Marimex won rights to operate pulp areas there leased from the government.
The three port areas were the first of 93 nationwide that the government hopes to auction under a 2012 law. The recent auction brought $114 million in concession fees to President Dilma Rousseff’s cash-poor government, far less than the roughly $154 million it had expected.
Planning Minister Nelson Barbosa said concession winners would be required to make more investments and upgrade port infrastructure.
"Any concession revenue helps to raise the primary surplus, but the main purpose of the program is to bring in more investment," Barbosa said after the auction in Sao Paulo.