TEU Turnaround Coming in First Quarter
Major U.S. ports could see their first year-over-year increases in container volume as early as February, the National Retail Federation and IHS Global Insight predict. Sequential monthly totals at leading U.S. cargo ports are improving, although they remain depressed, NRF and IHS say in their latest Port Tracker report. If containerized imports continue on their current track, however, NRF and Global Insight said they expect the long stretch of year-over-year declines to break in early 2010. “This could be the turnaround we’ve been waiting to see for a long time,” said Jonathan Gold, NRF vice president for supply chain and customs policy. “There’s not enough data yet to establish a clear trend, but we’re hopeful that this is a sign of recovery.” In September, import containers were down 16 percent from a year ago, and early projections for the October peak improved slightly to 15 percent. The gap begins to narrow in Global Insight’s projections for December — 1.06 million TEUs, about par with a year ago. January would mark the 31st month of year-over-year decline, but Global Insight expects the trend to be broken in February, when cargo is expected to total 973,872 TEUs, a 16 percent increase over February 2009. A 5 percent increase is forecast for March. “The second half of 2009 has continued to see declines from 2008’s levels, but not as large as we saw during the first half of this year,” IHS economist Paul Bingham said. “These ‘less bad’ numbers are evidence that the industry is seeing early signs of recovery.”
More Losses Ahead for Hapag-Lloyd
One of the largest stakeholders in German shipping giant Hapag-Lloyd expects the company to loss money in 2010 as well as 2009, and said the carrier should be merged with another shipping line. With the Hamburg-based company facing a $1 billion loss this year, according to some accounts, “I don’t expect a profit at Hapag next year either,” German logistics magnate Klaus-Michael Kuehne told the German weekly newspaper Welt am Sonntag. However, “I think the worst is behind us,” said Kuehne, the biggest investor in the Albert Ballin consortium, which owns a majority stake in the container line, and executive director of logistics giant Kuehne + Nagel. He said rising transport volumes and freight rates, along with cost cutting, were helping the company. The world’s fifth-largest ocean carrier booked an operating loss of $662 million in the first half of 2009, compared with a $190 million loss in the year-earlier period. Last month, Hapag-Lloyd obtained $1.8 billion in state loan guarantees after its owners agreed to inject $1.4 billion of fresh capital into Germany’s biggest ocean carrier. Kuehne said he favors an eventual merger of Hapag-Lloyd with another large shipping company, though the headquarters of the merged entity must remain in Hamburg, he said. He doesn’t expect TUI, the German tourism group that holds a 43 percent stake in Hapag-Lloyd, to sell its share of the company any time soon. “TUI can only get out once Hapag has a convincing business model, otherwise it will not find a buyer for its stake,” he said. Hamburg-based investor consortium Albert Ballin holds the remaining 57 percent.
Long Beach Rejects Clean-Trucks Appeal
Opponents of Long Beach’s clean-trucks settlement with the American Trucking Associations were frustrated when the city of Long Beach refused an appeal seeking to overturn the agreement. The port agreed last month to replace its motor carrier concession requirement, aimed at replacing owner-operators with company drivers, with a registration system. In return, the ATA dropped its lawsuit against the port. The federal district court in Los Angeles approved the settlement Oct. 20. On Nov. 16, the Natural Resources Defense Council appealed to the Long Beach City Council, charging the settlement violated the California Environmental Quality Act. The city’s attorney, Robert E. Shannon, rejected that argument. The federal district court retains exclusive jurisdiction and venue, over the settlement’s implementation, Shannon said, noting the U.S. Supreme Court has upheld the supremacy of federal court decisions. Los Angeles is maintaining its defense of a concession requirement for the port truckers.
UPS Seeks 4.9 Percent Hike
There’s no downturn evident in the parcel carriers’ announced rates for 2010. UPS has announced an effective 4.9 percent rate increase for parcel and express services for 2010, exceeding the price increase set earlier at FedEx Express and largely shrugging aside a year that has seen demand, and pricing, fall sharply. The average increase effective Jan. 4, 2010, will include a 6.9 percent hike in the average base price along with a cut in the fuel surcharge index of 2 percentage points. The increase comes two months after FedEx Express announced an effective 3.9 percent increase for 2010, based on a 5.9 percent boost in average express pricing for U.S. domestic and U.S. export shipments and a similar cut in the fuel surcharge. The increase will vary widely for different shippers: List prices for heavier domestic air shipments going longer distances will rise some 9.5 percent, according to an analysis by SJ Consulting, while some list ground and air prices will grow only about 4 percent. It also marks the fourth straight year UPS has raised the list prices at least 4.9 percent, even when market demand and pricing has moved in sharp fits up and down. UPS said it will release on Dec. 18 its detailed guide to rates, and UPS said in its report on the third quarter ending Sept. 30 that average revenue per package — a rough estimate of pricing — fell 9.1 percent from the same period a year ago, including a 4.3 percent drop in yield for ground shipments and a 23.6 percent decline in overnight express shipments. FedEx said its revenue per package for domestic express shipments fell 23 percent in the quarter ending Aug. 31.
YRC Worldwide Sells Dedicated Unit
YRC Worldwide lightened its heavy debt load a bit by selling its dedicated contract carriage business to Greatwide Logistics Services for $34 million. The unit, part of YRC Logistics, serves shippers in the grocery, retail and automotive sectors and has about $65 million to $75 million in annual revenue, said Longbow Research analyst Lee Klaskow, or about 1 percent of YRC Worldwide’s total revenue. The sale is another step in YRC Worldwide’s effort to cut its way back to profitability and avoid bankruptcy. YRC is engaged in a debt-for-equity exchange that would give its bondholders 95 percent of its common stock in return for wiping more than $500 million in debt from its books. If accepted, the exchange would trigger new long-term banking agreements the company needs to give it a fighting chance to survive. The offer’s deadline is Dec. 16.
Truck Tonnage Dips, Despite Overall Gains
The American Trucking Associations’ For-Hire Truck Tonnage Index for October tracked trucking’s bumpy route out of a three-year freight recession. The actual freight tonnage hauled by motor carriers increased 1.6 percent in October, slightly slower than in September. However, the seasonally adjusted tonnage index fell 0.2 percent, following a 0.3 percent drop in September and a 2.1 percent increase in August and July. Year-over-year results showed the most improvement. Compared to October 2008, the tonnage index fell 5.2 percent, its best showing since last November. The index was down 7.3 percent year-over-year in September. ATA Chief Economist Bob Costello said the October results reflect an economy still struggling to gain its balance. “Since consumer spending and manufacturing are not surging, trucking shouldn’t expect robust growth either,” he said. “However, both retail sales and manufacturing output are exhibiting mild upward trend lines, which is the path I expect truck freight to take.”
Somali Pirates Grow More Aggressive
Somali pirates are becoming more aggressive and dangerous, increasingly using machine guns and rocket-propelled grenades to intimidate crews and hijack ships despite extensive international naval operations off the Horn of Africa, international authorities say. The frequency of attacks in the Gulf of Aden and the Indian Ocean has risen since the end of a three-month monsoon season in September. On Nov. 16, pirates wielding machine guns attacked, boarded and hijacked a chemical tanker off the Somali Coast, taking 28 crewmembers hostage. The Maersk Alabama — which focused international attention on Somali piracy when its captain was held hostage in April — was attacked again Nov. 18. This time, the ship’s security team repelled the pirates with evasive maneuvers, long-range acoustical devices and small arms fire. To counter rising security costs, French shipping line CMA CGM will increase its piracy risk surcharge for transporting containers through the Gulf of Aden, boosting its prevailing Aden Gulf surcharge to $41 per 20-foot container effective Dec. 15. The shipping line said it follows best practices to avoid pirate attacks when in the region, including steaming at faster speed, following evasive routes and joining convoys whenever possible. Somali pirates hijacked a total of 32 vessels in the first nine months of 2009, taking 533 crewmembers hostage, the International Maritime Bureau said.
Top Railroads Cut More US Jobs
The biggest railroads in the U.S. trimmed another 408 jobs as of mid-October from a month earlier, taking their total employment level down to a new low. Reports the Class I carriers submitted to the Surface Transportation Board listed 149,020 workers in all, down from 149,428 in mid-September. That is the third straight monthly decline, after a gain in July — the only increase this year. October’s combined Class I railroad employment is down 6.6 percent from 159,511 in January, and 9.2 percent from 164,025 in October 2008. Those cutting jobs from mid-September to mid-October were BNSF Railway, Norfolk Southern Railway, CSX Transportation and U.S. operations of Canadian National Railway. Union Pacific Railroad, the largest employer, added workers in the latest month, along with Kansas City Southern and U.S. units of Canadian Pacific Railway. Among job categories, the railroads reported adding train crews and other transportation workers through mid-October, but cutting track and structure maintenance staff, professional positions and executives or their assistants.
Teamsters, ABF: Debating ‘Semantics’
Are they or aren’t they? A day after ABF Freight System’s chief operating officer told reporters the company was in a “dialogue” with the Teamsters on wage concessions similar to those granted less-than-truckload competitor YRC Worldwide, the union said no talks are under way that would result in concessions for its members. “We are not having contract or concession discussions with the company,” Teamsters National Freight Director Tyson Johnson said in a statement. ABF Chief Operating Officer Wesley Kemp had called the discussions “productive and cordial.” Later, an ABF spokesman issued a statement claiming “a difference of opinion as to how one would characterize the communication that’s taken place between ABF and the IBT concerning wage concessions,” and said it’s “likely best not to debate those semantics in a public forum.”