The backlog of ships waiting to unload their cargo at the port of Long Beach

Gridlock shows no signs of abating
at Long Beach, LA ports

SEVERE container traffic congestion is hampering the day to day operations of the ports of Los Angeles and Long Beach, and truck and rail systems that transport freight inland.

The Associated Press reported that "scores" of containerships carrying imports from Asia must often wait a week to unload their cargo at the southern California ports.

Thousands of new dock and rail workers have been hired recently in a bid to turn the ports into 24-hour operations; however, the plan is not scheduled to come into effect until next year, which does nothing to ease the congestion in the meanwhile.

AP quoted Marine Affairs expert, Marc Hershman, from the University of Washington as saying that the measure will help deal with present growth, but expressed concerns over the situation in five to 10 years from now.

Port authorities had expected port traffic to increase five per cent this year, half the actual figure of 10 per cent owing to the phenomenal growth of Sino-US trade.

The backlog grew worse early in the summer peak season, with terminal operators complaining they did not have enough staff to cope with the flood of container boxes coupled with the introduction of larger vessels which led to a fall in productivity at the terminals, said the article.

Positive steps, however, are being undertaken to ease the congestion, with moves afoot to recruit two thousand new port workers as soon as possible, bringing the two ports' total workforce to about 11,000.

The article said the jams at the two ports is not the result of staffing shortages alone, insufficient supplies of rail carriages and lorry drivers are adding to the backlog

Some industry experts believe a long-term solution to the mayhem would be to expand existing port facilities and to build rail and roadways to handle the rise in cargo volumes, however, such a proposal is likely to meet with resistance from local residents and environmentalists, AP said

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Carriers impose congestion surcharge
at LA/Long Beach

15 Oct 2004

The Trans Atlantic Conference Agreement (TACA) has announced that effective November 15 due to ongoing delays at the Californian ports of Los Angeles and Long Beach, its member carriers are imposing a congestion surcharge for shipments to, from, and via the ports of Los Angeles and Long Beach.

This surcharge will be $200 per 20 foot container and $400 per 40/45 foot container. The port surcharge, to form part of TACA's tariffs, will be effective until further notice.

"The delays are averaging three to four days," said David Jeffries, general manager of TACA. A summary of port operations in Los Angeles/Long Beach for Oct. 7 showed that 70 ships were in port on that day, of which 24 were waiting at anchor, he said. The wait for ships to be handled amounted to eight shifts, or four days.

Last month, the Transpacific Stabilization Agreement (TSA) said its member lines and their customers are grappling with transit time delays of eight to nine days that are largely beyond their control, and with infrastructure gridlock.

Transpacific carriers are "forced to skip port calls, shift priority cargo to other sailings, burn more fuel to make up schedule time and incur added trucking costs by using alternative U.S. gateways, among other strategies," the TSA said at the time, referring to problems on the U.S. West Coast.

The TSA also asserted that congestion delays result in curbing the effective ship capacity provided to the market.

TACA's member lines are: Atlantic Container Line AB, Hapag Lloyd Container Linie GmbH, Mediterranean Shipping Co. SA, A P Moller-Maersk Sealand, NYK, OOCL and P&O Nedlloyd Ltd.

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Boxed in and clogged up
Oct 14th 2004  The Economist Global Agenda

Ports in the big western economies are getting clogged up by the rising volume of world trade. They will need to follow Asia’s example and spend more on building the infrastructure where it is needed

THE acceleration in merchandise trade, particularly from Asia to the West, is playing havoc with world shipping. America, in particular, is sucking in imports at an ever-increasing pace: figures released on Thursday October 14th showed that its imports grew at a real rate of almost 15% in the year to August. As businesses crank up their supply chains in the run-up to the Christmas holiday season, some ports are bursting at the seams. Delays at the Los Angeles and Long Beach port complex, which handles the bulk of container cargoes to and from America’s west coast, have nearly doubled in the past year.

It can now take up to a week for a container vessel to dock, unload its cargo and leave Los Angeles or Long Beach; and delays there could lengthen before they improve. It is not unusual for the port to have 80 or so vessels tied up, with another 25 to 35 at anchor waiting to dock. If the crush continues, the port may even have to find fresh space (eg, off Huntingdon Beach) for ships to lie at anchor while waiting their turn. To cope with the extra workload, the port authority is talking about hiring another 2,000 casual workers—on top of the extra 3,000 it is in the process of recruiting and training.

Los Angeles and Long Beach is not the only port complex that is overworked. In an outspoken message to its members this week, Britain’s Freight Transport Association (FTA) said congestion at ports worldwide was stretching companies’ supply chains to breaking point and that the situation in British ports was “particularly dire”. It singled out Felixstowe and Southampton, two of the country’s biggest container ports, as being among the main offenders.

“There are reports that inbound boxes are routinely being held up on the dockside or even on board ships at anchor awaiting a berth,” Lloyd’s List reported the FTA as saying. Some ships were bypassing British ports altogether, the newspaper said, either to avoid delays or to make up for time lost because of congestion at earlier stops. A spokesman for Felixstowe, which last year added additional storage space and installed ten new cranes, said: “We are busy, not congested.”

Ports in continental Europe are also struggling to keep pace with the volumes of inbound traffic. Rotterdam has become so congested that the operators of barges (which take cargoes on along waterways such as the Rhine) are levying a surcharge on the carriers because of the extra boxes that need to be handled. The shipping lines are passing these charges on to the terminal operator which, in turn, is increasing its levy. Container traffic through Rotterdam rose by more than 13% during the first half of the year compared with the same period of 2003, contributing to an 8% increase in the port’s overall throughput during the period. “Such across-the-board growth has seldom happened before, if ever,” said Willem Scholten, the port of Rotterdam’s chief executive.

At the root of the problem, as with so much these days, is the sheer pace of growth in the volume of trade between rich countries and China. As the chart shows, this has led to a sharp increase in the average cost of shipping a basket of cargoes (including raw materials like iron ore) in the past few years, though freight rates are currently below the peak seen around the start of the year. Last year, according to the World Trade Organization (WTO), global merchandise trade grew by 4.5%. Much of this came from Asia, whose exports to western countries continued to grow strongly. This year, says the WTO, global trade is expected to expand by a further 7.5%. This is well above the 5% or so at which the world economy is expected to grow.

Many of the goods shipped from Asia end up in America, which imports considerably more goods than it exports. And herein lies the problem for shippers of goods and for the shipping lines that carry them. With many more containers traveling full from Asia to the West than the other way round, imbalances are quick to build up. The situation is made worse by the fact that, since they are inundated with incoming shipments, some ports like Southampton are restricting the number of empty containers handled on their premises. To get their boxes back to Asia, where they can profitably be put to work carrying more goods to the West, carriers either have to wait or divert the boxes to other ports that are prepared to handle them—either way, their costs are increased.

Eva Busch of Drewry Shipping Consultants in London reckons that, in the three months to September, containers shipped from Asia to America’s west coast outnumbered those going the other way by 2.5 to one. For the whole of 2004, she estimates that the number of TEUs (twenty-foot equivalent units) leaving Asia bound for America’s west coat could top 11m, while the number going the other way may be only 4.9m. The situation is made worse by the speed at which the container trade from Asia is growing: in 2003, it was up by 9%; this year, it is expected to jump by a further 14% or so.

Despite the congestion elsewhere, Hong Kong and Singapore, the world’s two biggest ports, have been able to cope with the extra volumes. During the eight months to August, the number of containers put through Hong Kong’s port was 14.6m. For the full year, it seems likely to equal or exceed 2003’s total of 20.4m, which was itself up on the previous year’s tally of just over 19m. Singapore has also reported no congestion. This is mainly because both ports have invested hugely in new facilities over the years.

Where they exist, East Asia’s worst delays are in the ports of southern China. The queues of lorries outside Shenzhen have begun to lengthen of late, while Shekou has been forced to install new gates in order to speed up the flow of cargoes in and out of the port, says Ms Busch. But neither has congestion on anything like the scale of America or Europe. This is not just good luck. As the most efficient ports in Asia have demonstrated repeatedly, the best way to avoid congestion is to anticipate an increase in demand and to spend money on building new facilities.

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Daewoo wins US$1.1 billion orders

October 19, 2004

(SEOUL) South Korea's Daewoo Shipbuilding and Marine Engineering, the world's second-largest shipbuilder, said yesterday that it had recently won foreign orders worth US$1.15 billion to build 10 ships.

The latest deals took orders this year to US$5.6 billion for 59 ships, beating a target for the entire year of US$4.38 billion, the company said in a statement.

It said it now expects total orders this year to reach US$7 billion, up from US$4.23 billion in 2003.

The company said in a filing to the stock exchange that it had won a 497.1 billion won (S$716 million) order from AP Moller of Denmark to build four 8,100 TEU (twenty-foot equivalent unit) container ships.

Separately, the firm also said that it had secured orders for six more ships, including three separate orders for a liquefied natural gas carrier from Norway's Bergesen, Golar LNG Limited and Russia's Sovcomflot.

In addition, Sweden's Wallenius Lines had ordered three automobile transport vessels, with a signing of the deal due later yesterday, Daewoo said.

Daewoo's shares finished up 1.8 per cent at 16,700 won, outperforming the broad market's 0.8 per cent gain. – Reuters

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Maersk Line to replace MSP ships

October 4, 2004

Maersk Line, Limited (MLL) says that it has signed agreements with the U.S. Maritime Administration that will transfer six Maritime Security Program (MSP) operating agreements to modern containerships that will replace six existing MSP vessels built in the 1980s and managed by U.S. Ship Management, Inc. (USSM).

The replacements were approved by the Maritime Administration and U.S. Transportation Command and, notes Maersk, represent a "significant improvement in the ability of MLL's U.S.-flag fleet to serve its military and commercial customers."

"This is a major milestone in MLL's plan to enroll newer, faster and larger U.S.-flagged vessels into the maritime security program," said Ken Gaulden, MLL's senior vice president for marketing and government relations. "The end result will be a much improved MSP."

MSP age limits require that older vessels be replaced in the current program before reaching 25 years of age. The first of the new replacement vessels will enter U.S. flag later this month. The replaced vessels will continue to operate under U.S. flag until their replacement begins operating under U.S. flag with a U.S. crew.

The disposition of the six replaced vessels will be determined in the near future, but they are ultimately expected to be operated in Maersk's international fleet.

All the replacement vessels will be integrated into MLL's existing U.S.-flag fleet operations, streamlining operations and creating efficiencies in MLL's global network of intermodal assets, including terminals, cranes, logistical platforms, computerized management systems, containers and chassis. The transfers will strengthen the MSP for military purposes and enhance the U.S.-flag presence in international shipping, says MLL.

Maersk Line, Limited is based in Norfolk, Virginia, and is one of the Department of Defense's primary shipping contractors. The company operates vessels registered in the United States in full compliance with U.S. laws and regulations.Ê It manages a fleet of nearly 50 ships in commercial and government service, including vessels requiring Top Secret security clearances. Maersk Line, Limited, a subsidiary of Denmark's A.P. Moller/Maersk A.S., is independently controlled by a board of directors comprised entirely of U.S. citizens, with retired vice chief of naval operations and supreme allied commander, Atlantic, Admiral Harold W. Gehman, serving as Board Chairman.