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Mar 06, 2018

IBM, Maersk in Blockchain Tie-up for Shipping Industry

Online Edition

IBM and Danish transport company Maersk said they were working together to digitize, manage, and track shipping transactions using blockchain technology.

The technology, which powers the digital currency bitcoin, enables data sharing across a network of individual computers. It has gained worldwide popularity due to its usefulness in recording and keeping track of assets or transactions across all industries.

The blockchain solution being built by the two companies is expected to be made available to the ocean shipping industry later this year, according to a joint statement from International Business Machines Corp and the container unit of A.P. Moller-Maersk. It would help manage and track the paper trail of tens of millions of shipping containers globally by digitizing the supply chain process from end to end.

This will enhance transparency and make the sharing of information among trading partners more secure.

When adopted at scale, the solution based on the Linux Foundation's open source Hyperledger platform has the potential to save the industry billions of dollars, the companies said.

"Working closely with Maersk for years, we've long understood the challenges facing the supply chain and logistics industry and quickly recognized the opportunity for blockchain to provide massive savings when used broadly across the ocean shipping industry ecosystem," said Bridget van Kralingen, senior vice president, industry platforms, at IBM.

IBM and Maersk intend to work with a network of shippers, freight forwarders, ocean carriers, ports and customs authorities to build the new global trade digitization product, the companies said.

The product is also designed to help reduce or eliminate fraud and errors and minimize the time products spend in the transit and shipping process.

For instance, Maersk found that in 2014, just a simple shipment of refrigerated goods from East Africa to Europe can go through nearly 30 people and organizations, including more than 200 different communications among them.

The new blockchain solution would enable the real-time exchange of original supply chain transactions and documents through a digital infrastructure that connects the participants within the network, according to IBM and Maersk.

Online Edition

IBM and Danish transport company Maersk said they were working together to digitize, manage, and track shipping transactions using blockchain technology.

The technology, which powers the digital currency bitcoin, enables data sharing across a network of individual computers. It has gained worldwide popularity due to its usefulness in recording and keeping track of assets or transactions across all industries.

Apr 02, 2018

12 Terminal operators will decide soon whether to incorporate a lower, flat pricing structure on the LA-Long Beach extended-gates program

Print Edition

Cargo intersts and truckers should know by early April if the PierPass extended-gates program in Los Angeles-Long Beach, now in its 13th year, will be restructured to incorporate a flat fee coupled with trucker appointments.

PierPass has its supporters and detractors, but port users agree that the largest US gateway couldn’t handle 17 million TEU a year without a regular schedule of night and weekend gates. Because many ports also struggle to handle record cargo volumes carried by 10,000 to 14,000 TEU mega ships, a successful program in Southern California could serve as a template for other ports seeking to establish a cost-effective program of extended gates.

The 12 container terminal operators in Los Angeles-Long Beach are assessing the options contained in a study released in early March by Tioga/WCL Consulting. The report followed months of meetings with terminal operators, truckers, beneficial cargo owners (BCOs), and cargo intermediaries that analyzed the pros and cons of the PierPass off-peak program.

Tuckers bear the brunt of delays at marine terminals, and they generally agree that the report, which leans toward a lower, flat fee, a portwide trucker appointment regime, and greater BCO participation in container peel-off programs at individual terminals, addresses most of their goals. “It’s much of what we’ve been asking for the past three years,” said Weston LaBar CEO of the Harbor Trucking Association.

Container terminal operators who are members of the West Coast Marine Terminal Operators Association must make the final decision on how the off-peak program will be restructured because the association’s agreement with the Federal Maritime Commission specifies that the terminal operators can only discuss matters involving rate setting among themselves and not with outside parties such as BCOs and truckers, PierPass President John Cushing said.

Cushing noted that since 2005 the off-peak program has accomplished its major goal of helping the ports handle growing cargo volumes and larger vessels while mitigating congestion on local freeways through a regular schedule of four weeknight gates and one weekend gate. A traffic-mitigation fee of $144.14 per 40-foot container covers about 81 percent of the additional costs terminals face for running five off-peak gates each week, according to the study.

Despite mitigating traffic impacts and allowing the ports to grow without having to build costly new terminals, periods of congestion are common daily. The study found long truck queues at the beginning of the first shift and especially in late afternoon when the first shift ends at 5 pm until the second shift begins at 6PM on weekdays, and it contributes to congestion and trucker delays in two ways, LaBar said. Some truckers enter the terminal as early as 4 PM and remain inside until the fee is no longer charged at 6 PM. Many truckers simply line up at the terminal gates in late afternoon and park there for an hour or two until 6PM.

The study lists a proposal to replace the traffic-mitigation fee that BCOs pay only for peak-period moves with a lower, flat fee that would be charged on all truck moves, day and night. The study didn’t recommend what the lower flat fee should be. When Oakland International Container Terminal in 2016 established its extended gates program, it assessed a flat fee of $30 per container whether the containers move during the day or night.

Mandatory trucker appointments would accompany the flat fee proposal to ensure truck traffic spreads out over 16 hours each day. Under the current arrangement, which disincentives peak calls, 42 percent of truck traffic moves during the day shift, when the fee is charged, and 58 percent at night, when the fee is waived, according to the study. Because terminals can only handle a certain number of moves each hour, appointments would be made on a first-come, first-served basis, thereby spreading the available slots throughout the day.

The study floated the concept of a portwide peel-off program in which containers consigned to particular BCOs, normally larger ones capable of aggregating a critical mass, are segregated into their own piles. When truckers serving a particular BCO arrive at the terminal, they proceed immediately to the designated pile and containers are peeled off from the top. This eliminates the need for each trucker to proceed deep into the terminal in search of a specific container.

Although BCOs and truckers said a portwide peel-off program could be cumbersome to manage, they encouraged individual terminals to have their own programs. LaBar said peel-off would be even more effective if the West Coast Marine Terminal Operators Association set a reduced fee, or no fee at all, to participate. Many larger BCOs today pay no traffic-mitigation fee because they keep their warehouse gates open all night and send most of their trucks to the terminals in the off-peak hours, he noted. Under a flat-fee arrangement, they would have no incentive to patronize the night gates, but they would continue to do so if they incurred little or no cost by participating in the peel-off program.

Nine of the 12 terminal operators have trucker appointment systems. Truckers would prefer a single portwide program with standard rules covering all terminals. The technology is available, they say, to enable a portwide trucker appointment program if all parties could agree on the particulars. As appointments become more sophisticated, LaBar said, predictive elements could be added to enable dual transactions for truckers and to help terminals and truckers manage the return of empty containers and loaded containers, which terminals still struggle handling at times.

Cushing said members of the terminal operators association will decide on a finally model for the restructured off-peak program by late March or early April.

 

Print Edition

Cargo intersts and truckers should know by early April if the PierPass extended-gates program in Los Angeles-Long Beach, now in its 13th year, will be restructured to incorporate a flat fee coupled with trucker appointments.

Apr 02, 2018

Weighing the impact of slow-steaming

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Talks beginning this year among member states the International Maritime Organization (IMO) will broach the subject of regulating vessel speeds, a proposal that would be pricey for vessel owners while slowing shipper supply chains.

“It’s something we’re going to be spending a lot of time looking at from a carrier perspective, and encourage shippers to look carefully as well,” World Shipping Council vice President Bryan Wood-Thomas told the 18th Annual TPM Conference in Long Beach, CA, in early March. “This is the time to look at it, because if you begin to look at it after most governments in the world have made a decision as to which direction to go, it will be too late.”

The IMO’s Marine Environment Protection Committee (MEPC) is working on a strategy to reduce greenhouse gas emissions from ships, which includes a list of short- and long-term measures. A proposal requiring ships to limit their speeds is “one of the few measures that will deliver emissions reductions in the short-term” according to the Clean Shipping Coalition, an environmental group with “observer” status at the IMO. The MEPC is scheduled to include the proposal at its April meeting.

While there is no question that reducing vessel speeds cuts emissions from individual ships, “even at a 10 percent speed reduction, you can’t do that across the world’s fleet and (compensate) by (putting into service) idle capacity, operators, would still have to build new ships,” Wood-Thomas said. “If you go to 20 percent, you have to build a lot of new inventory to the equation. And a 30 percent reduction would require a tremendous capital investment to move the same amount of material around the world.”

Franck Kayser, an independent shipping consultant, told the audience that such a proposal, if it were to be formalized into regulation, also would mean – at least in the short term – tighter capacity as volume from idle ship fleets is absorbed into service. “And that means demand for space increases oversupply, so if this speed scheme goes forward, shippers will see a significant increase in costs.”

Slow-steaming is typically used to lower operating costs when shipping is struggling. IMO studies have shown that total greenhouse gas emissions from international shipping decreased 10 percent between 2007 and 2012, in part because of more efficient vessels, but also a result of slow-steaming.

Many carriers, however, have abandoned the practice since the 2017 recovery in the dry bulk and container freight markets.

Shipper supply chains, particularly those that trade in the refrigerated markets, would be at risk as well,” Wood-Thomas cautioned. “You start to have to grapple with issues of how increased transit times affect the world’s trade lanes, and how it’s going to affect the shipment of perishables. It gets complicated quickly.”

Instead of regulating vessel speeds, there should be government incentives to help vessel owners retrofit or build new ships, said Kevin Mannix, director of Oregon Shipping Group, which supports developing marine and over-the-road shipping in Oregon. “The government,” he said, “doesn’t have to choose winners or losers, but make determinations using engineering and economics, what type of technology is working out there, and then apply financial incentives to help try these things out.”

 

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Talks beginning this year among member states the International Maritime Organization (IMO) will broach the subject of regulating vessel speeds, a proposal that would be pricey for vessel owners while slowing shipper supply chains.

Apr 02, 2018

ELD rule pressures inland warehousing

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Land valuations and rental rates for US industrial real estate will escalate in seaport cities and at major inland distribution hubs, but rents in tertiary markets 200 to 300 miles from ports could drop because of a shortage of truck capacity and drivers.

US imports “are a huge driver of demand for industrial real estate,” said Kevin Turner, executive director in Southern California at Cushman & Wakefield, which analyzed fourth-quarter 2017 demand for warehouse and distribution space near 13 leading container ports.

Although record-low vacancy numbers for many industrial real estate locations, and especially seaport-specific markets, may appear to be healthy, “theres something else going on,” Turner said. He’s telling his beneficial cargo owner (BCO) clients the strong growth in seaport markets, and key rail-served inland hubs such as Chicago and Dallas, is attracting truck capacity because drivers have higher earning power in those markets.

Drivers are less interested in the mid-range tertiary markets such as Phoenix or Las Vegas because port and road congestion, and now the federal mandate for electronic logging devices, are limiting the distances truckers can drive each day. The safety-driven electronic logging device (ELD) requirement is making it next to impossible for drivers to fudge on their hours of service as some allegedly used to do when using paper logs. Also, the farther the distance driven, the greater the likelihood that layover will be needed. As a result, truck drivers, many of whom are owner-operators, are more interested in servicing distribution warehouses in locations such as Southern California’s Inland Empire or central New Jersey and the Lehigh Valley transloading facilities that service the port of New York-New Jersey than in longer hauls to secondary and tertiary markets. “It is even more critical now to have transloading facilities near ports,” Turner said.

Fred Johring, president of Golden State Express and chairman of the Harbor Trucking Association in Southern California, said that as he tries to maintain capacity while the driver shortage is worsening, drivers ask him two questions. “How much do you pay?” and “Can you keep me busy?” The same situation is playing out at other major seaports.

As truck rates increase at least 5 to 7 percent this year, Turner said BCOs are focusing more than ever on optimizing their supply chains by taking space at transloading facilities close to seaports. As a result, BCOs are paying higher rental rates for transloading and distribution space in seaport cities.

He cautions, however, that rental rates also vary significantly due to other factors, including local real estate costs. Therefore, a port such as Savannah, which was among the fastest-growing US seaports last year, has an average industrial rental rateof $4.62 per square foot, whereas the average rental rates in Oakland are $10.43; in Los Angeles-Long Beach, $9.60; and Seattle-Tacoma, $8.95, even though imports at those ports did not grow as much as they did in Houston, Savannah, and Charleston.

The point, however, is that since the ELD requirement took effect in late December, BCOs in most of the major seaport regions will experience increased rental rates, in some cases exponential increases because demand for close-in warehouse space will increase, and those regions will experience a growing demand for truckers, which will result in increased driver wages and benefits. Increased warehouse rental costs and transportation costs will force BCOs to optimize their supply chains by locating close to both the ports handling their imports and the consumer markets they serve in the urban cores.

“They can’t put the whole cost on the consumer,” Turner said.

Generally, the push to get closer to ports and large rail hubs could have the opposite effect on those markets that are more than 100 miles from the ports, Turner said. Industrial rental rates in the secondary and tertiary markets could experience downward pressure, and those markets may see a decrease in truck capacity as drivers gravitate toward higher-paying work with more turns per day in the seaport regions. Other industry executives, however, note that each market has its own dynamics, and the secondary and tertiary markets will make adjustments to fill their needs.

Virtually every industrial real estate market in the US has been enjoying lower vacancy rates, strong demand for warehouse space, and rising rental rates as the recovery from the 2008-2009 recession appears ready to extend for another year. Retail sales, which increased 4.5 percent last year, are forecast to increase 2.9 percent in 2018, Turner noted. New home construction is at a 10 year high, GDP is forecast to increase about 2.5 percent this year, unemployment is at an eight0year low, and the cost of money is still relatively inexpensive.

 

Print Edition

Land valuations and rental rates for US industrial real estate will escalate in seaport cities and at major inland distribution hubs, but rents in tertiary markets 200 to 300 miles from ports could drop because of a shortage of truck capacity and drivers.

US imports “are a huge driver of demand for industrial real estate,” said Kevin Turner, executive director in Southern California at Cushman & Wakefield, which analyzed fourth-quarter 2017 demand for warehouse and distribution space near 13 leading container ports.

Apr 02, 2018

Location trumps price

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Demand for warehouses and distribution space is growing faster in high-cost port cities and major inland hubs than in secondary markets, despite accelerating rets, labor and land costs.

“If that’s where the demand is, that’s where I want to be. Yields will be higher,” Chris Caton, senior vice president of research at Prologis, told the 18th Annual TPM Conference in Long Beach, CA , on March 6.

Seaport locations such as Los Angeles-Long Beach and New York-New Jersey and inland hubs like Chicago and Dallas are experiencing especially rapid demand for industrial development, because of convergence of traditional import distribution activities and last-mile e-commerce fulfillment. Vacancy rates are low, rents are increasing steadily, and a shortage of warehouse workers and truck drivers are pushing labor costs higher at a faster pace than in secondary inland population centers. AAs a result, US industrial rents increased 9 percent last year, but rents increased 15 percent at locations close to ports.

A Cushman & Wakefield analysis of 13 major seaport industrial real estate markets found that the seaport locations accounted for 28 percent of net absorption in the fourth quarter of 2017. The average vacancy rate was 3.5 percent, compared with 5.1 percent for the US market as a while. Industrial real estate rental rates can be tracked on the JOC Shipping & Logistics Pricing Hub, which shows that rents in Los Angeles have risen 6.7 percent from the fourth quarter of 2016, to $9.60 per square foot, while rents in northern New Jersey are up 11.5 percent to $8.14.

One important reason why proximity to distribution hubs and population centers is more important than real estate prices is the increasing cost of transportation, said Michale Murphy, chief development officer at CenterPoint Properties. Until recently, transportation costs were 10 times the cost of real estate, but now its more like 13 to 14 percent, he said.

Increasing drayage costs and worsening driver shortages since the roll-out of the federal electronic logging device (ELD) mandate in December are forcing transportation prices higher. The April 1 enforcement of the ELD requirement is expected to accelerate this trend because drivers no longer will be able to adjust their log books to make it appear they are adhering to federal hours-of-service requirements. With an aging driver force and the difficulty drayage companies have attracting young drivers, warehouse operators’ ability to ensure access to sufficient truck capacity is more valuable than ever, Murphy said.

Rapid growth in e-commerce sales, which translates to a requirement to locate last-mile delivery facilities closer to large consuming populations. Are rapidly absorbing the supply of available industrial space in large port cities and inland rail transportation hubs. “Everyone Wants speed,” said Adam mullen, senior managing director and Americas leader at CBRE. “They are constantly rethinking their locations.” Retail sales at brick-and-mortar stores increased 2 percent last year, while e-commerce sales increased 15 percent.

The e-commerce trend is part of a larger migration to cities, a trend that is accelerating because the population seeks access to the urban experience. “Its all the things that make city life what it is,” Caton said. As traditional and e-commerce retailers focus on bringing their products closer to consumers, they are experimenting with different ways to deliver their products more efficiently “They’re still experimenting,” Caton said. “There are eight different ways it can work.”

Creativity in the siting of mixed-use distribution warehouses is especially evident today with the three-story facility Prologis is building at the Port of Seattle and the logistics hub CenterPoint is developing at the Port of Oakland.

Prologis last April broke ground on the first multistory distribution facility in the US, a 590,000-square-foot, three-story warehouse and distribution center two miles from the Port of Seattle. While Prologis has built multistory warehouses for 20 years in Japan, where developable land in urban areas is especially tight, the Seattle project is revolutionary for the US, and if successful, it could be duplicated in other large urban areas where land is at a premium.

Although port-adjacent property is more costly than land in distant locations, the emphasis of the future tenant or tenants won’t be on moving high-cost merchandise, but rather on attracting high-volume business, Caton said. Due to its location at the port, the Seattle facility could serve as an import distribution center and as a last-mile fulfillment warehouse for the urban area.

The 440,000-square-foot facility, CenterPoint is developing adjacent to container terminals at the Port of Oakland will be the first structure to be built as part of the Seaport Logistics Complex on the former 180-acre Oakland Army Base. “It’s a beautiful location,” Murphy said. “The location gives options for international, transloading and last-mile, the ability to serve different pieces of the supply chain.”

The evolution underway in the development of warehouses and distribution centers will help to sustain the momentum that industrial real estate has experienced since the end of the 2008-2009 economic recession, a period marked by 31 consecutive quarters of positive net absorption and 25 consecutive quarters of rent growth. “All of us are trying to figure out this evolution,” Mullen said. The rapid changes underway the past five years could accelerate at twice the pace In the next five years.

Mullen predicted that 2018 will see a continuation of the low vacancy rates, rising rents and robust development of recent years. Developers, landlords, and users will proceed with a sense of urgency. “No one in this room is getting more patient,” Mullen said. “They are getting less patient.”

Print Edition

Demand for warehouses and distribution space is growing faster in high-cost port cities and major inland hubs than in secondary markets, despite accelerating rets, labor and land costs.

“If that’s where the demand is, that’s where I want to be. Yields will be higher,” Chris Caton, senior vice president of research at Prologis, told the 18th Annual TPM Conference in Long Beach, CA , on March 6.

Apr 02, 2018

Pressure Rising

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Aligning capacity with fluctuating demand and sticker-shock pricing is always a tough dance in the air cargo spot market, but sharply rising volumes and lift constraints today are buffeting shippers and forwarders, with no swift solution in sight.

Historically, a full 50 percent of this volatile “boom-bust” marketplace has been driven by emergency shipments plus business cycle or seasonal demand factors, Mike Piza, senior vice president of Apex Global Logistics, said last month at 18th Annual TPM conference in Long Beach, California.

“But there’s a whole new paradigm in the air market today,” he added. “A few years ago, it was too much capacity and low volume, ‘just in time’ and emergency shipments. Now, its speed to market that is straining capacity everywhere, especially in peak seasons that seem to be getting longer.”

Sanne Manders, chief operating officer of Flexport, a San Francisco-based digital freight forwarder and customs broker, said demand growth in 2017 was stronger than anticipated. “You saw a rise in e-commerce and in freighters flying full directly from China to the US.”

But while volumes were large, actual tonnage was not, Manders contends. “When you get a parcel from Amazon, there’s a lot of air in that parcel, so air is filling up the plane very quickly with volumetric cargo.”

Adding to the demand for air cargo capacity last year, Manders said, were a series of new product launches of electronic goods manufactured in China, most notably the suite of Apple iPhones. On the supply side, capacity shortages arose when some large freighter operators “had a relatively large numbers of planes on the ground for heavy maintenance servicing,” he said, citing Korean Air Lines as an example.

“There is also a lot of capacity parker in the desert, such as passenger 747s. They can be converted to freighters, but that takes capital and maybe six to nine months for the overhaul. Not like you can just go into the desert and get a few planes.”

Flexport will launch its first weekly freighter flight between Hong Kong and Los Angeles this month, operating two flights per week as the tech-based forwarder locks in capacity on the busy and space constrained trans-Pacific route.

The two flights per week on Atlas Air Boeing 747-400 freighters will have a total capacity of 1,600 tons of cargo every month. To cater to peak season demand, the schedule will be increased to three times per week from September, increasing total cargo capacity to 2,400 tons per month.

Initially, the private cargo flights will target manufacturers, exporters, and trading companies in Shenzhen, Guangzhou, Hong Kong, and other major cities in southern China, as well as importers based in North America, Flexport said.

Claudia Andersen, import-export manager, enterprise logistics for 1-800Flowers.com, said she gets good service on ocean and uses air only when forced to. But the spot market today, she claims, is a “mess.”

“Before, it took 24 hours to get a quote, and now it takes 48 hours,” Andersen said, “plus its increasingly compounded by missed connections. A five-to seven-day service can take seven to nine days. I was paying for a three-to four-day premium service in the last two months of 2017 and sometimes getting deliveries in 11 to 12 days.

Andersen said she is abandoning air freight for a while because of the service inconsistencies and price volatilities. “We’re also educating our (company) buyers about the logistics problems we’re facing to guide them in ordering. I send them articles. I keep them informed.”

Her job, she said, is to give her buyers “the realities of what is happening in air cargo today. We are paying higher rates. We are experiencing longer transit times.”

Andersen declined to identify her primary air cargo provider, noting delays and service gaps are “an industry problem across the board, not just one airline. We will return to the (air cargo) market, we will pay for the premium service, we just expect to receive what we pay for.”

Glyn Hughes, global head of cargo for International Air Transport Association (IATA), said demand for air cargo capacity was up 9.3 percent in 2017, while growth in supply or lift increased 3 percent. “We’re still forecasting (supply-demand) growth for this year.”

The IATA official said air cargo growth from the mid-1990s was steady and “predictable,” but ever since the global financial crisis of 2008 to 2009, “there have been many “false starts” and the industry has been plagued by disruptions of the supply-demand equilibrium.

“To have a sustainable growth industry, you need to have a sustainable growth pattern,” Hughes said. He sees the rebound of 2017 continuing. “E-commerce is still less than 10 percent of total retail sales, but the potential (for expansion) is huge.”

Hughes called for even greater transparency and communications between the “tripartite” – the customer, carrier, and forwarder. “The sooner you can anticipate the demand happening, the sooner we can provide the freighter capacity to move it. But we haven’t digitized the support services, and this industry is historically non-communicative. We talk to the ground handler but not to the forwarder.

“We urge more people to get around a common table and talk so all our needs can be understood and balanced,” Hughes argued. “In air cargo, we are looking for optimization and equilibrium.”

Manel Galindo, CEO of Freightos WebCargo, said there was no indication on the horizon that demand would drop this year with cargo movements in January and February higher than they were in early 2016.

“So it seems likely that come the next peak season there will be similar capacity constraints, which will have a similar impact on pricing. Right now, as well as e-commerce growth, generally healthy world trade is also pushing up demand,” he said.

Forwarders are advising shippers to book freight early on the major east-west routes. C.H. Robinson said capacity will become harder to find as airlines try to engage with large shippers in a variety of industries and negotiate directly for their air freight needs.

“There is only so much air cargo space available,” the third-party logistics provider said in a report on air trends in 2018. “If large shippers absorb a larger slice of the available capacity, small and medium-sized shippers will probably find it a lot more difficult to secure air space for their freight.

“Generally speaking, the longer the lead time you can allow between pickup and delivery to customers, the more able you will be to find available space and contain your costs.”

To add stability to the volatile air cargo market, Manders of Flexport called for consistent volume shippers of goods such as high-value electronics and perishables “to lock in your pricing and capacity as soon as possible. The regular shippers who buy long-term contracts will still be subject to the (market’s) stronger volatility and a little bit higher rates, but they will be somewhat cushioned.

“The shipper who only needs air capacity for, say, a certain month or a short period of time, cannot lock in and will be subject to extreme volatility.”

Panelists at TPM agreed airport infrastructure problems, facility congestion, and traffic are adding to air cargo shipment delays, while freight plays second fiddle to passengers in airport expansion planning and new terminal construction. One solution often heard is to develop secondary airports with a focus on freight.

Hughes summed it up by saying, “It’s all about consistency and visibility. You have a 10-ton blocked space agreement with a carrier and you show up with 14 tons, our supply forecasts are off,” and the equilibrium is upended in that one spot alone.

 

 

Print Edition

Aligning capacity with fluctuating demand and sticker-shock pricing is always a tough dance in the air cargo spot market, but sharply rising volumes and lift constraints today are buffeting shippers and forwarders, with no swift solution in sight.

Historically, a full 50 percent of this volatile “boom-bust” marketplace has been driven by emergency shipments plus business cycle or seasonal demand factors, Mike Piza, senior vice president of Apex Global Logistics, said last month at 18th Annual TPM conference in Long Beach, California.

Apr 02, 2018

An East Coast gate-keeper

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The ports of Virginia and Georgia hope a groundbreaking agreement to collaborate on a host of operational and other issues will positions them as two of the most prominent gateway ports on the US East Coast, with rail a key focus.

The Federal Maritime Commission (FMC) in April 2017 unanimously voted to accept the East Coast Gateway Port Terminal Agreement between Virginia and Georgia, the first of its kind in the US, that some analysts believe will set a precedent for port partnerships.

Under the agreement, the ports will be able to jointly acquire operating systems and equipment; meet to share information on cargo handling, gate operations, turn times, staffing, and infrastructure; draft agreements with carriers, shippers, and other terminal operators; and sync marketing materials to attract joint services, alliances, and carrier network agreements. The two ports can’t jointly set rates or charges.

“This is not just a port agreement, this is a gateway port agreement,” Griffith V. Lynch, executive director of the Georgia Ports Authority, said in a panel discussion at the 18th Annual TPM Conference in Long Beach on March 7. “The gateway port agreement helps us ensure that for the future we will be able to handle this cargo,” he said. “I think we will see in the future fewer ports benefiting from these larger ships. I believe that you have got three gateway ports on the East Coast. And that is New York-New Jersey; that is not going to change. That’s Virginia. And that’s Georgia. So, to the extent that we can collaborate, the better it will be for everybody involved.”

The agreement, Lynch said, will help give the ports an edge on the East Coast, as ports along the coast face the logistical stress from the expanded Panama Canal and the steady escalation in size of mega-vessels.

Combined, Norfolk and Savannah handled 5.3 million loaded TEU in 2017, more than the 4.8 million laden TEU handled by the Port of New York and New Jersey, the East Coast’s largest port, according to PIERS, a sister product of The Journal of Commerce within HIS Markit. Norfolk and Savannah had a combined markets share of 32.8 percent of the total East Coast container trade last year, compared with a share of 29.2 percent at New York and New Jersey.

By pooling information on operating practices, comparing notes on new technology, and, perhaps in the future, coordinating ship arrivals at the two ports, they can improve operational efficiency and command more attention from beneficial cargo owners (BCOs) than operating alone, the executive directors of the ports said.

Virginia – which served by CSX Transportation’s $850 million National Gateway project, the last piece of which was opened in September – handles 36 percent of the port’s cargo by rail, and is looking to get to “40 percent and beyond,” said John F. Reinhart, CEO and executive director of the Port of Virginia, who also addressed the TPM panel.

In Savannah, which is spending $128 million to upgrade its rail capacity to enable it to load 10,000 foot trains and doubles its lift capacity, rail accounts for 18 to 20 percent of the cargo volume, and the port is hoping to expand that to 25 percent, Lynch said.

The two parties, he said, have spent the last year getting “to know each other.” Virginia, which had installed a Navis terminal operating system, was able to give insight to Georgia as it prepares to do the same. Likewise, the two executive directors spent a day with their support teams comparing the design each has for expanding their rail operations, which are a key part of both their future plans, Lynch said. “We are not doing the same thing. But we learned from each other,” he said. “That is a great example of what this whole thing is about.”

“One of the things we looked at is we were both operating ports,” Reinhart said. “We said, ‘What are the areas where cooperation and collaboration would add value?’ Some of these came real quickly. Customer service. If we can come up with better customer service and customer service that meets the requirements of the BCOs, we will be more competitive.”

Print Edition

The ports of Virginia and Georgia hope a groundbreaking agreement to collaborate on a host of operational and other issues will positions them as two of the most prominent gateway ports on the US East Coast, with rail a key focus.

The Federal Maritime Commission (FMC) in April 2017 unanimously voted to accept the East Coast Gateway Port Terminal Agreement between Virginia and Georgia, the first of its kind in the US, that some analysts believe will set a precedent for port partnerships.

Apr 02, 2018

Ocean Carriers try to recoup higher US surface costs

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US beneficial cargo owners (BCOs) scrambling to manage their supply chains amid intermodal rail delays and rising truck prices are paying an extra $300 per container under existing contracts, with some ocean carriers seeking to recoup their higher costs in the tight surface transport market. The truck capacity pressure, exacerbated by the federal electronic logging device (ELD) mandate, is trickling down to all modes of inland cargo transportation: railroad, drayage, and transloading and long-haul truckload. Ocean carriers are responding with a mixture of actions consisting of emergency surcharges, raising tariffs, and suspending or restricting store-door deliveries in the US. Higher surface transportation costs also are factoring into BCO and carrier negotiations of service contracts, which generally run from May to late April. Some carriers are working to reduce their exposure to store-door contracts where they have responsibility for inland moves to and from the port. Cosco Shipping, for example, told The Journal of Commerce that hopefully “a lot of this can be addressed in one-on-one negotiations with our (customer) accounts” rather than a widespread action. Trucking costs are expected to rise after April 1 when law enforcement will place drivers out of service for failure to operate a working ELD or for violating hours-of-service regulations. Daily truck productivity also is expected to drop with ELDs, and when coupled with rail ramp delays, ocean carriers are worried to the speed in turning around chassis will slow, increasing rental charges.

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Apr 05, 2018

Freight Pollution Vote Delayed

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Southern California air quality officials delayed action Friday on a proposal to draft regulations for warehouses, rail yards and large construction projects that are responsible for much of the regions most harmful smog-forming emissions.

The South Coast Air quality Management District governing board had been scheduled to vote on whether to use its authority to regulate freight facilities and development projects as indirect sources of pollution due to the large number of trucks, trains, and construction equipment they attract.

But the panel postponed the matter to its next meeting in May, citing the absence of three members, including Chairman William A. Burke, who was out sick.

Despite the absences, the board heard the results of a poll it commissioned, which found a majority of voters in the region support the agency pursuing a local ballot measure for a quarter-cent sales tax increase to fund pollution-reduction programs.

The tax-hike proposal is controversial and remains in its early stages. If ultimately approved by voters across Los Angeles, Orange, Riverside and San Bernardino counties on the 2020 ballot, it could raise an estimated $700 million a year, according to the district.

Of those surveyed, 65% favor the state Legislature giving the South Coast district authority to seek voter approval of a ballot measure to raise incentive funds for cleaner cars and trucks, according to online and telephone interviews with 1,490 registered voters. A narrower majority of 54% would support a quarter-cent sales tax hike for such programs.

The air board did not take action based on the poll. It remains unclear whether such a measure would require a simple majority or a two-thirds vote to pass.

The idea has drawn criticism from environmentalists and business-aligned Republicans on the board, who say it would unfairly burden residents across the region to fund clean-air incentives to industry. But Democrats on the panel say voters should have the chance to decide how to pay for cleaning the air.

A potential sales tax increase has emerged as one possible way for the agency to meet its obligations to cut the nation’s worst smog to federal health standards. To meet looming deadlines, the district says it must increase funding for cleaner vehicles to $1 billion a year, but so far is falling short.

Also Friday, the panel approved a $120,000 no-bid contract with the consulting firm of former California Assembly Speaker John A. Perez to help search for those pollution-reduction funds.

Under the agreement, Perez’s company, Double Nickel Advisors, would provide “strategic advice” to the air district regarding its communication and messaging to the state Legislature and governor’s administration.

The contract was not competitively bud, according to a staff report, because Perez’s position as former assembly speaker gives his firm “special and unique capabilities that will ensure the agency’s communications…garner support for our funding needs.”

Perez is not registered as a lobbyist and has agreed not to lobby on the district’s behalf, according to staff for the district, which gas three lobbyists in Sacramento. The district previously hired Perez’s firm in 2016 and records show the district has since awarded the firm more than $250,000 in strategic consulting contracts.

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Southern California air quality officials delayed action Friday on a proposal to draft regulations for warehouses, rail yards and large construction projects that are responsible for much of the regions most harmful smog-forming emissions.

The South Coast Air quality Management District governing board had been scheduled to vote on whether to use its authority to regulate freight facilities and development projects as indirect sources of pollution due to the large number of trucks, trains, and construction equipment they attract.

Apr 04, 2018

Port of Long Beach begins pilot program to reduce pollution

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The project also includes purchasing 12 batter-electric yard tractors, and converting four LNG trucks into plug-in hybrid-electric yard tractors, officials said.

Partners, including Southern California Edison, officially launched the project Wednesday at the port’s Pier J. The project, funded by a $9.7 million grant from the California Energy Commission, will bring 25 vehicles that are zero- or near zero-emissions to marine terminals for one year to test their performance, officials said in a prepared statement.

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“This project is another example of the goods movement industry, equipment builders, utilities and public agencies stepping up to reach for the goal of zero emissions,” Mario Cordero, Port of Long Beach executive director, said in a written statement. “Today, you can see how everyone is coming together to meet that challenge.”

The project is expected to reduce greenhouse gases by more than 1,323 tons and smog-causing nitrogen oxides by 27 tons each year, officials said. The new equipment is also expected to save more than 270,000 gallons of diesel fuel.

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The project also includes purchasing 12 batter-electric yard tractors, and converting four LNG trucks into plug-in hybrid-electric yard tractors, officials said.

Partners, including Southern California Edison, officially launched the project Wednesday at the port’s Pier J. The project, funded by a $9.7 million grant from the California Energy Commission, will bring 25 vehicles that are zero- or near zero-emissions to marine terminals for one year to test their performance, officials said in a prepared statement.

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