PMA, ILWU Negotiations Begin on Positive Note

Contract negotiators between the International Longshore and Warehouse Union and the Pacific Maritime Association began yesterday on an upbeat note.

“Both sides said they expect cargo to keep moving until an agreement is reached,” the ILWU and the employers association that represents shipping lines and terminal operators said in a joint statement.

The current six-year contract expires at midnight June 30, and negotiators will meet daily in San Francisco until a contract is reached, the statement read. Negotiations will alternate each week between the headquarters of the ILWU and the PMA.

The union seeks to negotiate a “fair agreement that protects the good jobs and benefits that support thousands of families and dozens of communities” on the West Coast, said ILWU International President Bob McEllrath.

PMA President Jim McKenna noted that West Coast ports in recent years have lost “significant market share” to ports in Canada and Mexico and to other U.S. ports. Employers seek to negotiate a contract that powers jobs and economic growth and protects the West Coast’s standing as the “gateway of choice for goods sent to and from Asia,” McKenna said.


-Bill Mongelluzzo, Senior Editor | May 13, 2014 9:12AM EDT

The Journal of Commerce

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Proposed Merger of Ports of L.A., Long Beach ‘Fraught with Political Uncertainties’

Citing a drop in market share by the busiest port complex in the U.S., the Los Angeles 2020 Commission has issued a recommendation to merge the ports of Los Angeles and Long Beach, an idea likely to revive tensions between the rival seaports.

The commission, made up of prominent business, labor and civic leaders, outlined a series of recommendations to reduce city bureaucracy and make the city more responsive to business investment. 

Their proposal to merge the largest and second largest ports in the U.S., however, is among their most ambitious. 

The Port of Los Angeles said it welcomes “the opportunity to discuss additional collaborative efforts that would both retain and expand the existing cargo and jobs at the San Pedro Bay port complex,” said Phillip Sanfield, a port spokesman. “The two ports have a strong track record of working together on a wide range of initiatives related to the environment, security and efficiency improvements.”


The two ports are operated separately by different governing boards and process 40% of U.S. imports. The two account directly for about 595,000 jobs in the region.

The L.A. 2020 Commission pointed to examples of regional cooperation at the ports of Seattle and Tacoma, as well as by New York and New Jersey officials. “We should be competing with ports in other regions, not with each other,” the report said.

Long Beach sued Los Angeles last year over a $500-million rail yard planned by the BNSF Railway. Long Beach was treated “very poorly by the port and the city of Los Angeles,” Foster said.

Foster said no one from the 2020 Commission had contacted his city about the idea of a merger.

The commission said it relied on data and interviews with people who do business at the ports. “Of course, the people of the ports of Long Beach and Los Angeles aren’t going to endorse the idea of a merger,” said Austin Beutner co-chair of the commission. “They’re going to fight for their turf.”

Jock O’Connell, an international trade economist who follows the ports, said that the idea of a merger objectively sounds like one worth considering but that the road would be “fraught with political uncertainties.”

Entering an agreement to work together could consolidate marketing efforts, he said. It could also make it easier for a consolidated port authority to fend off competition from other ports, including the looming threat of the Panama Canal expansion project.

But he warned that it would be a “politically difficult task” to get the two ports to agree to a merger. 

John Husing, an Inland Empire economist, said the idea is unlikely to get traction. 

Furthermore, the proposal itself isn’t a sound idea, according to Husing. “The public benefits from competition between them,” he said.


-Ricardo Lopez   LATIMES.COM
        Times staff writers James Rainey and David Zahniser contributed to this report.
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Specter of Longshore Unrest in June Makes Seattle Waterfront Uneasy

Port and maritime leaders are closely watching developments with the West Coast’s longshore union, worried that any labor issues around the contract that expires June 30 could divert cargo elsewhere.

The International Longshore and Warehouse Union is one of the most powerful unions in the country, with the power to shut down cargo movements over the West Coast.

Even the possibility of labor unrest is making the owners of cargo, called shippers, feel nervous. While the actual ILWU contract is coast-wide, the Puget Sound area may be especially vulnerable, because most of the containers moving through the ports of Seattle and Tacoma are “discretionary” cargo for inland destinations and could be routed elsewhere.

“The worst thing that could happens would be a strike or a lockout,” said Bruce Carlton, president of the National Industrial Transportation League. “There would be shippers out there saying, ‘Fool me once, shame on me; fool me twice and I’m out of here.’”

Carlton said that shippers around the country, many of whom also move cargo through the East Coast, are feeling skittish.

“Shippers are a little worn out on this subject, because last year we went through this on the East Coast. It was pretty bombastic,” he said. “There was never a strike, never a lockout, but lots of angst.”

The biggest issue in recent memory was in 2002, when a contract dispute resulted in slowdowns at the docks and a lockout.

“ILWU chose to slow walk the work, and management locked them out, and ships started backing up halfway to Hawaii,” Carlton said. “It took weeks to undo the damage that was done … There was some permanent damage to West Coast ports. Some shippers decided they were not going to risk that again, and for those who had flexibility in their supply chains, they made permanent changes to take their business elsewhere. Not huge numbers, but it happened, and they never came back.”

At the Port of Seattle, Co-President Stephanie Bowman said they’re closely watching the situation, although there’s no immediate threat.

“Given the walkout in 2002, certainly the largest big-box retailers started to hedge their bets,” she said. “The good news is we have not yet seen that, and our folks at Port of Seattle are watching it very, very closely. We haven’t seen any inkling of labor unrest.”

-Steve Wilhelm

Staff Writer- Puget Sound Business Journal

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CSAV Tie-up With Hapag-Lloyd Approved by Shareholders

Cia. Sud Americana de Vapores SA shareholders approved a proposed combination of its container shipping operations with Germany’s Hapag-Lloyd AG to create the fourth-largest container line in the world.

Shareholders that own 84.5 percent of the company’s stock voted in favor of the deal, by which CSAV will exchange all of its container shipping assets for a 30 percent stake in the Hamburg-based company. That percentage may increase to 34 percent via a $500 million capital increase in which CSAV has pledged $350 million, Chief Executive Officer Oscar Hasbun told shareholders at the meeting today in Valparaiso, Chile.

Chile’s billionaire Luksic family bet on a recovery in the global shipping industry in 2011 when it began building a stake in CSAV. Luksic now owns 37 percent. The company is seeking the combination to counter a prolonged slump in the container shipping market and compete with larger rival A.P. Moeller-Maersk A/S.

“Maersk is one of the few container shipping companies in the world that has profit and it does that by economies of scale,” Hasbun said today. “We want to reach Maersk’s level of profitability and efficiency.”

The combined company will reap annual savings of about $300 million, expand its customer base and reach more trade routes, Hasbun said. CSAV expects to sign a binding agreement in the next 30 to 40 days and close the deal by the end of 2014.

Hapag-Lloyd will undertake an initial public offering of shares to raise $500 million between 12 and 18 months after the transaction is completed, Hasbun said.

Holders that voted against the tie-up or didn’t attend the vote will have until April 20 to say if they want to be bought out of the company. If more than 5 percent of shareholders ask to be bought out, CSAV may call off the deal, Hasbun said.

Shareholders also approved today a $200 million capital increase to pay for seven new vessels being built by Samsung Heavy Industries Co (010140) Ltd.

-By Eduardo Thomson Bloomberg News

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Tacoma Port Bests Seattle in 2013 Container Count

The Port of Tacoma pulled significantly ahead of the Port of Seattle in container count during 2013, largely a result of the move of the Grand Alliance group of steamship lines from Seattle to Tacoma in 2012.

Whatever bragging rights that may bring Tacoma, the region’s overall erosion in cargo market share is pushing the two Puget Sound container ports toward closer collaboration.

Just-released numbers show that the equivalent of 1.89 million 20-foot containers (a measurement called TEUs). moved over Port of Tacoma docks during 2013. In comparison, the Port of Seattle handled 1.57 million TEUs, fewer than it handled in 2009 during the depths of the recession.

The Grand Alliance that switched to Tacoma in mid-2012, a collective of three of the world’s largest ocean carriers, includes Hapag-Lloyd (based in Germany), Orient Overseas Container Line (Hong Kong), and NYK Line (Japan).

For 2012 the leaders were switched, with the Port of Seattle ahead with 1.88 million TEUs, compared to the Port of Tacoma’s 1.71 million.

When viewed together, the ports of Seattle and Tacoma are stalled. Together, they handled 3.46 million TEUs during 2013 — slightly fewer than the 3.56 million they handled in 2008, just before the recession, and down from the 3.60 million they handled in 2012.

Meanwhile, West Coast container traffic overall increased 1.3 percent, to 15.4 million TEUs during 2012, according to the Pacific Maritime Association. Numbers for 2013 have not yet been compiled, but the Puget Sound has been losing market share against the West Coast, and nationally, for years.

Partly in response to this trend, the ports of Seattle and Tacoma are increasing their collaboration, and on Jan. 17 filed a “discussion agreement” with the Federal Maritime Commission.

“The agreement allows the two ports, with appropriate legal oversight, to share information about their respective operations, facilities and rates,” said a statement at the time. “These discussions are aimed at increasing our collective market share and generating more container cargo moving through Puget Sound, the nation’s third-largest container gateway.”

In the unusual joint statement, the ports alluded to increasing competition, especially from ports in the Southeast which are building up capacity in anticipation of the completion of the Panama Canal widening project.

“The ports of Seattle and Tacoma face fierce competition from ports throughout North America and must adjust to shifts in the global maritime industry,” the statement said. “Global shipping lines, continuing to lose millions of dollars each year, are investing in larger vessels with more capacity, sharing those vessels, consolidating terminals and reducing the number of ports at which they call.

Steve Wilhelm-Puget Sound Business Journal

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U.S., Europe, China Regulators Likely to Clear Container-ship Alliance

LONDON—U.S., European and Chinese regulators are likely to give the thumbs up to an alliance of three container-shipping companies, but not before demanding concessions to limit their dominance of the world’s busiest shipping routes, according to people with direct knowledge of the matter.

Denmark’s Maersk Line, France’s CMA CGM and Switzerland’s Mediterranean Shipping Co.—the world’s three biggest container-ship operators in terms of capacity—had planned to start operations of their so-called P3 Alliance in the second quarter of this year, but regulatory approval won’t come until later in the year, these people said. Maersk is a unit of A.P. Moller-Maersk

Senior representatives of the three regulators—the U.S. Federal Maritime Commission, the European Union’s Competition Commission and China’s transport ministry—met in Washington Tuesday to scrutinize the planned alliance.

“The regulators have determined that the P3 isn’t a merger, but an alliance. This means that it will probably be approved, but it will include clauses to protect parties like cargo owners, fuel providers and smaller competitors from price fixing and unfair competition,” said one of the people with direct knowledge of the matter.

Customers of the ship operators—such as freight forwarders, importers and exporters—are campaigning to block the alliance, saying they will have no control in negotiating freight rates with the container-shipping companies. Fuel suppliers are concerned that once P3 is up and running they won’t be able to separately negotiate fuel prices with the three vessel operators. Some smaller container-shipping companies fear they will be unfairly pushed out of the market given that Maersk, CMA CGM and MSC own the world’s largest fleets and biggest individual ships.

“Some of these concerns will be addressed by adding clauses as part of the regulatory approvals. The regulators believe they will reach an agreement with the three ship operators and the P3 will then satisfy all legal prerequisites,” the person familiar with the matter said.

For the three shipping companies, the pact’s logic rests on sharing ships and port facilities from Shanghai to Rotterdam, New York and the U.S. West Coast, as slack global economic growth, stubbornly low freight rates and high fuel costs erode their profit margins.

If approved, the P3 would control an estimated 43% of Asia-to-Europe container shipping, 41% of the trans-Atlantic market and about 24% of the trans-Pacific market.

Chinese regulators, who can take as many as five months to rule on such issues, have yet to receive documents from the three operators necessary for their review, while the Federal Maritime Commission will again look into the matter early this year after sending additional questions to the shipping companies this month, said the people familiar with the situation.


Costas Paris – The Wall Street Journal

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Transpacific Container Shippers Plan Freight Rate Rise

Container shipping lines have agreed to raise Asia-U.S. freight rates in two stages, by $200 per 40-foot container (FEU) from Dec. 20 and then by a further $300 per FEU from Jan. 15, in an effort to halt current losses, their organisation TSA said.

Transpacific container shipping lines regard late holiday season shipments in December and the pre-Lunar New Year period in January as pockets of particular strength in the Asia-U.S. trade and as an opportunity for badly needed revenue recovery.

The members of the TSA (Transpacific Stabilization Agreement) include the world’s biggest container shipping lines, such as Denmark’s Maersk, privately owned Switzerland-based Mediterranean Shipping Company (MSC), French privately held CMA CGM, China’s COSCO, Korea’s Hanjin Shipping and others.

“The central truth in this market is that every carrier is operating at a loss,” TSA executive administrator Brian Conrad said in a statement on Thursday.

Conrad acknowledged the difficulty of raising rates in a highly competitive market, but said that pressures on carriers from capital markets and parent companies to improve profitability are gradually overtaking supply-demand considerations.

The world’s biggest container shipping company, Maersk Line, a unit of A.P. Moller-Maersk, said earlier this week that it intend to increase rates on the busy route between Asia and northern Europe.

Other major container shipping companies have in recent weeks also announced higher prices that will take affect Dec. 15.

Freight rates have plunged to loss-making levels this year as a result of overcapacity in the market.

Founded in 1989, the TSA calls itself a “research and discussion forum of major container shipping lines” serving the trade from Asia to the United States.

Liner shipping was previously organised in similar groups called “liner conferences”, which met to discuss market conditions, freight rates and other common concerns.

But the European Union decided in 2006 to ban the practice as against competition rules and the ban took effect in 2008.

–Reporting by Ole Mikkelsen; Editing by Anthony Barker

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Hanjin Shipping Leaving Port of Portland

Hanjin Shipping Co. Ltd., the Port of Portland’s biggest trans-Pacific container carrier, confirmed the shipping line intends to pull out of Portland, ending two decades of service to exporters and importers.

Ending weekly service would be a major blow to the Northwest economy, hurting big importers such as Fred Meyer and Columbia Sportswear Co. and numerous exporters that would have to pay more to truck containers to the Port of Seattle.

It could jeopardize, too, the international container terminal as a business entity, potentially pricing out the remaining two carriers, Westwood Shipping Lines and Hapag-Lloyd.

Port of Portland managers said the decision may not be final, and pledged to do what they could to retain Hanjin or find a replacement.

A Hanjin letter sent to customers and obtained by The Oregonian did leave an opening for reconsideration. “Hanjin Shipping will continue to review the resumption of direct call service based on changing circumstances,” it said.

Hanjin, which began its Portland-Asia service in 1994, pulled out at one point in 2001 and returned three or four months later.

Bob Coleman, president of the Columbia River Customs Brokers & Freight Forwarders Association, called Hanjin’s decision devastating and said a withdrawal would hurt not only importers but exporters in eastern Oregon and Washington who ship their products by barge, truck and rail down the Columbia River. Exporters of products such as compressed hay, for example, have low margins that may not justify an extra $400 or $500 charge to truck a container to Seattle or Tacoma.

Each Hanjin vessel loads and offloads an average 1,600 containers per weekly call, according to the Port of Portland. Hanjin’s service represents about 80 percent of the container terminal’s volume, said Josh Thomas, a Port spokesman. He said the service supports an estimated 771 jobs in the region.

–Richard Read/The Oregonian

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ILA Delegates Approve, in Principle, Master Contract

Wage scale delegates for the International Longshoremen’s Association on Tuesday afternoon approved, in principle, the proposed aspects of a master contract for its dockworkers on the U.S. East and Gulf coasts.

ILA spokesman Jim McNamara said the union and representatives of the U.S. Maritime Alliance (USMX), the group that represents employers, will meet jointly on Wednesday at 1:30 p.m. to review the complete master contract proposal. The 200-plus wage scale delegate, who will make a recommendation to the union’s rank-and-file on whether or not to approve the contract are meeting in Tampa, Fla., through Thursday.

On Feb. 1, the ILA and USMX announced they had reached tentative agreement on a new, six-year master contract covering about 14,500 ILA workers who work at 14 container ports on the East and Gulf coasts, and the two sides agreed to keep ports operating normally while negotiations on local contract issues continued. The master contract is subject to formal ratification by both sides and successful conclusion of negotiations on local contracts.

Last week, the ILA said it reached a tentative agreement on local contract issues with the New York Shipping Association (NYSA). That agreement was said by the union to be “subject to some tweaking,” but will be presented to local union officials this week. Some other local negotiations are also continuing. Following this week’s meeting of wage scale delegates, the ILA said it hopes to schedule a date for ratification of both the master contract and local contracts for its members on the Atlantic and Gulf coasts. The ILA also said that Great Lakes District Council meetings will begin this Friday, March 15, in Tampa

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Hong Kong Dockworkers Refuse to Back Down in Port Strike

HONG KONG (AP) — Striking Hong Kong dockworkers refused to back down Wednesday in a weeklong pay dispute that is slowing cargo shipments at the world’s third busiest port.

Several hundred dockworkers and supporters camped out on the road in front of a container terminal. The workers are demanding a 20 percent pay raise to make up for pay cuts in past years but subcontractors supplying labor to port operators are only offering 5 percent.

Hong Kong is the world’s third busiest port by container volume, behind the mainland Chinese cities of Shanghai and Shenzhen, according to World Shipping Council data.

“There are some disruptions, particularly for the importers,” which are seeing some shipments of perishable goods like fruit rot because they’re sitting on the dock longer, said Willy Lin, chairman of the Hong Kong Shippers’ Council. “On the export side it’s slower to get the containers out of the terminals.”

The Shippers’ Council, which represents importers, exporters and manufacturers, has advised its members to arrange backup plans in case the strike drags on, including having shipments move through other ports in China, such as nearby Shenzhen.

Some shipping companies are already taking precautions. Japan’s Mitsui OSK Lines reported several delays and diverted two ships away from Hong Kong because of the strike. The company said a Europe-bound ship would skip the city and instead stop in Vietnam, where Hong Kong cargo would be transferred to another ship to get to its final destination.

Hong Kong is a major transfer point for goods coming in and out of mainland China. It was the world’s busiest port for years, handling shipments of jeans, shoes and electronics manufactured in southern China’s Pearl River Delta for export to consumers in the West. But it has been overtaken by Shanghai and Shenzhen in recent years.

Lin said Hong Kong’s port still holds an edge over its rivals in mainland China because it’s faster and more efficient. Hong Kong can turn around a container in 18-22 hours while Shenzhen needs 24, he said.

Lin said other regional rivals around Asia such as Singapore, Busan in South Korea and Kaohsiung in Taiwan “all want a slice of this pie” and the dispute will hurt Hong Kong’s image as a dependable port if it drags on.

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