Ocean Shipping News

Ocean Shipping News Summary

Monthly news digest of important developments in the ocean transportation field.

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Ocean Shipping News Summary

April 7, 2004

LABOR NEWS

THE ILA AND EMPLOYERS HAVE REACHED AGREEMENT ON A NEW SIX-YEAR CONTRACT COVERING PORTS ON ATLANTIC AND GULF COASTS. In line with earlier assurances from its leadership, the International Longshoremen’s Association and the United States Maritime Alliance, representing employers, reached agreement on a new six-year master contract six months before the present contract expires on September 30. The ILA is confident its members will approve that contract and local ones still being negotiated, by June 1.

The new master contract provides for:

WAGES - Under the contract, the starting pay for new union workers will increase from the previous $15 per hour to $16 per hour. Increases for workers earning more than $21 an hour will go up by $1 per hour in the first, third, fifth and sixth years, for a cumulative total of $4 per hour. Workers making $21 per hour or less will see their hourly wages being raised by $2 per hour in both the first and third year, and by $1.50 per hour in the fifth and sixth years.

LOCAL BENEFITS - Funding of local benefit plans to be raised from the current $11 per hour to $13 per hour over the life of the contract.

MEDICAL INSURANCE - Management will increase its contribution to medical plans and the union will accept certain changes including co-payments. A three-tiered benefit plan will be set up, with eligibility based on the number of hours worked.

Other changes agreed to are:

the ILA will retain traditional work, even if it is to be done by computers

jurisdictional disputes will be resolved by a management-labor committee

requires management to give employees 180-day notice of its intent to introduce any new technology. If the union objects and the matter goes to arbitration, the implementation will have to wait for an arbitration panel to hand down a favorable ruling.

OCEAN SHIPPING RATE NEWS

A CONSULTING ECONOMIST PREDICTS OCEAN SHIPPING RATES WILL INCREASE BY 12 TO 18 PERCENT THIS YEAR. While that is a sizeable increase, it is much lower than the increases of about 40 percent that went in last year. With container capacity tight, particularly in the trans-Pacific trade, and expected to remain that way for the next two years, John Fossey, director of container shipping research at Drewry Shipping Consultants believes freight rates will continue strong through 2006 because demand for container capacity will continue to exceed the supply of new vessels.

SURCHARGES CAN ADD 25 PERCENT TO THE DELIVERED COST OF A PRODUCT . At the fourth annual "Trans-Pacific Maritime Conference" held in Long Beach, Calif., last month, Robert Shepard, director of transportation of Reebok International Ltd., told the audience that the cumulative effect of half-a-dozen surcharges including bunker fuel surcharges, currency surcharges, government add-ons, such as Panama Canal and Alameda Corridor, can tack on $646 to the $2,500 base rate of a typical peak season containerized shipment moving to the U.S. West Coast from Asia.

TRANS-PACIFIC TRADE NEWS

SURVEY OF TRANS-PACIFIC SHIPPERS REVEALS THAT PRICE IS STILL THE MOST IMPORTANT FACTOR FOR THOSE NEGOTIATING SERVICE CONTRACTS. The survey of 850 shipper executives was conducted by Capital Consulting and Management for the JOURNAL OF COMMERCE. Beside price, other contract issues considered are:

vessel space availability

on-time arrivals

availability of containers in Asia

Also bought out in the survey was the fact that trans-Pacific service contracts are the hardest to negotiate because the trade in the Pacific has more rate and route options, price volatility and contract amendments.

NEW WEEKLY SERVICE CALLS AT ONLY TWO PORTS - SHANGHAI AND LONG BEACH. COSCO Container Line has begun a new weekly container shuttle service offering 12-day transit times form Shanghai to Long Beach, and 14 days on return voyages. The service, called its "CLX" service, is operating with a fleet of four 1,700 TEU containerships. The round trip voyage is only 28 days. Normally, shipping line services from Asia make calls at four or more ports, which take from 35 to 42 days to complete their loops. It is now known at this time whether Hanjin Shipping or "K" Line will take space on the new "CLX" service as they did on a previous COSCO service that has just been discontinued.

THREE LINES ADD A NEW TRANS-PACIFIC LINE . Hanjin Shipping, "K" Line and Yang Ming will begin a new joint Asia/U.S. West Coast service on April 14. The so-called "PSW-4" service will operate with a fleet of five ships having capacities of 2,850 TEUs. Here is the initial port rotation:

Qingdao Oakland

Shanghai Pusan

Pusan Kwangyang

Los Angeles Qingdao

Yang Ming, expecting growth in the Ningbo market, may soon begin making a call at Ningbo, while concurrently dropping both calls at Pusan. If this is accomplished, Ningbo will become the last port of call in Asia. COSCO Container Line will be chartering slots on this new service.

TRANS-PACIFIC TRADE NEWS (continued)

YANG MING LINE AND "K" LINE HAVE CUT FROM THREE TO FIVE DAYS OFF THEIR TRANSIT TIMES BETWEEN ASIA AND THE U.S. EAST COAST. At the end of March, these two lines reduced the size of their fleet in their "AWE-3" service from nine ships to eight, each with capacities of 3,300 TEUs. The port rotation is shown below:

Kaohsiung New York

Hong Kong Wilmington

Yantian Savannah

Pusan Kaohsiung

Savannah

This service through the Panama Canal is operated jointly with COSCO Container Line and Hanjin Shipping Co., Ltd.

U.S. LINES SERVICE BETWEEN CHINA AND LONG BEACH IS NOW OPERATING WEEKLY. Previously the service, using a fleet of five 1,600 TEU vessels, had been operating on a fortnightly schedule. The Santa Ana, California, headquartered shipping line calls at the following ports in the rotation shown below:

Shekou Shekou

Hong Kong Hong Kong

Long Beach

TRANS-PACIFIC CONTAINER LINES MOVING CARGO WESTBOUND TO ASIA ARE ATTEMPTING TO RESTORE RATES TO MORE COMPENSATORY LEVELS . High on the list of rates, the 13 member lines of the Westbound Trans-Pacific Stabilization Agreement (WTSA) want to restore are the sagging rates on wastepaper which accounts for 20.1 percent of the total westbound containerized cargo in the trade. While those westbound rates were increased last year, but they eroded even though demand increased. Their goal is to bring rates back to the 2003 level in effect when rates were last increased. Last year, WTSA carriers handled 730,000 container loads of wastepaper.

SOUTH AFRICA TRADE NEWS

CAROTRANS INTERNATIONAL HAS EXPANDED ITS SERVICE TO SOUTH AFRICA BY ADDING PORT ELIZABETH AS A DIRECT CALL . That service, by the Union, N.J. headquartered non-vessel-operating common carrier, is bi-weekly, while its direct service to the ports of Cape Town, Durban and Johannesburg is weekly. In Elizabeth, CaroTrans is working with World Groupage Services as its agent.

INDIAN SUBCONTINENT TRADE NEWS

THE FEDERAL MARITIME COMMISSION HAS BEEN NOTIFIED BY FOUR SHIPPING LINES THAT THEY ARE SETTING UP A NEW DISCUSSION AGREEMENT COVERING THE TRADE BETWEEN THE U.S. AND THE INDIAN SUBCONTINENT. Member lines of the new agreement that would cover trade between ports and points in India, Bangladesh, Pakistan and Sri Lanka, on the one hand, and all ports and points in the United States are:

Evergreen Marine Corp. Nippon Yusen Kisha (NYK)

Hapag-Lloyd P&O Nedlloyd

There is currently another discussion agreement covering this trade called Indamex. The member lines are:

CMA CGM

Contship Containerlines

Shipping Corporation of India

In the past, the Trans-Pacific Stabilization Agreement covered the U.S./Indian trade, but last year, following a settlement with the Federal Maritime Commission, the India subcontinent was removed from the scope of TSA's agreement. This happening came about after an FMC investigation into alleged service contract malpractices in the transpacific trade.

SHIPPING LINE NEWS

JOURNAL OF COMMERCE LISTS TOP 50 CONTAINER LINES. The listing, drawing from statistics compiled by its sister company, PIERS (Port Import/Export Reporting Service), appeared in the JOURNAL'S March 29-April 4, 2004 edition. Here are the top 10 shipping lines handling containers in the U.S. import trade lanes:

CARRIER MARKET SHARE

1. Maersk Sealand 12.8%

2. Hanjin 6.9%

3. Evergreen 6.8%

4. APL 6.6%

5. Mediterranean Shipping 4.4%

6. P&O Nedlloyd 4.4%

7. Cosco 4.4%

8. NYK Line 4.3%

9. OOCL 4.3%

10. Hyundai 3.9%

The top 10 lines handling containers in the U.S. export trade include all but Cosco and NYK Line, with Hapag-Lloyd and Crowley Liner Services being substituted in their place, ranking 7th and 8th respectively.

COSCO WAS ONE OF THE FIVE OF THE TOP 50 CONTAINER LINES POSTING DECLINING VOLUMES DURING 2003. China Ocean Shipping, ranked seventh among the top 50 carriers handling imports in the U.S. trade and twelfth handling exports, saw its combined import and export volume drop by more than 20,000 TEUs in 2003 versus 2000 - a decline of 12.7%

Others with much lower rankings, whose volume dropped were:

RANKING CARRIER % DECLINE

28 Wan Hai Lines -21.6%

38 Norasia -17.5%

30 Sea Star Line -12.6%

42 Italia Line -12.3%

31 Tropical Shipping - 0.0%*

*a decline of 49 TEUs

All of the remaining 45 container lines in the top 50 showed increased volumes in 2003. The carrier showing the highest percentage increase was Sinotrans Container Line at 127.7%. Mediterranean Shipping Co. ranked fifth, posted a 37.3% increase in volume, the best among the top 10.

SHIPPING LINE NEWS (continued)

CP SHIPS LTD. HAS AGREED TO ACQUIRE A MONTREAL LOGISTICS COMPANY . Under the arrangement, Roe Logistics, which has offices in Calgary, Montreal, Toronto and Vancouver, will become a subsidiary of CP Ships. This family-owned company specializes in providing forwarding, logistics, customs brokerage, warehousing and distribution services. The deal is expected to be finalized during the second quarter.

PORT NEWS

THREE SOUTH CAROLINA PORTS WILL BECOME THE FIRST IN THE U.S. TO COLLECT A PORT-SECURITY FEE . The South Carolina State Ports Authority has announced that beginning in July they will begin assessing a security fee of $1 per foot of vessel length on all inbound cargo ships entering the ports of Charleston, Georgetown and Port Royal. A total of 21 shipping lines will be affected. According to the Authority, which hopes to bring in $1 million in fees annually, the extra money is needed to pay for the new security requirements mandated by the federal government. The shipping lines have strongly protested the new tariff.

CONSTRUCTION ON A NEW CONTAINER TERMINAL AT THE PORT OF CHITTAGONG, BANGLADESH, HAS BEGUN. The $127 million project will enable the congested port to increase its capacity by 500,000 TEUs annually once completed. Also helping reduce congestion will be nine new yard cranes, six of which are already in use.

HONG KONG CONTINUES TO HOLD ITS LEAD AS THE WORLD'S LARGEST CONTAINER PORT . Last year, the Port of Hong Kong handled 20.4 million TEUs - an increase of 7 percent over 2002. Its nearest rival was the Port of Singapore which had a volume of 18.1 million TEUs - an increase of 7.8 million.

THE PORT OF HAMBURG HANDLED A RECORD VOLUME OF CONTAINERS LAST YEAR . During 2003, the port's container volume totaled 6.1 million TEUs - an increase of 14.2 percent over 2002. The growth is Asia container traffic was 17 percent, amounting to 3.1 million of the 6.1 million containers moving through the port. This is the fourth time Hamburg has posted double-digit growth since the completion of new cargo facilities along the lower Elbe waterway in 1999.

THE PHASE III CONTAINER TERMINAL AT THE CHINESE PORT OF YANTAI IS NOW BEING OPERATED BY CSX WORLD TERMINALS . This maritime terminal management company, a subsidiary of CSX Corp., entered into a joint venture agreement with the Yantai Port Authority in which both entities share a 50/50 partnership in the terminal's operation. The annual capacity of the port's terminal exceeds 1 million TEUs. It has four state-of-the-art quay shore cranes and has a quay draft of 14-meters.

HORIZON LINES HAS UPGRADED ITS CRANES AT THE PORT OF SAN JUAN . Horizon, formerly CSX Lines, has just installed two cranes at the port, replacing smaller ones. This new equipment is tall enough to work containerships that are six container tiers high and have a longer reach than the old ones. Loads of up to 40 tons can be handled. In another development, Horizon's owner - the Carlyle Group - has refused to comment on reports that it is seeking a buyer for Horizon.

INLAND WATERWAY NEWS

A NEW CONTAINER-ON-BARGE SERVICE IS NOW OPERATING BETWEEN MEMPHIS, TENN., AND LOUISVILLE, KY . The new service is being operated by Osprey Line, which is based in Houston, Texas. It will primarily handle southbound loads of cotton, forest products and steel to Memphis, and empty containers going northbound. At Memphis, those containers will be barged down the Mississippi River where they can be transferred to trans-Pacific all-water services that are gaining in number from and to Asia.

A NEW INLAND CONTAINER DEPOT HAS BEEN OPENED AT LONGTAN ON CHINA'S YANGTZE RIVER. The depot, which is part of the Port of Nanjing, is located about 230 miles from the Yangtze estuary at Shanghai and is the largest inland port on that river. Containers previously handled at Xinshenguei are now being handled at Longtan. Presently, Longtan opened year round to ships up to 35,000 tons and with the completion of dredging, Nanjing will be able to handle 50,000 ton ships. Longtan has a total capacity of 520,000 TEUs.

CONGESTION AT INDIA’S PORT OF JAWAHARLAL NEHRU IS SLOWING CARGO MOVING INTO AND OUT OF THE PORT . One week last month, the Nhava Sheva International Container Terminal closed its gates to all but perishable and refrigerated cargo, after it became clogged with containers. Railroad shipments of containers containing exports bound for the port from New Delhi’s Tughlaka terminal were suspended in an effort to clear the congestion. Delays of 4,700 import containers at two of the port’s terminals were also experienced.

AUSTRALIA-NEW ZEALAND TRADE NEWS

MEMBER LINES OF THE UNITED STATES/AUSTRALASIA DISCUSSION AGREEMENT (USADA) HAVE APPROVED A GENERAL RATE INCREASE . The increase, set to take effect on July 1, will apply on all container cargo moving from the U.S. to points and ports in Australia and New Zealand. Here are the increases that will be forthcoming:

20-foot containers - $200

40-foot containers - $300

According to a USADA announcement, "Increases in rate levels are needed to assist the carriers in reversing the effects of continual increases in costs that they have and continue to experience in virtually every aspect of their operations."

Member lines are:

ANZDL MAERSK SEALAND

CMA CGM MARFRET

FESCO P&O NEDLLOYD

LYKES LINES WALLENIUS WILHEIMSEN

HAMBURG SUD

SECURITY NEWS

BILLS IN THE HOUSE AND SENATE SEEK FUNDS FOR IMPROVING SECURITY AT PORTS . Senator Barbara Boxer (D. Calif.) and Representative Juanita Millander-McDonald (D. Calif.) have filed bills in the Senate and House respectively that seek $4 billion - $800 million per year for five years - to improve security at the nation's seaports. The money would come from general funds, with ports required to make a 25 percent match.