Global Ports Forum

Los Angeles Port Pilots Steer for $374,000 a Year While Long Beach Profits

mobile.bloomberg.com/news/2011-12-01/los-angeles-port-pilots-steer-for-374-000-a-year-while-long-beach-profits.html

Northern European Port Use and Container Rates Declining, JP Morgan Says

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Rigger in Crane Collapse Pleads Not Guilty to Manslaughter

www.nytimes.com/2009/01/06/nyregion/06crane.html

India’s Biggest Corporate Loss Shows Singh’s Deficit Dilemma
By Rakteem Katakey
August 10, 2012 8:31 AM EDT
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Indian Oil Corp. (IOCL) posted a record quarterly loss after the government failed to compensate it for capping fuel prices, showing the challenge facing Prime Minister Manmohan Singh as he attempts to rein in the nation’s finances.
The state-owned supplier of about 40 percent of the fuels consumed in India reported the biggest loss by any company in the country after selling products including diesel and kerosene below cost.
The pending compensation adds to the high inflation and budget deficit that Singh is grappling with, along with sliding industrial production, a failing monsoon, a declining rupee and the European debt crisis that’s sapped demand for Indian goods. The coalition government has refrained from increasing prices of diesel, the most widely used fuel, for more than a year to prevent protests from its allies and opposition parties gearing up for national elections in less than two years.
“There’s a problem with inflation and we can’t increase fuel prices, and the budgeted amount for subsidy is not enough,” Indian Oil Chairman R.S. Butola told reporters in New Delhi yesterday. “The problems are many, but something will have to be done. The loss is huge.”
Indian Oil’s loss widened to 224.5 billion rupees ($4.07 billion) in the three months ended June 30 from 37.2 billion rupees a year earlier, the nation’s largest company by sales said in a stock exchange filing. Rivals Hindustan Petroleum Corp. (HPCL) and Bharat Petroleum Corp. (BPCL) posted losses of a record 92.5 billion rupees and 88.4 billion rupees, respectively, in the quarter.
Indian Oil is yet to be compensated by Singh’s government for a loss of 174.9 billion rupees from selling diesel, kerosene and cooking gas below cost in the quarter, Butola said. The rupee’s slump in the period increased the cost of purchases for the refiner, which imports almost 80 percent of its oil needs, while Brent crude’s 20 percent decline last quarter lowered the value of its stockpiles by 40.6 billion rupees.
“The $4 billion loss is stunning and staggering,” said Jagannadham Thunuguntla, chief strategist at SMC Global Securities Ltd. (GLBS) in New Delhi. “The oil marketing policy is so complicated that these companies have to live at the mercy of cash compensation policy of the government.”
Indian Oil fell 0.5 percent to 250.35 rupees, the lowest level since June 19, at the close in Mumbai. The stock has declined 1.3 percent this year, compared with a 14 percent increase in the benchmark Sensitive Index. (SENSEX)
China, the world’s second-biggest oil consumer, increased retail gasoline and diesel prices for the first time since March starting today after global crude costs climbed. Brent crude oil in London trading gained 7.3 percent in July, the first increase in four months.
Indian Oil received 82 billion rupees as a government grant a year earlier. The refiner had debt of 909 billion rupees as of June 30, compared with 754.5 billion rupees on March 31, Butola said.
“Increasing fuel prices will lead to some pain for the people and this pain is a necessary medicine for reviving growth and sustaining the economy,” said Sonal Varma, economist at Nomura Holdings Inc. in Mumbai. “So far, political compulsions have been dominating economic compulsions and it’s time for this to reverse.”
India plans to cut the budget deficit to 5.1 percent of gross domestic product in the year ending March 31, after missing a target of 4.6 percent last year.
Inflation in Asia’s third-biggest economy has stayed above 7 percent since February. Price pressures from a drop in the rupee and the impact of a weak monsoon on crops forced the central bank to leave interest rates unchanged in July, breaking with a wave of cuts in borrowing costs from China to Brazil and Europe.
The rupee fell 8.6 percent against the U.S. dollar in the quarter ended June 30, the worst performer among major currencies in Asia Pacific. It has slumped about 18 percent against the dollar in the past 12 months to 55.285 per dollar.
Manufacturing fell 3.2 percent in June from a year earlier, according to India’s Central Statistical Office yesterday. Mining gained 0.6 percent and electricity output rose 8.8 percent.
Finance Minister Palaniappan Chidambaram, who was appointed last week, has said he intends to take steps to reverse the slowdown in manufacturing. He also pledged to clarify tax laws and contain the budget deficit as he tries to assuage concern that the nation’s outlook is deteriorating.
India will reassess its fiscal deficit goal for the 12 months that began April 1 after a mid-year review, Chidambaram said yesterday in a written response to questions from lawmakers. Forecasters from Citigroup Inc. to Crisil Ltd., the local unit of Standard & Poor’s, predict the gap will widen from 5.8 percent of GDP in 2011-2012.
India’s GDP rose 5.3 percent in the first quarter from a year earlier, the least since 2003. Standard & Poor’s and Fitch Ratings have warned they may strip the nation of its investment- grade credit rating, citing risks including fiscal and current- account deficits.
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net
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U.S. Navy Ship Collides With Tanker Near Strait of Hormuz
By Wael Mahdi and Isaac Arnsdorf
August 12, 2012 5:47 AM EDT
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The U.S. Navy said one of its guided-missile destroyers collided with an oil tanker near the Strait of Hormuz in the Persian Gulf.
The collision between USS Porter and the Panamanian-flagged bulk oil tanker M/V Otowasan occurred at about 1 a.m. local time, Bahrain-based U.S. 5th Fleet spokesman Lieutenant Greg Raelson said in a phone interview today. The collision was not combat-related and overall damage to the ship is being evaluated, he said.
Strait of Hormuz is a narrow waterway carrying a fifth of the world’s traded oil that Iranian officials have threatened to block in retaliation for sanctions targeting the country’s nuclear program. The U.S. Navy has said it would move to stop any Iranian attempt block the waterway.
The tanker, owned by Tokyo-based Mitsui OSK Lines Ltd. (9104), can hold 2 million barrels of crude oil and is 95 percent full, according to ship-tracking data compiled by Bloomberg. The vessel loaded at Mesaieed in Qatar and was sailing to Fujairah, the region’s largest refueling port in the United Arab Emirates, the data show.
“We have had no reports of any spills or leakage,” 5th Fleet’s Raelson said.
To contact the reporters on this story: Wael Mahdi in Manama at wmahdi@bloomberg.net; Isaac Arnsdorf in London at iarnsdorf@bloomberg.net
To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

The European Shippers Council has set out its opposition to the broad grouping of maritime interests that have called for the International Maritime Organization’s Safety of Life at Sea (Solas) regulations to be amended to require all containers to be weighed before loading at the export port to ensure to that the actual weights match the declared weight on the shipping documents.

The proposal – put forward by the Danish and Dutch governments in conjunction with shipping bodies the World Shipping Council, BIMCO and the International Chamber of Shipping – follows from what its proponents claim is mounting evidence that mis-declared container weights are a major cause of accidents in the container supply chain: from the series of collapsed container stacks that have occurred on box vessels over recent years, to the capsizing of the MSC Napoli in the English Channel in 2007, as well as to a series of truck rollovers.

However, Marco Wiesehahn, member of the ESC’s maritime transport committee, argued that there is already a Solas requirement for shippers to correctly declare weights, and the new proposals that make it the legal responsibility of the shipper to verify the declared weights will not make container shipping any safer.

In the case of the MSC Napoli, the Marine Accident Investigation Branch report found that although 20% of the boxes were heavier than their declared weights, it added that “the effect of the discrepancies alone would have been insufficient to cause hull failure”.

“It was bad maintenance of the vessel itself that was the cause of the accident,” said Mr Wiesehahn told The Loadstar. “Instead of just focusing on the container weights we have to get back to the core of the problem: firstly the lashing of the containers on the stack; secondly the maintenance procedures of the carriers; and thirdly the fact that it is common practice that around 10% of all containers loaded on a ship will end up on a stack different to that on the stowage plan.

“Even if a shipper correctly declares a weight, and verifies it, there is still a 10% chance that it will be put in the wrong stack and cause a collapse.”

He also argued that under the current regime carriers are already in position to refuse containers whose weight has been mis-declared.

“We already have the existing Solas regulations, but the execution of these isn’t being taken seriously. Carriers have the opportunity to say to shippers who they know regularly mis-declare weights that they will refuse their cargo, but they do not do that on commercial grounds.”

Further, he stated that the ESC has no opposition to containers being weighed at terminals, but said that terminal operators, most of whom have the ability to weigh boxes, oppose the notion that they be held legally responsible for verifying container weights

Although it advocates weighing containers within terminals as the most practical solution, the WSC-BIMCO-ICS proposal also outlines the possibility of weighing them outside ports, such as at shippers’ loading facilities, a prospect that Mr Weisehahn described as difficult to enforce: “In developed countries with well organised systems that may be feasible, but in other parts of the world you do wonder how that will be enforced.

“The IMO is also a maritime institution that has a right to define legislation for the sea, but container transport also takes place on land and inland waterways, where the IMO has no legal status, and what is needed for that regulation on land is expertise of land and inland waterway transport, and the IMO does not have that.”

He argued that it is actually the joint IMO-International Labour Organisation-UN Economic Commission for Europe working group into cargo transport units – which last met in April – that should take responsibility for setting new regulation because it represented a broader set of interests.

He admitted however that there was more shippers could do in terms of stowing and packing containers to make them safer to transport. “We are not running away from that. There is a need to increase the quality of container stowage, and we have a responsibility to do that.”

At last week’s TOC Container Supply Chain event, a seminar on the subject heard from BIMCO’s chief marine technical officer Aron Sorensen that it hopes that the proposal will be ratified IMO’s maritime safety committee and come into force in 2017.

As Maersk Line’s head of fleet management John Leach pointed out at the same session, it is absurd that “some 50 years into the container business we are still loading vessels where cargo weights are not really known”.

As a footnote, it is worth quoting recent TT Club research that shows that over the past six years, it has received a total of 357 accident claims costing $12.8m that were as a result of bad container stowage and handling. That equated to just over 10% of all supply chain claims made over that period, making it the largest single cause of accidents in the sector.

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NSW CONTAINER STRATEGY: DON’T DISMISS NEWCASTLE

Photo courtesy of heraldsun.com.au.

Opinion – Greg Cameron

The NSW government is preparing a container terminal strategy for NSW as part of its ‘scoping study’ for the long-term lease of Port Botany terminal. It is due for release mid-year without public consultation. In December, the NSW government revealed its intention to approve a 350% increase in Port Botany container terminal operations, from 2 million containers a year to 7 million. The only container option the NSW government is studying is continued expansion of Port Botany.

An investigation of the Newcastle container option would include relocating all current and future Port Botany container operations to Newcastle. Sydney airport can be expanded, including a third parallel runway, using the Port Botany terminal site. Since new aircraft are 60% quieter than existing aircraft, sound pollution may no longer be a deciding factor in relation to growth of Sydney airport. The installed infrastructure at Port Botany can be moved by barge to Newcastle.

The decision to reject Newcastle for a container terminal is long-standing. After the NSW government assumed ownership of the former BHP steelworks site in 2000, it based all feasibility studies on the existing Newcastle urban rail system. However, it was known in 1998 that the existing system was unsuitable for rail freight. When BHP proposed a rail freight by-pass of Newcastle, from Fassifern to Hexham, it was rejected by the NSW government.

The NSW government’s decision to reject the Newcastle option is based on the assumption that the Fassifern to Hexham rail by-pass will never be built. Surely the assumption is false?

The Fassifern to Hexham by-pass is economically viable. Instead of spending $200 million to upgrade the rail freight line from Port Botany, the funds can be re-allocated towards the cost of the Fassifern to Hexham line. By reducing travel time between Sydney and Brisbane by up to 35 minutes, the line permanently contributes to lower freight costs. By allowing the Newcastle urban system to be re-developed using light rail, significant urban development opportunities are enabled. Empty containers – currently 50% of all containers are exported empty – can be railed into northern NSW for back loading through Newcastle with coal, agricultural products and, in time, value added products. An optimally designed Newcastle terminal will deliver containers into Sydney at a competitive cost compared with Port Botany. A container terminal at Newcastle provides most regional areas of NSW with cost-effective access to a container terminal, for the first time.

Any strategic economic examination of a Newcastle terminal would include an intermodal terminal. Newcastle’s advantage is that 100% of containers will be railed to an intermodal terminal north of Sydney. This compares with shipping the containers to Port Botany and moving them by truck and rail to Moorebank, 30km west of Port Botany. At present, 86% of containers from Port Botany are trucked. The NSW government’s plan is to reduce that to 72% within 10 years. The Newcastle option clearly benefits Sydney’s road system.

Is there evidence to support the NSW government’s assertion that the Newcastle container terminal option is unviable? If so, where is this evidence?

It would make good economic sense to rigorously investigate the costs and benefits to the NSW economy of a container terminal at Newcastle, before decisions are taken.

Greg Cameron is a former BHP manager and specialises in economic modelling.
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June 14 (Bloomberg) — Thailand, the world’s second-biggest sugar exporter, is driving up global prices as the worst port congestion in memory restricts shipments.
Vessels are waiting to load as much as 7 percent of this year’s supply, said Piromsak Sasunee, chief executive officer of Thai Sugar Trading Corp., the largest shipper. A shortage of barges, a sunken ship blocking the biggest river and a lack of labor combined to delay exports, he said. Prices climbed 19 percent to 24.38 cents a pound since May 6 and may go as high as 30 cents over the remainder of the year, said Alan Winney, chairman of Queensland Sugar Ltd., Australia’s biggest supplier.

Sugar Rising as Thai Port Jams Worst in Memory

“I’ve never seen so many ships waiting to load sugar,” said Prasong Serisathien, 62, general manager of Siam Sugar Export Co., Thailand’s second-biggest exporter. “Problems have intensified because every step in the export chain from the warehouse to the vessel is congested.”
Even after the rebound, sugar is still this year’s worst- performer in the Standard & Poor’s GSCI index of 24 commodities. Prices slumped as a supply glut emerged after two years of shortages, potentially helping Nestle SA, the world’s biggest food company, trim the $1.7 billion it spends annually on the sweetener. Supplies are needed now because of fewer cargoes from Brazil, the world’s largest exporter, Piromsak said.
Bulk and Bags
Thailand exports sugar in bulk and bags through ports at Bangkok, and at Laem Chabang and Koh Si Chang in the Gulf of Thailand. While the ports can handle about 1 million metric tons of cargo a month, exporters are competing with suppliers of steel and wood-chips. They are also contending with congested roads and waterways. A sunken barge blocked the Chao Phraya River for almost two weeks before being salvaged on June 12.
Exports may jump 52 percent to 7 million tons this year, according to the country’s Office of the Cane & Sugar Board. It will have little impact on the freight market because global seaborne sugar shipments account for 1.5 percent of the bulk commodities trade, according to data from Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.
About 90 percent of global trade moves by sea, the Round Table of International Shipping Associations estimates.
Sugar is usually loaded on supramaxes, which carry about 52,000 tons, or handysizes, with a capacity of 28,000 tons. Returns for owners of supramaxes fell 44 percent in the past 12 months to $14,005 a day, according to the London-based Baltic Exchange, which publishes daily rates for more than 50 maritime routes. Returns on handysizes fell 42 percent to $11,073.
Freight Rates
The plunge in freight rates reflects a glut of capacity rather than a weakening world economy. The fleet of 2,613 handysizes expanded 6.5 percent in the past 12 months and new vessels on order at shipyards are equal to 31 percent of existing capacity, according to Redhill, England-based IHS Fairplay, which compiles data on ships and ports.
While Clarkson is forecasting global trade in dry bulk commodities to expand 4.1 percent this year, rates aren’t expected to rebound anytime soon. Forward freight agreements, traded by brokers and used to bet on future transport costs, anticipate handysize returns of $10,169 next year and supramax rates of $12,292, Baltic Exchange data show.
That contrasts with the sugar market, where buyers are paying a premium to secure Thai supplies. The sweetener costs 2.5 cents a pound more than prices on ICE Futures U.S. in New York, a global benchmark, and the premium will likely climb to 3 cents by the end of the year, Piromsak said.
Securing Supply
“The current line-up of vessels and the continued strength in regional demand are expected to support Thai premiums,” Peter de Klerk, an analyst at C. Czarnikow Sugar Futures Ltd., said in an e-mail. Czarnikow Group, based in London, handles about 10 percent of the global sugar trade.
Futures markets are reflecting concern about securing supply in the next several months. The October contract on ICE Futures U.S. closed at 24.38 cents on June 13. Sugar for delivery a year later was at 23.24 cents. That also indicates the surge in prices is not expected to last.
Should Brazilian cargoes accelerate and Thailand’s congestion ease, prices may resume their drop to reflect the return to a supply surplus. Harvests may outpace demand for a second year in the next season, with the glut increasing to 6.5 million tons, from 1.6 million tons, the U.S. Department of Agriculture estimates.
Smarties and Aero
Futures may go no higher than 26 cents in the remainder of the year before declining to 20 cents, the median in a Bloomberg survey of 17 analysts and traders shows. While prices may climb as high as 30 cents on disruptions caused by poor weather or shipping delays, they may bottom at 20 cents as global production increases, said Queensland Sugar’s Winney.
Lower prices may help Vevey, Switzerland-based Nestle, which said on June 8 its raw-materials bill may rise by as much as 3 billion Swiss francs ($3.6 billion) this year, the biggest gain ever. The company, whose candy brands include Smarties and Aero, spends about 1.5 billion Swiss francs a year on sugar.
For now, futures markets are trading in backwardation, when near-term supplies are costlier than longer-dated contracts.
“If Thai exporters want to benefit from the inverted market by shipping as much as they can in the next two to three months,” transport capacity could be strained, said Pierre- Henri Dietz, a Paris-based analyst at Sucden, the trading arm of Sucres et Denrees SA.
Chinese Buying
Purchases by China, the world’s second-biggest consumer after India, are surging. The country bought 157,508 tons in April, compared with 16,736 tons a year earlier, according to customs data compiled by Bloomberg. Imports in the marketing year that ends in September will climb 19 percent to 1.82 million tons, the USDA estimates.
Demand for Thai sugar has strengthened because of problems in Brazilian output, which normally represents about a quarter of the global total. While production in Brazil’s main producing region, the Center South, increased 6.8 percent in the second half of May from a year earlier, output was down 47 percent from mid-March to May 16, according to Unica, an industry group. The area will harvest less than expected on lower yields, according to Raizen, a sugar-cane venture between Cosan SA Industria & Comercio and Royal Dutch Shell Plc.
“The market has bottomed out or is near to bottoming out,” said Abah Ofon, a Singapore-based analyst at Standard Chartered Plc. “Anything that will add to supply concerns in the short term is going to be seen as bullish.”
To contact the reporters on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net ; Luzi Ann Javier in Singapore at ljavier@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net