2010 was a good year for Philips Publishing Group, and our flagship Pacific Maritime Magazine, and I write today to thank all of you whose support helped us achieve this success.
The maritime industry is a wonderful place to work, mostly because of the special character of those who work in it.
Whether born into the industry as my brother Chris and I were, or otherwise drawn to it, most of us are involved in it because we were called to it. As a result, the relationships we make are all the more satisfying because they are made in the furtherance of shared goals and values.
My father, Dick Philips, founded Pacific Maritime Magazine in 1983 with the mission of not only reporting on the Pacific Coast maritime community, but also advocating on behalf of that community. When my brother Chris and I founded Philips Publishing Group in 2000, we based our company on the core values our father instilled in us: ethical, truthful and complete reporting of the issues and championing of the causes that benefit the maritime community and the shippers, customers and others we serve.
Entering our 29th year of publication, Pacific Maritime Magazine continues as the voice of that advocacy.
We look forward to continuing to promote the maritime industry through Pacific Maritime Magazine, through our professional conferences and through the civic involvement of Philips Publishing Group staff.
And, we look forward to working with all of you who also advocate on behalf of our industry; educating the regulators, legislators, policymakers, environmental special interests, and the general business public about the economic value our industry represents and the social and cultural importance of the maritime and commercial fishing industries to the North American West Coast.
We wish you and your family a Happy and Prosperous New Year and look forward to seeing you next year on the waterfront.
Peter Philips
President
Philips Publishing Group
Thursday, December 30, 2010
Forum Selection Clauses in Maritime Contracts
By Marilyn Raia
The parties to a maritime contract have various options when trying to resolve a dispute. [See “Resolving Maritime Disputes”, Pacific Maritime Magazine, January 2010] They also have the option of agreeing on the geographic location for dispute resolution even if that location has no relationship to the dispute. The clause in a maritime contract designating the place for dispute resolution is called a “forum selection clause”. A forum selection clause might designate a particular country, state or court as the forum. It might also refer to the designated forum in more general terms such as the origin port or the destination port.
The parties to a maritime contract are not required to specify a forum for dispute resolution. If they do not specify a place, a court will consider alternatives including the place where the contract was made, or where the breaching party is located, or where the contract was to be performed. This article focuses on forum selection clauses in different types of maritime contracts.
Towage Contracts
The US Supreme Court first addressed forum selection clauses in international towage contracts in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). That case involved a towage contract between an American corporation, Zapata, and a German towing company, Unterweser. The towage contract provided: “any dispute arising must be treated before the London Court of Justice”. The towed vessel, Zapata’s drilling rig, suffered damage during the tow. Despite the forum selection clause in the towage contract, Zapata sued Unterweser in federal court in Florida. The district court held the forum selection clause to be unenforceable as against public policy, reasoning parties to a contract could not agree ahead of time to “oust the jurisdiction of the courts”. The court of appeals agreed with the district court. The US Supreme Court disagreed with both. It held the forum selection clause to be prima facie valid because it was freely bargained for. The US Supreme Court also recognized the party objecting to the forum selection clause had the burden of proving it unreasonable under the circumstances. That meant the objecting party had to show that trial in the contracted forum would be so “gravely difficult and inconvenient” as to deprive that party of its “day in court”. Even though the selected forum might be inconvenient for the parties, the inconvenience did not make the forum selection clause unenforceable because the possibility of inconvenience was known and contemplated at the time the parties agreed to it.
Since Bremen, forum selection clauses in other types of maritime contracts have been held enforceable.
Passenger Tickets
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) involved a ticket purchased in Washington for a California-Mexico cruise. The ticket provided that all disputes “shall be litigated, if at all, in and before a Court located in the State of Florida, USA to the exclusion of the Courts of any other state or country”.
Shute was injured during the cruise and sued Carnival in the federal court in Washington for negligence. The district court held the forum selection clause enforceable. The court of appeals disagreed, relying on the criteria in the Bremen decision and holding the clause was not freely bargained for. The US Supreme Court held the forum selection clause in the printed ticket enforceable. It reasoned the ticket was a routine form contract and the provision requiring litigation in Florida was reasonable under the circumstances. The circumstances included 1) Carnival’s interest in limiting the places it could be sued; 2) the minimization of confusion over the proper place for litigation; and 3) the reduction in fare reflecting the savings incurred by Carnival when limiting the places it could be sued. The US Supreme Court rejected the notion Carnival selected Florida as the forum for litigation to discourage passengers from pursuing their claims.
Bills of Lading
Bills of lading serve three purposes: a receipt for cargo; a document of title; and a contract of carriage. When serving as a contract of carriage to or from the United States in foreign trade, they are mandatorily subject to the United States Carriage of Goods by Sea Act, 46 U.S.C. 30701 et seq., [COGSA] which prohibits provisions in bills of lading that lessen the carrier’s liability below the standards set forth in COGSA.
Carriers routinely place forum selection clauses in the fine print on the reverse side of their bills of lading. Commonly selected forums include the United States District Court for the Southern District of New York and the High Courts of Japan or Korea. Until the US Supreme Court decided Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995), forum selection clauses in bills of lading were routinely held void on the ground they lessened the carrier’s liability below COGSA’s standards. The courts reasoned cargo owners would be discouraged from suing if required to sue in a distant forum, resulting in lower settlements for cargo claims to the carrier’s advantage.
Sky Reefer involved a bill of lading clause requiring cargo owners to arbitrate cargo damage disputes in Japan. The US Supreme Court held the clause enforceable finding it did not necessarily impermissibly lessen the carrier’s liability under COGSA. The court also noted the clause required only arbitration, which allowed the district court to retain jurisdiction to make sure the parties’ substantive interests were protected. Since Sky Reefer, courts have often extended its reasoning to uphold bill of lading clauses requiring litigation in a foreign country over which the district court would not be able to retain jurisdiction.
Employment Contracts
Forum selection clauses in maritime employment contracts also have been held enforceable. In Calix-Chacon v. Global International Marine, Inc., 493 F.3d 507 (5th Cir. 2007), a US company hired a Honduran seaman to work aboard its vessel. The employment contract provided that any claims would be brought exclusively in a court in Honduras. The seaman sued his employer in a federal court in Louisiana for personal injuries. The district court denied the employer’s motion to dismiss the case holding the forum selection clause unenforceable. The court of appeals held a foreign forum selection clause in a US maritime employment contract is not per se unreasonable and that the party objecting to it bears the burden of proving it unreasonable under the circumstances.
Dockage Agreements
Forum selection clauses may also be found in dockage agreements. In Ruble Heck-Dance v. Inversiones Isleta Marina, Inc., 381 F.Supp.2d 50 (D. P.R. 2005), the dockage agreement required all legal matters to proceed before a local state court. The marina sued its tenant in state court for unpaid charges and obtained a judgment. To satisfy the judgment, the marina attached the tenant’s vessel. Three years later, the tenant sued the marina in federal court alleging the marina had not followed proper procedures in the state court action. The marina moved to dismiss the action based on the forum selection clause in the dockage agreement requiring suits to be brought in state court, not federal court. The federal court dismissed the case, finding the forum selection clause in the dockage agreement applied to the facts of the case, that is, the allegations arose from the dockage agreement. It also found the forum selection clause “obvious and understandable” and within the tenant’s knowledge because it participated in the state court proceedings and did not object at that time.
Insurance Policies
A marine insurance policy is also a maritime contract in which a forum selection clause may be found and enforced. In Marco Forwarding Co. v. Continental Casualty Company, 2005 AMC 2669 (S.D. Fla. 2005), Marco was sued for negligence in stowing and securing a shipment. In turn, Marco sued its insurer, Continental, for denying coverage for its liability. Continental successfully moved to dismiss the case based on a clause in the policy requiring litigation of disputes in Canada. The district court held the inconvenience and economic hardship to Marco, who was located in Florida where the underlying cargo damage claim had been litigated, were insufficient to avoid the forum selection clause.
Forum selection clauses have been held enforceable in a wide variety of maritime contracts. They have been upheld in negotiated as well as non-negotiated contracts. Before negotiating a forum selection clause in a maritime contract, due consideration should be given to various factors including the convenience of the chosen forum to the parties and the availability there of necessary witnesses and evidence. A court’s subpoena power does not extend across state or country borders. Accordingly, the ability to prosecute or defend a claim can be severely compromised when witnesses and evidence cannot be compelled into the chosen forum.
The party facing an undesirable forum selection clause in a non-negotiated contract may have little choice. It can accept the potential need to litigate in an undesirable or inconvenient place as a condition of doing business with a company or not do business with that company because the forum selection clause is likely to be enforced.
Marilyn Raia is of counsel to Bullivant Houser Bailey and is located in the firm’s San Francisco office. She specializes in maritime and transportation matters and can be reached at marilyn.raia@bullivant.com
The parties to a maritime contract have various options when trying to resolve a dispute. [See “Resolving Maritime Disputes”, Pacific Maritime Magazine, January 2010] They also have the option of agreeing on the geographic location for dispute resolution even if that location has no relationship to the dispute. The clause in a maritime contract designating the place for dispute resolution is called a “forum selection clause”. A forum selection clause might designate a particular country, state or court as the forum. It might also refer to the designated forum in more general terms such as the origin port or the destination port.
The parties to a maritime contract are not required to specify a forum for dispute resolution. If they do not specify a place, a court will consider alternatives including the place where the contract was made, or where the breaching party is located, or where the contract was to be performed. This article focuses on forum selection clauses in different types of maritime contracts.
Towage Contracts
The US Supreme Court first addressed forum selection clauses in international towage contracts in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). That case involved a towage contract between an American corporation, Zapata, and a German towing company, Unterweser. The towage contract provided: “any dispute arising must be treated before the London Court of Justice”. The towed vessel, Zapata’s drilling rig, suffered damage during the tow. Despite the forum selection clause in the towage contract, Zapata sued Unterweser in federal court in Florida. The district court held the forum selection clause to be unenforceable as against public policy, reasoning parties to a contract could not agree ahead of time to “oust the jurisdiction of the courts”. The court of appeals agreed with the district court. The US Supreme Court disagreed with both. It held the forum selection clause to be prima facie valid because it was freely bargained for. The US Supreme Court also recognized the party objecting to the forum selection clause had the burden of proving it unreasonable under the circumstances. That meant the objecting party had to show that trial in the contracted forum would be so “gravely difficult and inconvenient” as to deprive that party of its “day in court”. Even though the selected forum might be inconvenient for the parties, the inconvenience did not make the forum selection clause unenforceable because the possibility of inconvenience was known and contemplated at the time the parties agreed to it.
Since Bremen, forum selection clauses in other types of maritime contracts have been held enforceable.
Passenger Tickets
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) involved a ticket purchased in Washington for a California-Mexico cruise. The ticket provided that all disputes “shall be litigated, if at all, in and before a Court located in the State of Florida, USA to the exclusion of the Courts of any other state or country”.
Shute was injured during the cruise and sued Carnival in the federal court in Washington for negligence. The district court held the forum selection clause enforceable. The court of appeals disagreed, relying on the criteria in the Bremen decision and holding the clause was not freely bargained for. The US Supreme Court held the forum selection clause in the printed ticket enforceable. It reasoned the ticket was a routine form contract and the provision requiring litigation in Florida was reasonable under the circumstances. The circumstances included 1) Carnival’s interest in limiting the places it could be sued; 2) the minimization of confusion over the proper place for litigation; and 3) the reduction in fare reflecting the savings incurred by Carnival when limiting the places it could be sued. The US Supreme Court rejected the notion Carnival selected Florida as the forum for litigation to discourage passengers from pursuing their claims.
Bills of Lading
Bills of lading serve three purposes: a receipt for cargo; a document of title; and a contract of carriage. When serving as a contract of carriage to or from the United States in foreign trade, they are mandatorily subject to the United States Carriage of Goods by Sea Act, 46 U.S.C. 30701 et seq., [COGSA] which prohibits provisions in bills of lading that lessen the carrier’s liability below the standards set forth in COGSA.
Carriers routinely place forum selection clauses in the fine print on the reverse side of their bills of lading. Commonly selected forums include the United States District Court for the Southern District of New York and the High Courts of Japan or Korea. Until the US Supreme Court decided Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995), forum selection clauses in bills of lading were routinely held void on the ground they lessened the carrier’s liability below COGSA’s standards. The courts reasoned cargo owners would be discouraged from suing if required to sue in a distant forum, resulting in lower settlements for cargo claims to the carrier’s advantage.
Sky Reefer involved a bill of lading clause requiring cargo owners to arbitrate cargo damage disputes in Japan. The US Supreme Court held the clause enforceable finding it did not necessarily impermissibly lessen the carrier’s liability under COGSA. The court also noted the clause required only arbitration, which allowed the district court to retain jurisdiction to make sure the parties’ substantive interests were protected. Since Sky Reefer, courts have often extended its reasoning to uphold bill of lading clauses requiring litigation in a foreign country over which the district court would not be able to retain jurisdiction.
Employment Contracts
Forum selection clauses in maritime employment contracts also have been held enforceable. In Calix-Chacon v. Global International Marine, Inc., 493 F.3d 507 (5th Cir. 2007), a US company hired a Honduran seaman to work aboard its vessel. The employment contract provided that any claims would be brought exclusively in a court in Honduras. The seaman sued his employer in a federal court in Louisiana for personal injuries. The district court denied the employer’s motion to dismiss the case holding the forum selection clause unenforceable. The court of appeals held a foreign forum selection clause in a US maritime employment contract is not per se unreasonable and that the party objecting to it bears the burden of proving it unreasonable under the circumstances.
Dockage Agreements
Forum selection clauses may also be found in dockage agreements. In Ruble Heck-Dance v. Inversiones Isleta Marina, Inc., 381 F.Supp.2d 50 (D. P.R. 2005), the dockage agreement required all legal matters to proceed before a local state court. The marina sued its tenant in state court for unpaid charges and obtained a judgment. To satisfy the judgment, the marina attached the tenant’s vessel. Three years later, the tenant sued the marina in federal court alleging the marina had not followed proper procedures in the state court action. The marina moved to dismiss the action based on the forum selection clause in the dockage agreement requiring suits to be brought in state court, not federal court. The federal court dismissed the case, finding the forum selection clause in the dockage agreement applied to the facts of the case, that is, the allegations arose from the dockage agreement. It also found the forum selection clause “obvious and understandable” and within the tenant’s knowledge because it participated in the state court proceedings and did not object at that time.
Insurance Policies
A marine insurance policy is also a maritime contract in which a forum selection clause may be found and enforced. In Marco Forwarding Co. v. Continental Casualty Company, 2005 AMC 2669 (S.D. Fla. 2005), Marco was sued for negligence in stowing and securing a shipment. In turn, Marco sued its insurer, Continental, for denying coverage for its liability. Continental successfully moved to dismiss the case based on a clause in the policy requiring litigation of disputes in Canada. The district court held the inconvenience and economic hardship to Marco, who was located in Florida where the underlying cargo damage claim had been litigated, were insufficient to avoid the forum selection clause.
Forum selection clauses have been held enforceable in a wide variety of maritime contracts. They have been upheld in negotiated as well as non-negotiated contracts. Before negotiating a forum selection clause in a maritime contract, due consideration should be given to various factors including the convenience of the chosen forum to the parties and the availability there of necessary witnesses and evidence. A court’s subpoena power does not extend across state or country borders. Accordingly, the ability to prosecute or defend a claim can be severely compromised when witnesses and evidence cannot be compelled into the chosen forum.
The party facing an undesirable forum selection clause in a non-negotiated contract may have little choice. It can accept the potential need to litigate in an undesirable or inconvenient place as a condition of doing business with a company or not do business with that company because the forum selection clause is likely to be enforced.
Marilyn Raia is of counsel to Bullivant Houser Bailey and is located in the firm’s San Francisco office. She specializes in maritime and transportation matters and can be reached at marilyn.raia@bullivant.com
EnviroFocus: Hybrid Marine Solutions
By George Roddan
Commercial vessels operating in and around the world's ports have been identified as being responsible for a significant element of the total daily air pollution for a given surrounding area.
This pollution has been associated with an increased incidence of respiratory-related disease, in addition to increased greenhouse gas emissions. Governments and regulatory bodies are now focused worldwide on reducing the marine component of pollution in these heavily used ports.
Harbor craft are typically powered by diesel engines regulated by the US Environmental Protection Agency (EPA), whose emission regulations for the new marine engines require the use of low sulphur fuel and other strategies to improve emission profiles. Future EPA regulations are becoming even more stringent and are aggressively geared toward simultaneous reduction of toxic air contaminants, particulate matter (PM) and nitrogen oxides (NOx), as well as greenhouse gas emissions (CO2).
One available solution to achieve these emissions standards is the use of a number of propulsion sources in one vessel (also known as the hybrid propulsion). This technology is not new to the marine world; diesel electric ships and submarines have been common for more than sixty years. These vessels are driven by an electric motor which derives energy from diesel generators, or batteries in the case of the submarine.
Advances in hybrid propulsion technology are accelerating the solution to both emissions and energy efficiency in the marine industry. For certain types of craft, such as the harbor tug, which spends most of its time loitering or in transit at low loads, followed by short bursts of high bollard pull, a hybrid solution can achieve real emissions reductions of particulate matter, carbon monoxide and nitrogen oxides by 50 percent or more, and fuel savings of about 25percent. This is accomplished through the use of a combination of smaller more efficient diesel engines coupled to electric drive systems and a battery bank to assist in the intermittent high load situations.
Other vessels and equipment can benefit from the use of hybrid technologies, depending on the application, including ferries, fishing vessels and port machinery. The return on investment for a successful marine application can be as little as 2 years, which is a compelling reason to seriously consider this option, which also provides significant environmental benefits.
Battery Storage for Marine Hybrids
Hybrid marine applications provide a unique challenge for electrical storage systems, and these challenges are the basis for a new Pacific Northwest industry. The PNW has a long history of marine industrial activity and experience. More recently there has been intense activity in the high tech sectors of electrical power management and advanced battery development. New technology and battery systems development have provided a basis for the marine industry to now look seriously at integrating these advances into projects that require high energy density and power.
The Technology - Lithium Ion Battery Systems
Currently, a state-of-the- art lithium-based battery cell technology is being integrated by Corvus Energy Ltd. to provide a high-density electrical energy storage solution that is safe, reliable and readily adapted to the marine environment.
The team of engineers at Corvus Energy has extensive experience in marine design and powertrain development, as well as the production of battery storage systems for both automotive and undersea applications. Corvus engineers have worked in the fields of naval architecture and ship design, as well as undersea technology with manned and autonomous underwater vehicles.
Previous solutions to battery storage utilized lead-acid based technology. For most large scale applications, (over 200 kWh), the size and weight of the lead acid batteries makes them too un-wieldy and dangerous for marine installations. With recent advances, lithium ion battery technology becomes the choice for certain applications. Although the first cost of the lithium-based systems is high, the advantages of increased number of life cycles, low volume and extremely low weight provide incentive to develop high performance large-scale systems.
Based on life cycle costing, lithium battery systems are more economical than any other chemistry, and over the life of the battery pack become comparable in cost to grid power. This will be a key factor driving the adoption of lithium ion battery packs for years to come.
Li-ion System Benefits
Independently tested to achieve exceptionally high abuse tolerance, Li-ion batteries offer safety by way of inherent cell chemistry and design as well as patented battery management system.
With a wide operating temperature range between -20 degrees Celsius to 60 degrees Celsius, a 3,000 + cycle life and a 10 to 20 year calendar life, advanced lithium-ion battery systems ensure the reliable availability of power under all operating conditions.
Lithium-ion battery systems offer rapid charge and discharge rates, and can respond within milliseconds to required power and energy outputs. The Li-ion systems are scalable to meet different power and energy storage specifications ranging from 5 kWh all the way up to multiple megawatt sized banks.
Finally, lithium ion chemistry provides a clean and recyclable solution to high density storage as compared to the toxic alternatives of lead acid and nickel-metal hydrides. Lithium is non-toxic and 100% recyclable.
Local, state and federal governments worldwide continue to clamp down on maritime emissions. With many tug companies like Foss, Seaspan and Crowley either already using hybrid technology or developing hybrid vessels, lithium ion battery technology could power the next generation of harbor craft.
George Roddan has been involved in consulting and hydrodynamic design of marine craft for the last 28 years. He has extensive experience in physical model testing, computational fluid dynamics (CFD), and performance evaluation, as well as in detailed structural design and driveline engineering for all types of vessels.
Commercial vessels operating in and around the world's ports have been identified as being responsible for a significant element of the total daily air pollution for a given surrounding area.
This pollution has been associated with an increased incidence of respiratory-related disease, in addition to increased greenhouse gas emissions. Governments and regulatory bodies are now focused worldwide on reducing the marine component of pollution in these heavily used ports.
Harbor craft are typically powered by diesel engines regulated by the US Environmental Protection Agency (EPA), whose emission regulations for the new marine engines require the use of low sulphur fuel and other strategies to improve emission profiles. Future EPA regulations are becoming even more stringent and are aggressively geared toward simultaneous reduction of toxic air contaminants, particulate matter (PM) and nitrogen oxides (NOx), as well as greenhouse gas emissions (CO2).
One available solution to achieve these emissions standards is the use of a number of propulsion sources in one vessel (also known as the hybrid propulsion). This technology is not new to the marine world; diesel electric ships and submarines have been common for more than sixty years. These vessels are driven by an electric motor which derives energy from diesel generators, or batteries in the case of the submarine.
Advances in hybrid propulsion technology are accelerating the solution to both emissions and energy efficiency in the marine industry. For certain types of craft, such as the harbor tug, which spends most of its time loitering or in transit at low loads, followed by short bursts of high bollard pull, a hybrid solution can achieve real emissions reductions of particulate matter, carbon monoxide and nitrogen oxides by 50 percent or more, and fuel savings of about 25percent. This is accomplished through the use of a combination of smaller more efficient diesel engines coupled to electric drive systems and a battery bank to assist in the intermittent high load situations.
Other vessels and equipment can benefit from the use of hybrid technologies, depending on the application, including ferries, fishing vessels and port machinery. The return on investment for a successful marine application can be as little as 2 years, which is a compelling reason to seriously consider this option, which also provides significant environmental benefits.
Battery Storage for Marine Hybrids
Hybrid marine applications provide a unique challenge for electrical storage systems, and these challenges are the basis for a new Pacific Northwest industry. The PNW has a long history of marine industrial activity and experience. More recently there has been intense activity in the high tech sectors of electrical power management and advanced battery development. New technology and battery systems development have provided a basis for the marine industry to now look seriously at integrating these advances into projects that require high energy density and power.
The Technology - Lithium Ion Battery Systems
Currently, a state-of-the- art lithium-based battery cell technology is being integrated by Corvus Energy Ltd. to provide a high-density electrical energy storage solution that is safe, reliable and readily adapted to the marine environment.
The team of engineers at Corvus Energy has extensive experience in marine design and powertrain development, as well as the production of battery storage systems for both automotive and undersea applications. Corvus engineers have worked in the fields of naval architecture and ship design, as well as undersea technology with manned and autonomous underwater vehicles.
Previous solutions to battery storage utilized lead-acid based technology. For most large scale applications, (over 200 kWh), the size and weight of the lead acid batteries makes them too un-wieldy and dangerous for marine installations. With recent advances, lithium ion battery technology becomes the choice for certain applications. Although the first cost of the lithium-based systems is high, the advantages of increased number of life cycles, low volume and extremely low weight provide incentive to develop high performance large-scale systems.
Based on life cycle costing, lithium battery systems are more economical than any other chemistry, and over the life of the battery pack become comparable in cost to grid power. This will be a key factor driving the adoption of lithium ion battery packs for years to come.
Li-ion System Benefits
Independently tested to achieve exceptionally high abuse tolerance, Li-ion batteries offer safety by way of inherent cell chemistry and design as well as patented battery management system.
With a wide operating temperature range between -20 degrees Celsius to 60 degrees Celsius, a 3,000 + cycle life and a 10 to 20 year calendar life, advanced lithium-ion battery systems ensure the reliable availability of power under all operating conditions.
Lithium-ion battery systems offer rapid charge and discharge rates, and can respond within milliseconds to required power and energy outputs. The Li-ion systems are scalable to meet different power and energy storage specifications ranging from 5 kWh all the way up to multiple megawatt sized banks.
Finally, lithium ion chemistry provides a clean and recyclable solution to high density storage as compared to the toxic alternatives of lead acid and nickel-metal hydrides. Lithium is non-toxic and 100% recyclable.
Local, state and federal governments worldwide continue to clamp down on maritime emissions. With many tug companies like Foss, Seaspan and Crowley either already using hybrid technology or developing hybrid vessels, lithium ion battery technology could power the next generation of harbor craft.
George Roddan has been involved in consulting and hydrodynamic design of marine craft for the last 28 years. He has extensive experience in physical model testing, computational fluid dynamics (CFD), and performance evaluation, as well as in detailed structural design and driveline engineering for all types of vessels.
Alternate Fuels for Marine Propulsion Plants
By Louis J. Lemos
Commendable strides in the pursuit of alternative fuels and energy sources are being made, thanks mainly to private enterprise initiative and governmental endeavor, expressed by the US Department of Energy, to share information with interested members of the public. Meanwhile, public awareness of this progress is also assured by trade and consumer media reports on the topic of atmospheric pollution by exhaust emissions from ships. Proposed counter measures within the realm of feasibility and currently in use include legislation mandating that ships use low sulfur fuel within coastal waters such as Sulfur Emission Control Areas (SECA), or switching to shore power (cold ironing) while moored alongside the pier; increased use of Selective Catalytic Reduction (SCR) systems and electronically-controlled common rail fuel injection systems.
The overall effect of such measures has produced a significant drop in nitrous oxides, sulfur dioxides, hydrocarbons and particulate matter. The trend toward diesel-electric main propulsion plants involving medium speed engines of the trunk piston type, mainly for large passenger cruise liners, coastal ferries, research ships and some offshore support vessels, has also contributed significantly to the reduction of pollutant bearing exhaust emissions.
The difference in NOx emissions produced by diesel-electric plants can be as much as 20 percent lower than that of their straight-diesel-powered counter parts. This is attributable to the fact that the diesel engines in a diesel-electric propulsion plant, operate at a fairly constant speed, conducive to fairly stable combustion temperatures, maximum efficiency, optimum fuel economy and resultant uniformity of exhaust emissions with reduced pollutant content.
Cylinder Liner Lubrication
Currently, most large container ships, bulk carriers and super tankers are propelled by large slow speed, large bore diesel engines of the crosshead type. Many of them are now equipped with electronically controlled common rail fuel injection systems in addition to Selective Catalytic Reduction (SCR) systems of which there are several variations. Because of their immense size, these engines with cylinder bores ranging from 500 millimeters to 980 millimeters (19.68 inches to 38.58 inches) cannot rely on splash lubrication of the cylinder walls exclusively. For this purpose a separate cylinder liner lubrication method is employed using mechanical lubricators, independent of the main engine-driven lubrication system. The requirements for independently lubricating the cylinder liners of slow speed, large bore engines are to neutralize acids formed during combustion and thereby protect the cylinder liner from cold corrosion attack, to establish a reasonably stable oleous film between the cylinder liner and the piston rings and to preserve a degree of cleanliness of the cylinder liner surface and piston ring pack.
Low Sulfur Fuel Compatibility
It has been established that the requirement for continued reduction in allowable sulfur content of fuel, such as Low Sulfur Fuel (LSF), and Ultra-Low Sulfur Fuel (ULSF), adversely affects cylinder liner lubrication, particularly of the large-bore, slow-speed, main propulsion diesel engines. This is due to the use of a cylinder oil having a rather high Total Base Number (TBN), such as 70 TBN, that may result in excessive deposits on the pistons and scuffing of the cylinder liners. The severity of such adverse factors will vary in accordance with the degree of usage of LSF. For ships operating on trans-oceanic routes, wherein the majority of their running time is outside of the above-mentioned coastal areas, the use of conventional diesel fuels with relatively-higher sulfur content will be permissible. However, upon approaching such regulated areas it will become mandatory to switch to LSF for the duration of passage and/or presence therein. Conversely, ships engaged mainly in coastal trade on a full-time basis, and burning LSF, will require the use of a cylinder oil of a correspondingly lower Total Base Number such as 40 TBN. Given that the acidity of diesel fuel is proportional to the level of sulfur content, the Total Base number of the lubricant is relative to the oil's ability to neutralize the acid. This is why the Total Base Number of an oil is also considered to be its Neutralization Value, and can be expressed as a measure of the acidity or alkalinity of the oil, whichever characteristic it possesses, and is also called the Acidity Number. A significant advantage of these mechanical lubricators is that, based on the known sulfur value of the fuel, the corresponding feed rate of the cylinder lubricant can be adjusted accordingly, for maximum effect. Should the need arise to change from the 70 TBN cylinder oil, commonly used for high sulfur fuels, to the lower 40 TBN cylinder oil, for use with low sulfur fuel, it is advisable to contact the lubricant supplier to determine the recommended feed rate of the lubricant, in order to ensure that the appropriate degree of cylinder liner lubrication is maintained.
The Cost of Compliance
While the enforcement of restricted exhaust emissions is of prime concern to ship-owners, so too is the difference in cost between conventional heavy fuel (380 centistokes) averaging 2.5% Sulfur Oxide (SOx), currently available for about $480.00 per ton, versus Marine diesel Oil (MDO) rated at less than 0.1% SOx, reportedly, around $695.00 per ton, depending upon the location of the bunkering port. Hence, compliance with the law becomes a rather expensive proposition. In addition to which, the contemporary solution to such outlawed exhaust emissions, involving switching from conventional heavy fuel (380 centistokes), or from No. 2 diesel fuel, to a distillate fuel with very low sulfur content, known as Ultra-Low Sulfur Fuel (ULSF), has caused problems of its own. Typically, related incidents involving ULSF have adversely affected cylinder liner lubrication of large-bore, slow-speed main propulsion diesel engines, and the diminished lubricity of ULSF has also been determined to be the cause of fuel injection pump binding of generator engines, resulting in loss of power. In one such incident, the generator failure resulted in a loss of steering power aboard a vessel heading into port.
Furthermore, it has been found that bio-fuel blends (also used as substitutes for conventional heavy fuel), are detrimental to elastomer sealing materials (a form of polymerized compounds), used in certain fuel transfer pump oil seals, apparently due to acidity of the bio-fuel due to oxidation. Given the temperature difference between MDO and ULSF, and the potential for fuel injection pump seizure, MAN diesel & Turbo has devised a diesel “switch” to handle changeover between high and low sulfur fuels, independent of engine load, and to automatically adjust fuel temperatures in the MGO cooler, for vessels entering or departing from SECA regulatory zones. The system is also designed to “log” the changeover process for official documentation for port authorities if and when required. This system is actually a later version of the “switch” originally developed by MAN diesel for the changeover from MDO to LNG, applicable to dual-fuel engines. Another alternative to the ultra-low sulfur fuel lies in the potential efficacy of “exhaust gas scrubbers", such as those built by Hamworthy, Krystallon and the dry-scrubbing system recently certified by Germanischer Lloyd for MAN Diesel and Turbo, to reduce the levels of emission effluents by a factor not less than 95% sulfur oxide (S0x); 78% for nitrogen oxide, (NOx), and about 83% for particular matter (PM) within the next five years.
Dual Fuel
Yet another possible alternative lies in the feasibility of converting contemporary main propulsion diesel engines, whereby they become capable of burning "dual fuel“. This would involve retaining the conventional marine diesel oil (MDO) capability and modifying the engines to be capable of also burning liquefied natural gas (LNG). Several recently built European tankers, designed for the LNG trade with dual fuel (DF) capability plus a fleet of Norwegian ferries currently in operation are also burning LNG, from which the exhaust emissions are reportedly extremely low. While conventional wisdom appears to fault marine diesel engines for their exhaust emissions far more so than that of their highway or railroad counterparts, the truth is that for a riverine tugboat pushing a “fleet” of twelve of fifteen loaded barges upstream, the diesel engine exhaust emissions are estimated to be approximately 0.470 grams per ton/mile; which is about 27.70% lower than that of railroad trains and 35.60% lower than that of highway trucks, and are expected to become even lower if and when they eventually switch to burning LNG, given the current trend toward the adoption of LNG as a preferred marine engine fuel.
Readiness
Since most ships are now powered by oil-burning diesel engines, either direct-drive, geared-drive or diesel-electric drive, the number of steam ships still in operation has diminished considerably. However, in the case of heavy oil tankers, such as VLCCs, (Very Large Crude Carriers), despite their large main propulsion diesel engines of 50,000-bhp or more, steam boilers play a prominent role in providing steam to sustain the cargo tank heating coils. This is due to the fact that in cold climates such as found in Northern European seaports, the relatively low sea water temperature has chilled the heavy black crude oil to a such a high viscosity that the cargo can not be pumped out without being pre-heated by the steam-heated tank coils. In such instances, the critical factors become (a) the oil seals of the fuel oil transfer pumps and boiler service pumps and (b) the steam boiler burner tips. Are they all currently designed for use with ULSF? Or do they also need to be replaced with ULSF-compatible components? The inevitable conclusion to all this is that solutions to certain problems that in turn, create problems of their own, are unacceptable and must be carefully evaluated before allowing one problem to be replaced by another potentially worse. Hence, responsible ship owners and ship managers can not afford to ignore the above-mentioned factors, and have a moral obligation to alert their crews to such potential problems and take appropriate instructive and/or corrective measures to ensure that the required level of "readiness" is capable of sustaining the appropriate level of sea-worthiness.
LNG
Likewise, in view of the growing trend towards Dual-Fuel diesel engines, despite their several years of experience with various grades of diesel fuel, an appropriate level of readiness will be required of all those crew members involved with bunkering and monitoring of LNG fuel aboard ship. Meanwhile, ashore, it is reasonable to assume that as the demand for LNG as a marine fuel increases, and that suppliers develop the technology for economic mass production of same, that the price of such fuel will gradually decrease to a more competitive level. Meanwhile, considering their extensive experience with LNG as a marine fuel, with the design of ships and main propulsion engines specifically designed and built to be powered by LNG, Rolls-Royce is probably the most valuable source of information on this subject within the vast maritime community.
Commendable strides in the pursuit of alternative fuels and energy sources are being made, thanks mainly to private enterprise initiative and governmental endeavor, expressed by the US Department of Energy, to share information with interested members of the public. Meanwhile, public awareness of this progress is also assured by trade and consumer media reports on the topic of atmospheric pollution by exhaust emissions from ships. Proposed counter measures within the realm of feasibility and currently in use include legislation mandating that ships use low sulfur fuel within coastal waters such as Sulfur Emission Control Areas (SECA), or switching to shore power (cold ironing) while moored alongside the pier; increased use of Selective Catalytic Reduction (SCR) systems and electronically-controlled common rail fuel injection systems.
The overall effect of such measures has produced a significant drop in nitrous oxides, sulfur dioxides, hydrocarbons and particulate matter. The trend toward diesel-electric main propulsion plants involving medium speed engines of the trunk piston type, mainly for large passenger cruise liners, coastal ferries, research ships and some offshore support vessels, has also contributed significantly to the reduction of pollutant bearing exhaust emissions.
The difference in NOx emissions produced by diesel-electric plants can be as much as 20 percent lower than that of their straight-diesel-powered counter parts. This is attributable to the fact that the diesel engines in a diesel-electric propulsion plant, operate at a fairly constant speed, conducive to fairly stable combustion temperatures, maximum efficiency, optimum fuel economy and resultant uniformity of exhaust emissions with reduced pollutant content.
Cylinder Liner Lubrication
Currently, most large container ships, bulk carriers and super tankers are propelled by large slow speed, large bore diesel engines of the crosshead type. Many of them are now equipped with electronically controlled common rail fuel injection systems in addition to Selective Catalytic Reduction (SCR) systems of which there are several variations. Because of their immense size, these engines with cylinder bores ranging from 500 millimeters to 980 millimeters (19.68 inches to 38.58 inches) cannot rely on splash lubrication of the cylinder walls exclusively. For this purpose a separate cylinder liner lubrication method is employed using mechanical lubricators, independent of the main engine-driven lubrication system. The requirements for independently lubricating the cylinder liners of slow speed, large bore engines are to neutralize acids formed during combustion and thereby protect the cylinder liner from cold corrosion attack, to establish a reasonably stable oleous film between the cylinder liner and the piston rings and to preserve a degree of cleanliness of the cylinder liner surface and piston ring pack.
Low Sulfur Fuel Compatibility
It has been established that the requirement for continued reduction in allowable sulfur content of fuel, such as Low Sulfur Fuel (LSF), and Ultra-Low Sulfur Fuel (ULSF), adversely affects cylinder liner lubrication, particularly of the large-bore, slow-speed, main propulsion diesel engines. This is due to the use of a cylinder oil having a rather high Total Base Number (TBN), such as 70 TBN, that may result in excessive deposits on the pistons and scuffing of the cylinder liners. The severity of such adverse factors will vary in accordance with the degree of usage of LSF. For ships operating on trans-oceanic routes, wherein the majority of their running time is outside of the above-mentioned coastal areas, the use of conventional diesel fuels with relatively-higher sulfur content will be permissible. However, upon approaching such regulated areas it will become mandatory to switch to LSF for the duration of passage and/or presence therein. Conversely, ships engaged mainly in coastal trade on a full-time basis, and burning LSF, will require the use of a cylinder oil of a correspondingly lower Total Base Number such as 40 TBN. Given that the acidity of diesel fuel is proportional to the level of sulfur content, the Total Base number of the lubricant is relative to the oil's ability to neutralize the acid. This is why the Total Base Number of an oil is also considered to be its Neutralization Value, and can be expressed as a measure of the acidity or alkalinity of the oil, whichever characteristic it possesses, and is also called the Acidity Number. A significant advantage of these mechanical lubricators is that, based on the known sulfur value of the fuel, the corresponding feed rate of the cylinder lubricant can be adjusted accordingly, for maximum effect. Should the need arise to change from the 70 TBN cylinder oil, commonly used for high sulfur fuels, to the lower 40 TBN cylinder oil, for use with low sulfur fuel, it is advisable to contact the lubricant supplier to determine the recommended feed rate of the lubricant, in order to ensure that the appropriate degree of cylinder liner lubrication is maintained.
The Cost of Compliance
While the enforcement of restricted exhaust emissions is of prime concern to ship-owners, so too is the difference in cost between conventional heavy fuel (380 centistokes) averaging 2.5% Sulfur Oxide (SOx), currently available for about $480.00 per ton, versus Marine diesel Oil (MDO) rated at less than 0.1% SOx, reportedly, around $695.00 per ton, depending upon the location of the bunkering port. Hence, compliance with the law becomes a rather expensive proposition. In addition to which, the contemporary solution to such outlawed exhaust emissions, involving switching from conventional heavy fuel (380 centistokes), or from No. 2 diesel fuel, to a distillate fuel with very low sulfur content, known as Ultra-Low Sulfur Fuel (ULSF), has caused problems of its own. Typically, related incidents involving ULSF have adversely affected cylinder liner lubrication of large-bore, slow-speed main propulsion diesel engines, and the diminished lubricity of ULSF has also been determined to be the cause of fuel injection pump binding of generator engines, resulting in loss of power. In one such incident, the generator failure resulted in a loss of steering power aboard a vessel heading into port.
Furthermore, it has been found that bio-fuel blends (also used as substitutes for conventional heavy fuel), are detrimental to elastomer sealing materials (a form of polymerized compounds), used in certain fuel transfer pump oil seals, apparently due to acidity of the bio-fuel due to oxidation. Given the temperature difference between MDO and ULSF, and the potential for fuel injection pump seizure, MAN diesel & Turbo has devised a diesel “switch” to handle changeover between high and low sulfur fuels, independent of engine load, and to automatically adjust fuel temperatures in the MGO cooler, for vessels entering or departing from SECA regulatory zones. The system is also designed to “log” the changeover process for official documentation for port authorities if and when required. This system is actually a later version of the “switch” originally developed by MAN diesel for the changeover from MDO to LNG, applicable to dual-fuel engines. Another alternative to the ultra-low sulfur fuel lies in the potential efficacy of “exhaust gas scrubbers", such as those built by Hamworthy, Krystallon and the dry-scrubbing system recently certified by Germanischer Lloyd for MAN Diesel and Turbo, to reduce the levels of emission effluents by a factor not less than 95% sulfur oxide (S0x); 78% for nitrogen oxide, (NOx), and about 83% for particular matter (PM) within the next five years.
Dual Fuel
Yet another possible alternative lies in the feasibility of converting contemporary main propulsion diesel engines, whereby they become capable of burning "dual fuel“. This would involve retaining the conventional marine diesel oil (MDO) capability and modifying the engines to be capable of also burning liquefied natural gas (LNG). Several recently built European tankers, designed for the LNG trade with dual fuel (DF) capability plus a fleet of Norwegian ferries currently in operation are also burning LNG, from which the exhaust emissions are reportedly extremely low. While conventional wisdom appears to fault marine diesel engines for their exhaust emissions far more so than that of their highway or railroad counterparts, the truth is that for a riverine tugboat pushing a “fleet” of twelve of fifteen loaded barges upstream, the diesel engine exhaust emissions are estimated to be approximately 0.470 grams per ton/mile; which is about 27.70% lower than that of railroad trains and 35.60% lower than that of highway trucks, and are expected to become even lower if and when they eventually switch to burning LNG, given the current trend toward the adoption of LNG as a preferred marine engine fuel.
Readiness
Since most ships are now powered by oil-burning diesel engines, either direct-drive, geared-drive or diesel-electric drive, the number of steam ships still in operation has diminished considerably. However, in the case of heavy oil tankers, such as VLCCs, (Very Large Crude Carriers), despite their large main propulsion diesel engines of 50,000-bhp or more, steam boilers play a prominent role in providing steam to sustain the cargo tank heating coils. This is due to the fact that in cold climates such as found in Northern European seaports, the relatively low sea water temperature has chilled the heavy black crude oil to a such a high viscosity that the cargo can not be pumped out without being pre-heated by the steam-heated tank coils. In such instances, the critical factors become (a) the oil seals of the fuel oil transfer pumps and boiler service pumps and (b) the steam boiler burner tips. Are they all currently designed for use with ULSF? Or do they also need to be replaced with ULSF-compatible components? The inevitable conclusion to all this is that solutions to certain problems that in turn, create problems of their own, are unacceptable and must be carefully evaluated before allowing one problem to be replaced by another potentially worse. Hence, responsible ship owners and ship managers can not afford to ignore the above-mentioned factors, and have a moral obligation to alert their crews to such potential problems and take appropriate instructive and/or corrective measures to ensure that the required level of "readiness" is capable of sustaining the appropriate level of sea-worthiness.
LNG
Likewise, in view of the growing trend towards Dual-Fuel diesel engines, despite their several years of experience with various grades of diesel fuel, an appropriate level of readiness will be required of all those crew members involved with bunkering and monitoring of LNG fuel aboard ship. Meanwhile, ashore, it is reasonable to assume that as the demand for LNG as a marine fuel increases, and that suppliers develop the technology for economic mass production of same, that the price of such fuel will gradually decrease to a more competitive level. Meanwhile, considering their extensive experience with LNG as a marine fuel, with the design of ships and main propulsion engines specifically designed and built to be powered by LNG, Rolls-Royce is probably the most valuable source of information on this subject within the vast maritime community.
Tuesday, December 28, 2010
Alameda Corridor Hit With Bond Rating Downgrade
Bond rating agency Moody’s has downgraded a major portion of Alameda Corridor debt, becoming the third major rating agency in December to either downgrade the corridor's bond ratings or issue a negative outlook regarding the financial future of the Southern California rail expressway.
Moody’s downgraded $737 million in corridor subordinate debt from Baa2 to Baa1, or one step above non-investment grade. The agency did affirm its previous rating of A3, or one step above Baa1, on $966 million in corridor senior debt. Moody’s also changed the outlook for the corridor to negative.
Less than a week ago, the Alameda Corridor Transportation Authority, or ACTA, received a negative ratings outlook from ratings agency Fitch. At the time, Fitch also affirmed medium grade ratings for both the senior and subordinate debt.
In April, Standard and Poor’s was the first agency to issue a negative outlook for ACTA. This was a downgrade from the stable outlook S&P issued to ACTA just six months earlier in October 2009. S&P also reaffirmed the negative outlook for ACTA in a review issued last week.
Opened in April 2002 at a cost of $2.4 billion, the Alameda Corridor is a 20-mile-long freight rail expressway that currently shuttles approximately 35 percent of the cargo containers moving through the Southern California ports to a transcontinental railroad yard near downtown Los Angeles.
The construction cost of the corridor was financed by the issuance of just over $1.7 billion in corridor revenue-backed bonds, $400 million from the ports of Long Beach and Los Angeles, and funding from various other government sources. Corridor revenues are generated by fees charged on containers using the corridor.
Bond ratings, such as those issued by Fitch, offer a guide to the level of risk associated with a particular debt issuer--in this case ACTA. Moody’s is one of the three most recognized bond rating agencies along with Fitch and Standards & Poors and one of only ten such agencies recognized by the Securities and Exchange Commission.
Higher ratings, such as "Aaa" or "Aa1" in Moody's case, generally open more financial resources up to an issuer and often at much more favorable terms. Low ratings can mean a significant increase in what a debt issuer has to pay--through higher interest rates or stricter terms--when looking to issue new debt. Low ratings can also prevent an issuer from being able to renegotiate or restructure an existing issuance at more favorable terms.
According to Moody’s, the ACTA downgrade reflects what the agency sees as less than sufficient ability by the corridor to generate enough revenues to cover both consolidated $1.7 billion in senior and subordinate debt.
“The negative outlook reflects the expectation that container growth will remain somewhat sluggish after an initial strong increase,” said Moody’s, “therefore key liquidity may weaken as reserves are utilized to pay for operations and consolidated debt service coverage will likely remain below one times given the current escalating debt service schedule.“
“The downgrade and negative outlook also incorporate the delays in the implementation of a debt restructuring plan that is necessary for coverage relief, and the short timeline remaining to successfully implement a plan before ACTA's target of the October 1, 2011 debt service payment date.”
A fallback measure if refinancing was not available would be the ports of Long Beach and Los Angeles which under the corridor operating agreement are responsible for up to 40 percent of ACTA debt service in the event of shortfalls. A long term reliance on the two ports for corridor debt service could drain the ports of much-needed cash reserves.
Fitch estimated the two ports' total gross liability for corridor debt service "at $60 million to $150 million spread over the years 2012-2020 [and] depending on the severity of the stress assumptions."
All three agencies have pointed out that both ports have an adequate amount of unrestricted cash to meet any near-term shortfall payments without having to adjust their rates or tariffs, any sizable draw down of port cash reserves could reflect on the ports' own ratings.
According to Fitch, as of Sept. 30, 2010, the Port of Los Angeles had $311 million in unrestricted cash and the Port of Long Beach had $403 million in unrestricted cash.
Moody’s downgraded $737 million in corridor subordinate debt from Baa2 to Baa1, or one step above non-investment grade. The agency did affirm its previous rating of A3, or one step above Baa1, on $966 million in corridor senior debt. Moody’s also changed the outlook for the corridor to negative.
Less than a week ago, the Alameda Corridor Transportation Authority, or ACTA, received a negative ratings outlook from ratings agency Fitch. At the time, Fitch also affirmed medium grade ratings for both the senior and subordinate debt.
In April, Standard and Poor’s was the first agency to issue a negative outlook for ACTA. This was a downgrade from the stable outlook S&P issued to ACTA just six months earlier in October 2009. S&P also reaffirmed the negative outlook for ACTA in a review issued last week.
Opened in April 2002 at a cost of $2.4 billion, the Alameda Corridor is a 20-mile-long freight rail expressway that currently shuttles approximately 35 percent of the cargo containers moving through the Southern California ports to a transcontinental railroad yard near downtown Los Angeles.
The construction cost of the corridor was financed by the issuance of just over $1.7 billion in corridor revenue-backed bonds, $400 million from the ports of Long Beach and Los Angeles, and funding from various other government sources. Corridor revenues are generated by fees charged on containers using the corridor.
Bond ratings, such as those issued by Fitch, offer a guide to the level of risk associated with a particular debt issuer--in this case ACTA. Moody’s is one of the three most recognized bond rating agencies along with Fitch and Standards & Poors and one of only ten such agencies recognized by the Securities and Exchange Commission.
Higher ratings, such as "Aaa" or "Aa1" in Moody's case, generally open more financial resources up to an issuer and often at much more favorable terms. Low ratings can mean a significant increase in what a debt issuer has to pay--through higher interest rates or stricter terms--when looking to issue new debt. Low ratings can also prevent an issuer from being able to renegotiate or restructure an existing issuance at more favorable terms.
According to Moody’s, the ACTA downgrade reflects what the agency sees as less than sufficient ability by the corridor to generate enough revenues to cover both consolidated $1.7 billion in senior and subordinate debt.
“The negative outlook reflects the expectation that container growth will remain somewhat sluggish after an initial strong increase,” said Moody’s, “therefore key liquidity may weaken as reserves are utilized to pay for operations and consolidated debt service coverage will likely remain below one times given the current escalating debt service schedule.“
“The downgrade and negative outlook also incorporate the delays in the implementation of a debt restructuring plan that is necessary for coverage relief, and the short timeline remaining to successfully implement a plan before ACTA's target of the October 1, 2011 debt service payment date.”
A fallback measure if refinancing was not available would be the ports of Long Beach and Los Angeles which under the corridor operating agreement are responsible for up to 40 percent of ACTA debt service in the event of shortfalls. A long term reliance on the two ports for corridor debt service could drain the ports of much-needed cash reserves.
Fitch estimated the two ports' total gross liability for corridor debt service "at $60 million to $150 million spread over the years 2012-2020 [and] depending on the severity of the stress assumptions."
All three agencies have pointed out that both ports have an adequate amount of unrestricted cash to meet any near-term shortfall payments without having to adjust their rates or tariffs, any sizable draw down of port cash reserves could reflect on the ports' own ratings.
According to Fitch, as of Sept. 30, 2010, the Port of Los Angeles had $311 million in unrestricted cash and the Port of Long Beach had $403 million in unrestricted cash.
Vigor Ind. Looks to Buy Todd Shipyard Corp
Portland, Oregon-based Vigor Industrial has entered into an agreement to purchase the 94-year-old Todd Shipyard Corporation, which operates ship building, maintenance and repair facilities in Bremerton, Everett and Seattle.
The agreement calls for Vigor to acquire the stock of Todd for $22.27 per share, or approximately $130 million, in an all-cash deal.
The Todd board of directors has unanimously approved the agreement.
Vigor’s tender offer is scheduled to commence no later than December 30, 2010, and will expire on January 28, 2011, unless extended.
Under the terms of the agreement, Todd may solicit superior proposals from third parties through January 28, 2011, subject to extension at Todd’s option as provided in the agreement.
Unless a third party offer appears, the Vigor transaction is expected to close in the first quarter of 2011.
“Todd is Puget Sound’s leading shipyard and the combination of Vigor and Todd will create the largest and most capable marine services company in the Pacific Northwest,” said Frank Foti, the President of Vigor. “The combination of resources and capabilities will allow the combined companies to expand both the scope and capacity of their ship repair and new construction business.”
Todd’s management will remain intact and all contracts will remain in place.
“We believe that the addition of Todd’s products to Vigor will help create a stronger, more diversified company with long-term advantages for both companies’ customers and employees,” said Todd President and CEO Stephen Welch. Todd currently employs about 800 workers.
Todd’s directors and officers and certain other stockholders who own an aggregate of approximately 15.3 percent of Todd’s outstanding stock have entered into agreements pursuant to which they have agreed to transfer their shares to Vigor and to vote their shares in favor of a merger if a vote is required by law.
Vigor claims it has obtained enough financing to purchase all 5.78 million Todd shares outstanding as well as refinance all existing Todd debt.
The terms of the agreement set 67 percent of outstanding Todd stock as the minimum Vigor must purchase for the deal to close. In the event that the minimum condition is not met, and in certain other circumstances, the parties have agreed to complete the transaction through a one-step merger after receipt of shareholder approval.
In related news, at least a half-dozen shareholder-representing law firms have said they are investigating the agreement and how the Todd board may have abrogated its fiduciary responsibility and short-changed certain shareholders.
The agreement calls for Vigor to acquire the stock of Todd for $22.27 per share, or approximately $130 million, in an all-cash deal.
The Todd board of directors has unanimously approved the agreement.
Vigor’s tender offer is scheduled to commence no later than December 30, 2010, and will expire on January 28, 2011, unless extended.
Under the terms of the agreement, Todd may solicit superior proposals from third parties through January 28, 2011, subject to extension at Todd’s option as provided in the agreement.
Unless a third party offer appears, the Vigor transaction is expected to close in the first quarter of 2011.
“Todd is Puget Sound’s leading shipyard and the combination of Vigor and Todd will create the largest and most capable marine services company in the Pacific Northwest,” said Frank Foti, the President of Vigor. “The combination of resources and capabilities will allow the combined companies to expand both the scope and capacity of their ship repair and new construction business.”
Todd’s management will remain intact and all contracts will remain in place.
“We believe that the addition of Todd’s products to Vigor will help create a stronger, more diversified company with long-term advantages for both companies’ customers and employees,” said Todd President and CEO Stephen Welch. Todd currently employs about 800 workers.
Todd’s directors and officers and certain other stockholders who own an aggregate of approximately 15.3 percent of Todd’s outstanding stock have entered into agreements pursuant to which they have agreed to transfer their shares to Vigor and to vote their shares in favor of a merger if a vote is required by law.
Vigor claims it has obtained enough financing to purchase all 5.78 million Todd shares outstanding as well as refinance all existing Todd debt.
The terms of the agreement set 67 percent of outstanding Todd stock as the minimum Vigor must purchase for the deal to close. In the event that the minimum condition is not met, and in certain other circumstances, the parties have agreed to complete the transaction through a one-step merger after receipt of shareholder approval.
In related news, at least a half-dozen shareholder-representing law firms have said they are investigating the agreement and how the Todd board may have abrogated its fiduciary responsibility and short-changed certain shareholders.
San Diego Port Approves 30-Year Pasha Lease
The National City Marine Terminal in San Diego Bay is a 125-acre five-berth facility operated by Pasha Automotive Services, which over the past 20 years has processed more than four million imported vehicles through the terminal. The NCMT serves as one of the primary United States ports of entry for car manufacturers Acura, Hino Motors, Honda, Isuzu, Mitsubishi Fuso, Nissan, and, Volkswagen.
Last week, the governing board for the Port of San Diego sought to assure that Pasha will be at the NCMT for some time to come.
The board approved a 30-year terminal operating agreement for Pasha at the NCMT which takes effect Jan. 1, 2010 and extends through December 31, 2040.
"They have been a superior tenant to us and have brought in millions in revenue, which is ultimately pumped back into capital improvement projects in National City and the other member cities," said Robert Valderrama, Chairman of the Board of Port Commissioners.
For its part, Pasha has pledged to invest over ten million dollars in improvements over the life of the agreement, or an average of about $335,000 a year
The terms of the lease include a minimum annual guarantee of revenue from the number of vehicles imported each year at the terminal. The minimum annual guarantee is approximately $5.2 million during the first year of the new agreement, and increasing to $5.9 million from years five through nine. Additionally, Pasha will pay dockage, wharfage, and space occupancy charges, assume utility costs after 2011, and assume pavement maintenance on the terminal.
“In 20 years this partnership with the port and our community has blossomed from 30 employees to several hundred, from 30,000 vehicles to more than 400,000 in a single year,” said Pasha Automotive Services Vice President John Pasha. “There is no other West Coast solution like the National City Marine Terminal which includes five berths, capacity for 180 railcars on site, proximity to local and regional markets via truck or landbridge, a highly skilled and efficient workforce trained in over 200 accessories on more than a dozen brands and plenty of capacity to grow.”
In addition to automobiles, Pasha is looking at the possibility of luring general cargo to the NCMT.
Last week, the governing board for the Port of San Diego sought to assure that Pasha will be at the NCMT for some time to come.
The board approved a 30-year terminal operating agreement for Pasha at the NCMT which takes effect Jan. 1, 2010 and extends through December 31, 2040.
"They have been a superior tenant to us and have brought in millions in revenue, which is ultimately pumped back into capital improvement projects in National City and the other member cities," said Robert Valderrama, Chairman of the Board of Port Commissioners.
For its part, Pasha has pledged to invest over ten million dollars in improvements over the life of the agreement, or an average of about $335,000 a year
The terms of the lease include a minimum annual guarantee of revenue from the number of vehicles imported each year at the terminal. The minimum annual guarantee is approximately $5.2 million during the first year of the new agreement, and increasing to $5.9 million from years five through nine. Additionally, Pasha will pay dockage, wharfage, and space occupancy charges, assume utility costs after 2011, and assume pavement maintenance on the terminal.
“In 20 years this partnership with the port and our community has blossomed from 30 employees to several hundred, from 30,000 vehicles to more than 400,000 in a single year,” said Pasha Automotive Services Vice President John Pasha. “There is no other West Coast solution like the National City Marine Terminal which includes five berths, capacity for 180 railcars on site, proximity to local and regional markets via truck or landbridge, a highly skilled and efficient workforce trained in over 200 accessories on more than a dozen brands and plenty of capacity to grow.”
In addition to automobiles, Pasha is looking at the possibility of luring general cargo to the NCMT.
Diesel Emission Reduction Act Renewed By Congress
Lost in the spotlight of the tax-compromise legislation, the Don’t Ask, Don’t Tell repeal, and the START Treaty ratification, the 111th Congress did manage to pass a few other pieces of legislation during its final two weeks.
On Dec. 20, following an earlier Senate approval, the House passed a five-year extension of the Diesel Emissions Reduction Act. The bill now awaits President Obama’s signature.
The bill, if signed, would authorize providing grants and loans worth $500 million over the next five years to reduce emissions from existing diesel engines through the installation of retrofitting equipment.
First authorized in 2005, and set to at the end of fiscal year 2011 if not extended, the DERA has provided $465 million to retrofit programs over the past five years.
The catch is that the bill only authorizes the $500 million in funds, but does not appropriate them. The 112th Congress must take up that battle in the coming session.
According to data from the Diesel Technology Forum, retrofit diesel vehicles emit 20 percent to 90 percent less emissions.
Supporters of the bill claim that for every $1 of DERA money spent over the past five years, the nation has experienced $20 in environmental or health benefits.
Federal estimates suggest that there are as many as 11 million older diesel trucks and other commercial vehicles or pieces of equipment in service.
With retrofit devices typically costing in the neighborhood of $10,000 to $20,000, the $500 million target for DERA would only provide enough funds to fully cover the costs of roughly 25,000 to 50,000 retrofits.
A program at the ports of Long Beach and Los Angeles to bring all ports-servicing trucks up to 2007 or newer emission standards began in October 2008 and though DERA funds did not play a role, the private trucking industry did spend more than $600 million to bring the less than 10,000 trucks still servicing the two ports into compliance, mainly through the purchase of newer vehicles.
The DERA legislation was introduced in the Senate by Delaware Senator Tom Carper and Ohio Senator George Voinovich. The House version was sponsored by California Representatives Doris Matsui and Laura Richardson.
On Dec. 20, following an earlier Senate approval, the House passed a five-year extension of the Diesel Emissions Reduction Act. The bill now awaits President Obama’s signature.
The bill, if signed, would authorize providing grants and loans worth $500 million over the next five years to reduce emissions from existing diesel engines through the installation of retrofitting equipment.
First authorized in 2005, and set to at the end of fiscal year 2011 if not extended, the DERA has provided $465 million to retrofit programs over the past five years.
The catch is that the bill only authorizes the $500 million in funds, but does not appropriate them. The 112th Congress must take up that battle in the coming session.
According to data from the Diesel Technology Forum, retrofit diesel vehicles emit 20 percent to 90 percent less emissions.
Supporters of the bill claim that for every $1 of DERA money spent over the past five years, the nation has experienced $20 in environmental or health benefits.
Federal estimates suggest that there are as many as 11 million older diesel trucks and other commercial vehicles or pieces of equipment in service.
With retrofit devices typically costing in the neighborhood of $10,000 to $20,000, the $500 million target for DERA would only provide enough funds to fully cover the costs of roughly 25,000 to 50,000 retrofits.
A program at the ports of Long Beach and Los Angeles to bring all ports-servicing trucks up to 2007 or newer emission standards began in October 2008 and though DERA funds did not play a role, the private trucking industry did spend more than $600 million to bring the less than 10,000 trucks still servicing the two ports into compliance, mainly through the purchase of newer vehicles.
The DERA legislation was introduced in the Senate by Delaware Senator Tom Carper and Ohio Senator George Voinovich. The House version was sponsored by California Representatives Doris Matsui and Laura Richardson.
Thursday, December 23, 2010
Big Yards Searching for Big Orders
After a decade of building new crude carriers for the Alaska trade, new product tankers for the coastal trades and new container carriers and trailer ships for the Jones Act trade, the country’s bigger shipyards are searching for new orders – and the pickings are lean. In October the East Coast’s Aker Philadelphia yard conceded that it has yet to secure fresh contracts and acknowledged that if it is “unable to expand its current backlog, it would be challenging to continue as a going concern”. The yard disclosed that it “has reduced and will continue to adjust its workforce in line with its backlog” and warned that “the challenging US economy continues to delay the decision-making process for newbuilds and creates difficulties regarding financing of newbuild projects”.
Aker Philadelphia delivered the tenth tanker of the 12-ship series it has been building for OSG in August, with the final two OSG ships to be delivery in the first half of next year. OSG had proposed having 25 of the ships built several years ago but a swing to Articulated Tug/Barge (ATB) combinations for petroleum product movement has dented this market.
Aker Philadelphia delivered the tenth tanker of the 12-ship series it has been building for OSG in August, with the final two OSG ships to be delivery in the first half of next year. OSG had proposed having 25 of the ships built several years ago but a swing to Articulated Tug/Barge (ATB) combinations for petroleum product movement has dented this market.
US Navy Charters Commercial Tankers
The US Navy's Military Sealift Command (MSC) is chartering two newly built US-flag commercial tankers to replace a number of its older T-5 class ships that have been meeting the fuel requirements of US forces stationed overseas. The first of the vessels, the 600-foot Empire State, entered MSC service under a short-term charter agreement in mid-2010. Its contract has now been extended for five years and it will be joined by a sister vessel, Evergreen State.
Both ships are products of the NASSCO shipyard at San Diego, California and have a capacity of approximately 331,000 barrels. They are replacing two of the MSC's four government-owned T-5 class tankers, USNS Paul Buck and USNS Samuel L. Cobb, which have been transferred into the US National Defense Reserve Fleet (NSRF). Of the service’s remaining two T-5s, the USNS Lawrence H. Gianella has been transferred to MSC's Maritime Prepositioning Force while USNS Richard G. Matthiesen will join Cobb and Buck in the NDRF next year.
All four T-5s were built in the mid-1980s and operated under long-term charters from private owners until they were purchased by the MSC in 2003.
MSC-operated tankers carried 1.5 billion gallons of petroleum products worldwide last year, including replenishing trips through ice to the McMurdo Research Station in Antarctica and the Thule Air Force Base in Greenland.
Both ships are products of the NASSCO shipyard at San Diego, California and have a capacity of approximately 331,000 barrels. They are replacing two of the MSC's four government-owned T-5 class tankers, USNS Paul Buck and USNS Samuel L. Cobb, which have been transferred into the US National Defense Reserve Fleet (NSRF). Of the service’s remaining two T-5s, the USNS Lawrence H. Gianella has been transferred to MSC's Maritime Prepositioning Force while USNS Richard G. Matthiesen will join Cobb and Buck in the NDRF next year.
All four T-5s were built in the mid-1980s and operated under long-term charters from private owners until they were purchased by the MSC in 2003.
MSC-operated tankers carried 1.5 billion gallons of petroleum products worldwide last year, including replenishing trips through ice to the McMurdo Research Station in Antarctica and the Thule Air Force Base in Greenland.
Not a Many Splendored Thing
In one of the more publicized cruise ship misadventures of the past several years, Carnival Cruise Lines’ 2008-built Carnival Splendor was disabled by an engine room fire off the west coast of Mexico on November 8th and not towed into port until November 11th, the 3,299 passengers and 1,167 crewmembers on board having to make due during this period with cold food, non-working toilets and other inconveniences.
According to Carnival spokeswoman Joyce Oliva, a generator caught fire in the ship’s aft engine room at approximately 6 a.m. on November 8th, damaging a switchboard and preventing the transmission of electricity to other machinery, including the ship’s propulsion motors. Nearly everything requiring electricity then became inoperable, including air conditioning, hot water, stoves, waste system and refrigeration. The cause of the fire, which was quickly put out by the crew and the ship's automatic fire-suppression system, is still being investigated.
Vessels assisting the stricken cruise ship during its ordeal included the container vessel Dresden Express, which is active in the Automated Mutual-Assistance Vessel Rescue System (AMAVRS) program, as well as the US aircraft carrier USS Ronald Reagan, which was on a training exercise nearby and able to ferry more than 60,000 pounds of supplies via helicopter. Also involved were the US Coast Guard Cutters Edisto, Morgenthau, and Aspen and a Mexican Navy 140-foot patrol boat, plus several Mexican tugs, the latter because it was first expected that the Carnival ship would have to be moved to a Mexican port.
Tugs used in the 6-knot tow to San Diego included Harley Marine’s 4,400HP Millennium Dawn and 3,000HP Ernest Campbell. “We’ve never had anything like this happen before,” said Carnival Cruise Lines CEO Gerry Cahill of the event.
According to Carnival spokeswoman Joyce Oliva, a generator caught fire in the ship’s aft engine room at approximately 6 a.m. on November 8th, damaging a switchboard and preventing the transmission of electricity to other machinery, including the ship’s propulsion motors. Nearly everything requiring electricity then became inoperable, including air conditioning, hot water, stoves, waste system and refrigeration. The cause of the fire, which was quickly put out by the crew and the ship's automatic fire-suppression system, is still being investigated.
Vessels assisting the stricken cruise ship during its ordeal included the container vessel Dresden Express, which is active in the Automated Mutual-Assistance Vessel Rescue System (AMAVRS) program, as well as the US aircraft carrier USS Ronald Reagan, which was on a training exercise nearby and able to ferry more than 60,000 pounds of supplies via helicopter. Also involved were the US Coast Guard Cutters Edisto, Morgenthau, and Aspen and a Mexican Navy 140-foot patrol boat, plus several Mexican tugs, the latter because it was first expected that the Carnival ship would have to be moved to a Mexican port.
Tugs used in the 6-knot tow to San Diego included Harley Marine’s 4,400HP Millennium Dawn and 3,000HP Ernest Campbell. “We’ve never had anything like this happen before,” said Carnival Cruise Lines CEO Gerry Cahill of the event.
Russian Ports Hoping to Compete in the World Arena
By Eugene Gerden
Russia is planning to become an active player in the global marine cargo shipping market, by expanding its share of international transit shipments and increasing the cargo turnover of its seaports, according to statements recently made during a St. Petersburg, Russia conference, “The Future of Russian Ports.”
Russian seaports are steadily recovering from the effects of the global recession, which is expected to result in an increase of their total cargo turnover of up to 525 million tons this year, compared with 426 million tons in 2009.
Russia’s large seaport capacity includes about 100 km (62 miles) of total length of its ports' quay front and more than 1,000 gantry cranes, as well as several thousand different transshipment possibilities. Technical capabilities of the country's transshipment complexes allow its facilities to handle about 10,000 of cars a day, while the total storage capacity of the country's ports is estimated at 15 million tons of cargo.
Despite these figures, Russia still has a shortage of seaports, and the existing capacities can’t cope with the ever-growing exports of hydrocarbons, petroleum, grain, fertilizers and other products.
Oleg Bukin, director of "Management of Transport Assets" company, which operates several stevedoring companies in Russia, in an interview with the local “Transport of Russia” paper, said further development of the Russian seaports is mainly hampered by undeveloped infrastructure near the ports.
"Most of the roads have low capacity, being in poor condition. This reduces the efficiency of port land and impedes the work of railway transport. The lag in the development of port infrastructure has already resulted in a significant portion of foreign trade cargo being delivered to Russia by sea to the ports of neighboring countries in Western and Eastern Europe, and handled in these ports. This leads to lost profits of the Russian ports and a decrease in tax payments to the budget", Bukin said.
Russia's current share in the global market of transit shipments remains low. According to the head of the Investment Department of the Federal Agency of Maritime and River Transport (RosMorRechFlot) Viktor Vovk, in 2009 Russia provided services for carriage of only 9 percent of global transit cargo shipments. However, the transit capacity between Asia and Europe is estimated at US$600 billion, and Russia's share could theoretically increase up to 15 percent of this value, especially in the case of an active use of the Northern Sea Route (NSR).
The interest of Russian and foreign shipping and business communities to the Northern Sea Route is determined by two major factors. First of all, it can become more profitable alternative for other shipping routes between the ports in Europe, the Far East and North America.
According to V. Pazovsky, a senior fellow of the Far Eastern State Maritime Academy, the Northern Sea Route is interesting for foreigners as a transport artery for the transportation of minerals from the Arctic regions of Russia.
“These areas contain up to 35% of global oil and gas reserves. Starting transportation of the Russian gas and oil by sea may be more advantageous than building gas and oil pipelines. In addition, these pipelines to Western Europe can only pass through the former Soviet republic, whose policies are not always predictable, while transportation through their territories is quite expensive,” he said. At the same time, the ice conditions in the Barents Sea and the western part of the Kara Sea are quite favorable and allow the passage of ice-class tankers without escort of icebreakers for most of the year. In addition, said Pazovsky, the Northern Sea Route can arrange transportation of fertilizers from the Kola Peninsula to the East Asia and in particular to China.
According to Vovk, during the next 10-15 years the ice edge would go far enough, to start the use of Northern Sea Route (NSR) for 6 months of the year.
One of the main advantages of NSR is that it is almost half as long as other sea routes from Europe to the Far East: the distance from Hamburg, Germany to Yokohama, Japan through the NSR is 11,880 km, while the alternative through the Suez Canal is 20,520 km.
According to experts of the St. Petersburg Rosbalt business journal, after the collapse of the USSR the NSR was abandoned, and now its recovery requires billions of dollars of investment. Moreover, as recently stated by the governor of the Murmansk region Dmitry Dmitrenko NSR will be only profitable if the volume of its cargo shipments don’t fall below 4 million tons per year.
However, some Russian experts have already expressed their doubts, regarding with the ability of the Northern Sea Route, in its present conditions, to pass large volumes of transit shipments. Among the main reasons for their skepticism are the need for the use of specialized ice-class vessels, lack of awareness of foreign ship owners about the ports, located along the Northern Sea Route, the lack of reliable ice-breaker and information systems and traditional Russian bureaucratic formalities. In addition, representatives of the Suez Canal Authority have repeatedly stated its readiness to compete with the Northern Sea Route through the reduction of its tariffs.
At the same time the development of the Northern Sea Route is not the only way to expand the current Russian share in the global market of transit cargo shipments.
According to a recently adopted Marine Transport Program in Russia, by 2015 the level of investments in further development of all Russia's largest seaports is expected to reach 630 billion rubles (USD $19 billion).
In the case of Black Sea South ports, particular attention is expected to be paid Novorossiysk port, Russia's largest port, which has an annual capacity of 100 million tons. The port has a good geographical position, being located on the northeast coast of the Black Sea and at the intersection of transportation corridors linking Russia with the Middle East, America, the Mediterranean, South and South-East Asia.
In addition, the port is deep and does not freeze all year round, which allows for uninterrupted navigation. In this regard, during the next several years, new rail and automobile roads are expected to be built near Novorossiysk. There is also a possibility of further expansion of its container terminals and an increase of their capacity up to 2.5 million tons by 2015.
In addition to Novorossiysk, the government plans to accelerate the development of other Russian major Black Sea ports, including Taman, through the construction of a new dry cargo port area, as well as "Rostov Multifunctional port”, an expected universal multi-modal transport and logistics hub. By 2015, the volume of transshipment cargo at both ports should reach 40 million tons and 16 million tons, respectively.
With regard to the Northern ports, the turnover of the Murmansk port is expected to increase from 35 million tons in 2009 to 80 million tons by 2015, while in Ust-Luga from the current 10 million tons to 120 million tons.
In the case of Caspian, the government is ready to start further development of local Olya and Makhachkala ports, while in the Far East a new Vostochny-Nakhodka transportation hub is expected to be established. The latter project involves gradual construction of new container terminals with a total eventual capacity of 10 million TEUs a year, as well the establishment of a special economic port zone at the Sovetskaya Gavan port.
According to Alexei Klyavin, Head of the Department of State Policy for Maritime and River Transport Ministry of Transport of Russia, implementation of all of these projects will help to increase the total annual cargo turnover of the Russian ports to 750 million tons by 2015.
At the same time, the use of the enormous potential of Russia in the sphere of transit shipments is impossible in the absence of reforms of already existing legislation. According to some experts, Russia is one of the world's most unfavorable countries in terms of customs procedures. For instance, while in Russia customs inspections apply for 44 percent of delivered cargo, in Germany and the US, these figures are less than 3 percent, while in the UK even 2 percent. Moreover, the companies must submit an average of 8 documents for exports of cargo from a Russian port and no more than 13 for imports, twice what is required in developed countries.
However much may change in the near future. At present the Russian Ministry of Transportation is completing the development of the bill, which should significantly simplify all the customs procedures in the Russian seaports.
Julia Zvorykina, an Assistant Minister of Transport, recently said that the Russian government is considering creating a single electronic customs database, which will simplify paperwork and reduce processing time of customs declarations.
"Such a system already exists in world major sea ports," Zvorykina said. However, the timing of the introduction of this system was not disclosed.
Russia is planning to become an active player in the global marine cargo shipping market, by expanding its share of international transit shipments and increasing the cargo turnover of its seaports, according to statements recently made during a St. Petersburg, Russia conference, “The Future of Russian Ports.”
Russian seaports are steadily recovering from the effects of the global recession, which is expected to result in an increase of their total cargo turnover of up to 525 million tons this year, compared with 426 million tons in 2009.
Russia’s large seaport capacity includes about 100 km (62 miles) of total length of its ports' quay front and more than 1,000 gantry cranes, as well as several thousand different transshipment possibilities. Technical capabilities of the country's transshipment complexes allow its facilities to handle about 10,000 of cars a day, while the total storage capacity of the country's ports is estimated at 15 million tons of cargo.
Despite these figures, Russia still has a shortage of seaports, and the existing capacities can’t cope with the ever-growing exports of hydrocarbons, petroleum, grain, fertilizers and other products.
Oleg Bukin, director of "Management of Transport Assets" company, which operates several stevedoring companies in Russia, in an interview with the local “Transport of Russia” paper, said further development of the Russian seaports is mainly hampered by undeveloped infrastructure near the ports.
"Most of the roads have low capacity, being in poor condition. This reduces the efficiency of port land and impedes the work of railway transport. The lag in the development of port infrastructure has already resulted in a significant portion of foreign trade cargo being delivered to Russia by sea to the ports of neighboring countries in Western and Eastern Europe, and handled in these ports. This leads to lost profits of the Russian ports and a decrease in tax payments to the budget", Bukin said.
Russia's current share in the global market of transit shipments remains low. According to the head of the Investment Department of the Federal Agency of Maritime and River Transport (RosMorRechFlot) Viktor Vovk, in 2009 Russia provided services for carriage of only 9 percent of global transit cargo shipments. However, the transit capacity between Asia and Europe is estimated at US$600 billion, and Russia's share could theoretically increase up to 15 percent of this value, especially in the case of an active use of the Northern Sea Route (NSR).
The interest of Russian and foreign shipping and business communities to the Northern Sea Route is determined by two major factors. First of all, it can become more profitable alternative for other shipping routes between the ports in Europe, the Far East and North America.
According to V. Pazovsky, a senior fellow of the Far Eastern State Maritime Academy, the Northern Sea Route is interesting for foreigners as a transport artery for the transportation of minerals from the Arctic regions of Russia.
“These areas contain up to 35% of global oil and gas reserves. Starting transportation of the Russian gas and oil by sea may be more advantageous than building gas and oil pipelines. In addition, these pipelines to Western Europe can only pass through the former Soviet republic, whose policies are not always predictable, while transportation through their territories is quite expensive,” he said. At the same time, the ice conditions in the Barents Sea and the western part of the Kara Sea are quite favorable and allow the passage of ice-class tankers without escort of icebreakers for most of the year. In addition, said Pazovsky, the Northern Sea Route can arrange transportation of fertilizers from the Kola Peninsula to the East Asia and in particular to China.
According to Vovk, during the next 10-15 years the ice edge would go far enough, to start the use of Northern Sea Route (NSR) for 6 months of the year.
One of the main advantages of NSR is that it is almost half as long as other sea routes from Europe to the Far East: the distance from Hamburg, Germany to Yokohama, Japan through the NSR is 11,880 km, while the alternative through the Suez Canal is 20,520 km.
According to experts of the St. Petersburg Rosbalt business journal, after the collapse of the USSR the NSR was abandoned, and now its recovery requires billions of dollars of investment. Moreover, as recently stated by the governor of the Murmansk region Dmitry Dmitrenko NSR will be only profitable if the volume of its cargo shipments don’t fall below 4 million tons per year.
However, some Russian experts have already expressed their doubts, regarding with the ability of the Northern Sea Route, in its present conditions, to pass large volumes of transit shipments. Among the main reasons for their skepticism are the need for the use of specialized ice-class vessels, lack of awareness of foreign ship owners about the ports, located along the Northern Sea Route, the lack of reliable ice-breaker and information systems and traditional Russian bureaucratic formalities. In addition, representatives of the Suez Canal Authority have repeatedly stated its readiness to compete with the Northern Sea Route through the reduction of its tariffs.
At the same time the development of the Northern Sea Route is not the only way to expand the current Russian share in the global market of transit cargo shipments.
According to a recently adopted Marine Transport Program in Russia, by 2015 the level of investments in further development of all Russia's largest seaports is expected to reach 630 billion rubles (USD $19 billion).
In the case of Black Sea South ports, particular attention is expected to be paid Novorossiysk port, Russia's largest port, which has an annual capacity of 100 million tons. The port has a good geographical position, being located on the northeast coast of the Black Sea and at the intersection of transportation corridors linking Russia with the Middle East, America, the Mediterranean, South and South-East Asia.
In addition, the port is deep and does not freeze all year round, which allows for uninterrupted navigation. In this regard, during the next several years, new rail and automobile roads are expected to be built near Novorossiysk. There is also a possibility of further expansion of its container terminals and an increase of their capacity up to 2.5 million tons by 2015.
In addition to Novorossiysk, the government plans to accelerate the development of other Russian major Black Sea ports, including Taman, through the construction of a new dry cargo port area, as well as "Rostov Multifunctional port”, an expected universal multi-modal transport and logistics hub. By 2015, the volume of transshipment cargo at both ports should reach 40 million tons and 16 million tons, respectively.
With regard to the Northern ports, the turnover of the Murmansk port is expected to increase from 35 million tons in 2009 to 80 million tons by 2015, while in Ust-Luga from the current 10 million tons to 120 million tons.
In the case of Caspian, the government is ready to start further development of local Olya and Makhachkala ports, while in the Far East a new Vostochny-Nakhodka transportation hub is expected to be established. The latter project involves gradual construction of new container terminals with a total eventual capacity of 10 million TEUs a year, as well the establishment of a special economic port zone at the Sovetskaya Gavan port.
According to Alexei Klyavin, Head of the Department of State Policy for Maritime and River Transport Ministry of Transport of Russia, implementation of all of these projects will help to increase the total annual cargo turnover of the Russian ports to 750 million tons by 2015.
At the same time, the use of the enormous potential of Russia in the sphere of transit shipments is impossible in the absence of reforms of already existing legislation. According to some experts, Russia is one of the world's most unfavorable countries in terms of customs procedures. For instance, while in Russia customs inspections apply for 44 percent of delivered cargo, in Germany and the US, these figures are less than 3 percent, while in the UK even 2 percent. Moreover, the companies must submit an average of 8 documents for exports of cargo from a Russian port and no more than 13 for imports, twice what is required in developed countries.
However much may change in the near future. At present the Russian Ministry of Transportation is completing the development of the bill, which should significantly simplify all the customs procedures in the Russian seaports.
Julia Zvorykina, an Assistant Minister of Transport, recently said that the Russian government is considering creating a single electronic customs database, which will simplify paperwork and reduce processing time of customs declarations.
"Such a system already exists in world major sea ports," Zvorykina said. However, the timing of the introduction of this system was not disclosed.
Tuesday, December 21, 2010
Alameda Corridor Receives Negative Outlook From Fitch
Bond rating agency Fitch on Friday affirmed "high" and "good" level ratings on $1.7 billion in Alameda Corridor bond debt, while at the same time issuing a negative ratings outlook for the bonds.
Opened in April 2002, the $2.4 billion Alameda Corridor is a 20-mile-long freight rail expressway that currently shuttles approximately 35 percent of the cargo containers moving through the Southern California ports to a transcontinental railroad yard near downtown Los Angeles.
The $2.4 billion cost of the corridor was financed by the issuance of just over $1.7 billion in corridor revenue-backed bonds, $400 million from the ports of Long Beach and Los Angeles, and various other government sources. Corridor revenues are generated by fees charged on containers using the corridor.
On Friday, Fitch issued an "A" rating, labeled as upper medium grade, on $966 million in bonds issued by the corridor's governing authority in 1999. The agency also issued a "BBB+" rating, labeled as lower medium grade, on $737 million in subordinate issuances from 1999 and 2004.
Both of these ratings, while nowhere near as high as the "AA" ratings held by the two ports, remain in fairly positive territory. The "BBB+" rating is still two full ratings levels above non-investment grade bonds.
Bond ratings, such as those issued by Fitch, offer a guide to the level of risk associated with a particular debt issuer, in this case the Alameda Corridor. Fitch is one of the three most recognized bond rating agencies along with Moody's and Standards & Poors and one of only ten such agencies recognized by the Securities and Exchange Commission.
Higher ratings, such as "AAA," generally open more financial resources up to an issuer and often at much more favorable terms. Low ratings can mean a significant increase in what a debt issuer has to pay--through higher interest rates or stricter terms--when looking to issue new debt. Low ratings can also prevent an issuer from being able to renegotiate or restructure an existing issuance at more favorable terms.
More worrisome for the corridor than the bong ratings, however, is the ratings outlook issued by Fitch. The corridor had held a "ratings watch negative," which is issued when Fitch sees a heightened probability of a downward rating change. On Friday, Fitch changed this to a "negative ratings outlook," a more concrete assertion applied when Fitch believes that the issuer's rating is likely to move downward over a one- to two-year period.
In issuing the ratings and outlook, Fitch pointed out that although the corridor saw dramatic downturns in cargo volumes in 2008 and 2009, container volumes moved along the corridor in 2010 have show a 14 percent increase compared to the first 10 months of 2009.
"This indicates that volume is recovering somewhat," said a Fitch statement, "however, the volume setback incurred in 2008 and 2009 combined with the corridor's escalating debt service profile mean that action is still needed to meet the authority's debt service obligations."
Fitch pointed out that there are several options available for the corridor to address the anticipated shortfall in revenues, including refinancing a portion of outstanding debt via the Railroad Rehabilitation and Improvement Financing, or RRIF, offered through the United States Department of Transportation's Federal Rail Administration. The RRIF provides direct federal loans and loan guarantees to finance development of railroad infrastructure. ACTA applied for a RRIF loan in March 2010 to restructure the $737 million in subordinate bonds, and expects a decision on its application in early 2011.
"Another option would be to refinance a portion of existing debt with a traditional municipal finance issuance, utilizing the existing senior and subordinate liens," said Fitch. "In both these cases, ACTA would seek to reduce annual debt service requirements and backload debt, while substantially reducing or eliminating the need for port shortfall advance payments to fund a portion of debt service in future years."
The real concern would be if the corridor could not meet its debt service. The ports of Long Beach and Los Angeles are legally committed under the corridor operating agreement to cover up to 40 percent of the corridor's annual debt service payment in the event of shortfalls.
While on the one hand this provides the corridor with a backstop that improves its credit standing, such a drain on port revenue, especially if the shortfalls continue for a long period of time, could significantly impact the two ports' cash flow situations.
Fitch estimates "the ports' gross joint liability for corridor debt service at $60 million to $150 million spread over the years 2012-2020 depending on the severity of the stress assumptions."
While Fitch points out that both ports have an adequate amount of unrestricted cash to meet any near-term shortfall payments without having to adjust their rates or tariffs, any sizable draw down of port cash reserves could reflect on the ports' own ratings.
According to Fitch, as of Sept. 30, 2010, the Port of Los Angeles had $311 million in unrestricted cash and the Port of Long Beach had $403 million in unrestricted cash.
Opened in April 2002, the $2.4 billion Alameda Corridor is a 20-mile-long freight rail expressway that currently shuttles approximately 35 percent of the cargo containers moving through the Southern California ports to a transcontinental railroad yard near downtown Los Angeles.
The $2.4 billion cost of the corridor was financed by the issuance of just over $1.7 billion in corridor revenue-backed bonds, $400 million from the ports of Long Beach and Los Angeles, and various other government sources. Corridor revenues are generated by fees charged on containers using the corridor.
On Friday, Fitch issued an "A" rating, labeled as upper medium grade, on $966 million in bonds issued by the corridor's governing authority in 1999. The agency also issued a "BBB+" rating, labeled as lower medium grade, on $737 million in subordinate issuances from 1999 and 2004.
Both of these ratings, while nowhere near as high as the "AA" ratings held by the two ports, remain in fairly positive territory. The "BBB+" rating is still two full ratings levels above non-investment grade bonds.
Bond ratings, such as those issued by Fitch, offer a guide to the level of risk associated with a particular debt issuer, in this case the Alameda Corridor. Fitch is one of the three most recognized bond rating agencies along with Moody's and Standards & Poors and one of only ten such agencies recognized by the Securities and Exchange Commission.
Higher ratings, such as "AAA," generally open more financial resources up to an issuer and often at much more favorable terms. Low ratings can mean a significant increase in what a debt issuer has to pay--through higher interest rates or stricter terms--when looking to issue new debt. Low ratings can also prevent an issuer from being able to renegotiate or restructure an existing issuance at more favorable terms.
More worrisome for the corridor than the bong ratings, however, is the ratings outlook issued by Fitch. The corridor had held a "ratings watch negative," which is issued when Fitch sees a heightened probability of a downward rating change. On Friday, Fitch changed this to a "negative ratings outlook," a more concrete assertion applied when Fitch believes that the issuer's rating is likely to move downward over a one- to two-year period.
In issuing the ratings and outlook, Fitch pointed out that although the corridor saw dramatic downturns in cargo volumes in 2008 and 2009, container volumes moved along the corridor in 2010 have show a 14 percent increase compared to the first 10 months of 2009.
"This indicates that volume is recovering somewhat," said a Fitch statement, "however, the volume setback incurred in 2008 and 2009 combined with the corridor's escalating debt service profile mean that action is still needed to meet the authority's debt service obligations."
Fitch pointed out that there are several options available for the corridor to address the anticipated shortfall in revenues, including refinancing a portion of outstanding debt via the Railroad Rehabilitation and Improvement Financing, or RRIF, offered through the United States Department of Transportation's Federal Rail Administration. The RRIF provides direct federal loans and loan guarantees to finance development of railroad infrastructure. ACTA applied for a RRIF loan in March 2010 to restructure the $737 million in subordinate bonds, and expects a decision on its application in early 2011.
"Another option would be to refinance a portion of existing debt with a traditional municipal finance issuance, utilizing the existing senior and subordinate liens," said Fitch. "In both these cases, ACTA would seek to reduce annual debt service requirements and backload debt, while substantially reducing or eliminating the need for port shortfall advance payments to fund a portion of debt service in future years."
The real concern would be if the corridor could not meet its debt service. The ports of Long Beach and Los Angeles are legally committed under the corridor operating agreement to cover up to 40 percent of the corridor's annual debt service payment in the event of shortfalls.
While on the one hand this provides the corridor with a backstop that improves its credit standing, such a drain on port revenue, especially if the shortfalls continue for a long period of time, could significantly impact the two ports' cash flow situations.
Fitch estimates "the ports' gross joint liability for corridor debt service at $60 million to $150 million spread over the years 2012-2020 depending on the severity of the stress assumptions."
While Fitch points out that both ports have an adequate amount of unrestricted cash to meet any near-term shortfall payments without having to adjust their rates or tariffs, any sizable draw down of port cash reserves could reflect on the ports' own ratings.
According to Fitch, as of Sept. 30, 2010, the Port of Los Angeles had $311 million in unrestricted cash and the Port of Long Beach had $403 million in unrestricted cash.
Los Angeles Port Tightens Clean Truck Regs to Punish Scofflaws and ‘Loopholers’
The governing board for the Port of Los Angeles is cracking the whip on scofflaws that have been circumventing clean truck rules in the port area and others that have been exploiting a loophole in the ports' truck program regulations.
The five-member Board of Harbor Commissioners on Thursday approved new penalties of up to a $1,000 and six months in jail for port-servicing drivers that transfer containers from compliant clean trucks to older and more polluting trucks within the port area. In addition, trucking firms found to be involved in such transfers, known as "dray-offs," could face a revocation of their concession agreement with the port and have all of their trucks barred from port service.
The clean truck program requires that all trucks servicing the port have a signed concession agreement with the port and only use 2004 or newer model year trucks. The program's regulations stiffen on Jan. 1, 2012, to only allow 2007 or newer trucks to service port facilities.
Using the dray-off technique allows trucking firms to move a greater number of containers with fewer clean trucks, which according to the port, defeats the emission-cutting concept of the truck program and puts fully-compliant truck firms at a disadvantage.
The new port regulation, which still requires Los Angeles City Council approval, only addresses dray-offs that occur within the port boundaries.
The port board also approved closing a loophole in the clean truck program regulations that was being exploited by a growing number of drivers. The clean truck program only set model year regulations on Class 8 trucks--mainly because there were only a handful of the smaller Class 7 rigs in the port at the time and these smaller trucks can not legally handle the weight of a fully loaded container.
However, the number of old Class 7 trucks calling at the port--some estimated to cost less than $5,000 compared to a new compliant $120,000 Class 8 rig--has exploded in recent days. The port estimates that the average age of the Class 7 recently brought into port service is about 12 years old, or roughly what the average age of a Class 8 truck in the port fleet was before the clean truck program began in October 2008. The newly-approved port regulation closes the loophole by applying the truck program model year restrictions to Class 7 trucks as well. Owners of Class 7 rigs have until July 1, 2011 to either upgrade their engines or purchase new compliant vehicles.
Some trucking firms had previously testified to the port board that while they wanted to remain compliant with the truck program rules, they were forced to begin using some of the smaller trucks simply to compete with those that had first brought in the Class 7 rigs.
The five-member Board of Harbor Commissioners on Thursday approved new penalties of up to a $1,000 and six months in jail for port-servicing drivers that transfer containers from compliant clean trucks to older and more polluting trucks within the port area. In addition, trucking firms found to be involved in such transfers, known as "dray-offs," could face a revocation of their concession agreement with the port and have all of their trucks barred from port service.
The clean truck program requires that all trucks servicing the port have a signed concession agreement with the port and only use 2004 or newer model year trucks. The program's regulations stiffen on Jan. 1, 2012, to only allow 2007 or newer trucks to service port facilities.
Using the dray-off technique allows trucking firms to move a greater number of containers with fewer clean trucks, which according to the port, defeats the emission-cutting concept of the truck program and puts fully-compliant truck firms at a disadvantage.
The new port regulation, which still requires Los Angeles City Council approval, only addresses dray-offs that occur within the port boundaries.
The port board also approved closing a loophole in the clean truck program regulations that was being exploited by a growing number of drivers. The clean truck program only set model year regulations on Class 8 trucks--mainly because there were only a handful of the smaller Class 7 rigs in the port at the time and these smaller trucks can not legally handle the weight of a fully loaded container.
However, the number of old Class 7 trucks calling at the port--some estimated to cost less than $5,000 compared to a new compliant $120,000 Class 8 rig--has exploded in recent days. The port estimates that the average age of the Class 7 recently brought into port service is about 12 years old, or roughly what the average age of a Class 8 truck in the port fleet was before the clean truck program began in October 2008. The newly-approved port regulation closes the loophole by applying the truck program model year restrictions to Class 7 trucks as well. Owners of Class 7 rigs have until July 1, 2011 to either upgrade their engines or purchase new compliant vehicles.
Some trucking firms had previously testified to the port board that while they wanted to remain compliant with the truck program rules, they were forced to begin using some of the smaller trucks simply to compete with those that had first brought in the Class 7 rigs.
Los Angeles Port Ends Negotiations Over Shipyard Re-Use
Two years of contentious back and forth between the Port of Los Angeles and a Long Beach firm hoping to redevelop a shuttered shipyard at the port essentially ended with two words and a vote on Thursday.
"We're done," said Port of Los Angeles Executive Director Geraldine Knatz, just before the five-member port board voted to officially terminate negotiations with Gambol Industries over the shipyard re-use project.
However, the port board's decision, which now allows the port to move forward with its original plans to use the former shipyard site as a dump site for dredge material, did not sit well with Gambol plan supporter and City Council member Janice Hahn.
Following the port vote, Hahn, whose district covers the port, said she plans to take the issue back to the City Council. The port is operated by the city's Harbor Department, which answers to the Los Angeles mayor and city council.
In addition, as recently as last month, Gambol threatened litigation over what it claims have been bad faith efforts by the port during negotiations on the shipyard re-use plan.
Gambol's plan called for a $50 million re-development of the shuttered South West Marine shipyard along the main channel of the port into a modern ship repair facility. The firm, which claims it has a solid business plan that would create hundreds of jobs at the proposed facility, has faced stiff criticism from the port, shipping industry, and longshore unions. However, under pressure from Los Angeles City Hall, the port signed a memorandum of understanding with Gambol in 2009 to consider the development of the ship repair facility.
Port officials have maintained that the Gambol plan was unrealistic and could seriously delay an Army Corps of Engineers channel-deepening project and ongoing terminal development at the port. The port envisioned the former shipyard slips as a perfect location to deposit dredge material from the Army Corps project.
Earlier this year, Gambol proposed sending the dredge material to the neighboring Port of Long Beach's Middle Harbor project as landfill, saving Los Angeles the $30 million cost to build a retaining dike at the shipyard, according to Gambol. Port of Long Beach port officials shot down the idea, stating in an Oct. 18 memo that Los Angeles port officials had failed to respond to a Long Beach port request for design plans for the reuse of the Los Angeles fill material in Long Beach.
In an Oct. 27 letter to officials at both ports, a Gambol attorney claims that Los Angeles port officials purposely failed to submit the design plan to Long Beach in an effort to undermine the Gambol project.
The Gambol letter went on to claim that the firm had lost million of dollars in development costs due to Los Angeles port officials' actions and warned that Gambol would seek all "available remedies" for what the firm's attorney describes as "the port's conduct, actions and/or inactions, and numerous violations of the MOU."
Following the port vote, Gambol officials indicated the firm would continue to fight for the shipyard re-use project.
In the early 2000s, the adjacent Port of Long Beach engaged in a similar process, searching for several years for a firm that could present a viable plan to redevelop several massive dry docks vacated by the U.S. Navy into a shipyard. While several firms stepped forward, the plans never materialized and the drydocks were eventually filled with dredge material and paved over to add additional acreage to a massive container terminal development.
"We're done," said Port of Los Angeles Executive Director Geraldine Knatz, just before the five-member port board voted to officially terminate negotiations with Gambol Industries over the shipyard re-use project.
However, the port board's decision, which now allows the port to move forward with its original plans to use the former shipyard site as a dump site for dredge material, did not sit well with Gambol plan supporter and City Council member Janice Hahn.
Following the port vote, Hahn, whose district covers the port, said she plans to take the issue back to the City Council. The port is operated by the city's Harbor Department, which answers to the Los Angeles mayor and city council.
In addition, as recently as last month, Gambol threatened litigation over what it claims have been bad faith efforts by the port during negotiations on the shipyard re-use plan.
Gambol's plan called for a $50 million re-development of the shuttered South West Marine shipyard along the main channel of the port into a modern ship repair facility. The firm, which claims it has a solid business plan that would create hundreds of jobs at the proposed facility, has faced stiff criticism from the port, shipping industry, and longshore unions. However, under pressure from Los Angeles City Hall, the port signed a memorandum of understanding with Gambol in 2009 to consider the development of the ship repair facility.
Port officials have maintained that the Gambol plan was unrealistic and could seriously delay an Army Corps of Engineers channel-deepening project and ongoing terminal development at the port. The port envisioned the former shipyard slips as a perfect location to deposit dredge material from the Army Corps project.
Earlier this year, Gambol proposed sending the dredge material to the neighboring Port of Long Beach's Middle Harbor project as landfill, saving Los Angeles the $30 million cost to build a retaining dike at the shipyard, according to Gambol. Port of Long Beach port officials shot down the idea, stating in an Oct. 18 memo that Los Angeles port officials had failed to respond to a Long Beach port request for design plans for the reuse of the Los Angeles fill material in Long Beach.
In an Oct. 27 letter to officials at both ports, a Gambol attorney claims that Los Angeles port officials purposely failed to submit the design plan to Long Beach in an effort to undermine the Gambol project.
The Gambol letter went on to claim that the firm had lost million of dollars in development costs due to Los Angeles port officials' actions and warned that Gambol would seek all "available remedies" for what the firm's attorney describes as "the port's conduct, actions and/or inactions, and numerous violations of the MOU."
Following the port vote, Gambol officials indicated the firm would continue to fight for the shipyard re-use project.
In the early 2000s, the adjacent Port of Long Beach engaged in a similar process, searching for several years for a firm that could present a viable plan to redevelop several massive dry docks vacated by the U.S. Navy into a shipyard. While several firms stepped forward, the plans never materialized and the drydocks were eventually filled with dredge material and paved over to add additional acreage to a massive container terminal development.
Seattle Port Growth Down In November, Tacoma Up
The Port of Seattle continued to report increased year-over-year cargo volumes in November, while across Puget Sound the Port of Tacoma turned in its second straight month of growth for the first time since June of 2008.
While the Port of Seattle reported its 11th straight monthly increases of 2010 in November when compared to the year-ago periods, the port's total box numbers were off 17.2 percent from the previous month. The port's November numbers fell to the same levels as those in April, indicating that the peak season that began at the port back in May is slowly, but steadily dropping off as the year ends.
For the month of November, the port handled a total of 169,953 TEUs, up 11.3 percent compared to November 2009. Port officials also reported handling 70,466 loaded import TEUs in November, a 9.9 percent increase over the same month last year. In another sign that volumes are slowing, the port reported handling 46,545 loaded export TEUs, a decline of 3.3 percent over the year-ago period.
Despite the slowing year-end volumes, the port is still on pace to easily shatter beginning-of-the-year predictions of cargo growth for the year. Most analysts and experts were predicting a moderate 5 percent growth at West Coast ports in 2010. Seattle moved a total of 1,975,813 TEUs in the first 11 months of the year, a 37.3 percent increase over the January to November period in 2009.
Across the sound, total container volumes at the Port of Tacoma in November were only nominally up over the month of October--by about 450 TEUs, or less than 0.4 percent. Tacoma has experienced dramatic ups and down from month to month since the start of the year, with no discernible pattern.
In November, Tacoma port officials report handling a total of 120,095 TEUs, a 1.9 percent increase over November 2009 and tying with August for the largest monthly percentage growth since June 2008. The port also handled a total of 38,950 loaded import TEUs, a 16 percent increase over the year-ago period, and a total of 31,857 loaded export TEUs, a 4.7 percent increase over November 2009.
Despite the positive gains in three of the last four months, Tacoma is still on track to end the year down about 7 percent. However, this represents a significant improvement over 2009 when the port was down for the calendar year by 16.9 percent compared to 2008. Tacoma has not had a statistically significant positive year since 2005 (the port actually gained 0.038 percent in 2006, but reported the year as 0.0 percent growth).
Economic forecasters from the University of Puget Sound said last week that Tacoma would end the calendar year up 7.1 percent and could expect to see 4.4 percent growth in total container volumes in 2011.
While the Port of Seattle reported its 11th straight monthly increases of 2010 in November when compared to the year-ago periods, the port's total box numbers were off 17.2 percent from the previous month. The port's November numbers fell to the same levels as those in April, indicating that the peak season that began at the port back in May is slowly, but steadily dropping off as the year ends.
For the month of November, the port handled a total of 169,953 TEUs, up 11.3 percent compared to November 2009. Port officials also reported handling 70,466 loaded import TEUs in November, a 9.9 percent increase over the same month last year. In another sign that volumes are slowing, the port reported handling 46,545 loaded export TEUs, a decline of 3.3 percent over the year-ago period.
Despite the slowing year-end volumes, the port is still on pace to easily shatter beginning-of-the-year predictions of cargo growth for the year. Most analysts and experts were predicting a moderate 5 percent growth at West Coast ports in 2010. Seattle moved a total of 1,975,813 TEUs in the first 11 months of the year, a 37.3 percent increase over the January to November period in 2009.
Across the sound, total container volumes at the Port of Tacoma in November were only nominally up over the month of October--by about 450 TEUs, or less than 0.4 percent. Tacoma has experienced dramatic ups and down from month to month since the start of the year, with no discernible pattern.
In November, Tacoma port officials report handling a total of 120,095 TEUs, a 1.9 percent increase over November 2009 and tying with August for the largest monthly percentage growth since June 2008. The port also handled a total of 38,950 loaded import TEUs, a 16 percent increase over the year-ago period, and a total of 31,857 loaded export TEUs, a 4.7 percent increase over November 2009.
Despite the positive gains in three of the last four months, Tacoma is still on track to end the year down about 7 percent. However, this represents a significant improvement over 2009 when the port was down for the calendar year by 16.9 percent compared to 2008. Tacoma has not had a statistically significant positive year since 2005 (the port actually gained 0.038 percent in 2006, but reported the year as 0.0 percent growth).
Economic forecasters from the University of Puget Sound said last week that Tacoma would end the calendar year up 7.1 percent and could expect to see 4.4 percent growth in total container volumes in 2011.
The Cunningham Report Ceases Publication
Earlier this month, Southern California’s The Cunningham Report ceased publication after 15 years and 750 weekly issues. Publisher George Cunningham says it’s time to do other things.
“It's a big world, there are adventures to be had, and we are going to have them.” He says in his farewell note to readers. We here at Philips Publishing Group and PMM Online wish him all the best.
“It's a big world, there are adventures to be had, and we are going to have them.” He says in his farewell note to readers. We here at Philips Publishing Group and PMM Online wish him all the best.
Russian Shipping on the Verge of Big Changes
By Eugene Gerden
December 2010
Russia is planning to become an active player in the global marine cargo shipping market, by expanding its share of international transit shipments and increasing the cargo turnover of its seaports, according to statements recently made during a St. Petersburg, Russia conference, “The Future of Russian Ports.”
Russian seaports are steadily recovering from the effects of the global recession, which is expected to result in an increase of their total cargo turnover of up to 525 million tons this year, compared with 426 million tons in 2009.
Russia’s large seaport capacity includes about 100 km (62 miles) of total length of its ports’ quay front and more than 1,000 gantry cranes, as well as several thousand different transshipment possibilities. Technical capabilities of the country’s transshipment complexes allow its facilities to handle about 10,000 of cars a day, while the total storage capacity of the country’s ports is estimated at 15 million tons of cargo.
Despite these figures, Russia still has a shortage of seaports, and the existing capacities can’t cope with the ever-growing exports of hydrocarbons, petroleum, grain, fertilizers and other products.
Oleg Bukin, director of “Management of Transport Assets” company, which operates several stevedoring companies in Russia, in an interview with the local “Transport of Russia” paper, said further development of the Russian seaports is mainly hampered by undeveloped infrastructure near the ports.
“Most of the roads have low capacity, being in poor condition. This reduces the efficiency of port land and impedes the work of railway transport. The lag in the development of port infrastructure has already resulted in a significant portion of foreign trade cargo being delivered to Russia by sea to the ports of neighboring countries in Western and Eastern Europe, and handled in these ports. This leads to lost profits of the Russian ports and a decrease in tax payments to the budget”, Bukin said.
Russia’s current share in the global market of transit shipments remains low. According to the head of the Investment Department of the Federal Agency of Maritime and River Transport (RosMorRechFlot) Viktor Vovk, in 2009 Russia provided services for carriage of only 9 percent of global transit cargo shipments. However, the transit capacity between Asia and Europe is estimated at US$600 billion, and Russia’s share could theoretically increase up to 15 percent of this value, especially in the case of an active use of the Northern Sea Route (NSR).
The interest of Russian and foreign shipping and business communities to the Northern Sea Route is determined by two major factors. First of all, it can become more profitable alternative for other shipping routes between the ports in Europe, the Far East and North America.
According to V. Pazovsky, a senior fellow of the Far Eastern State Maritime Academy, the Northern Sea Route is interesting for foreigners as a transport artery for the transportation of minerals from the Arctic regions of Russia.
“These areas contain up to 35% of global oil and gas reserves. Starting transportation of the Russian gas and oil by sea may be more advantageous than building gas and oil pipelines. In addition, these pipelines to Western Europe can only pass through the former Soviet republic, whose policies are not always predictable, while transportation through their territories is quite expensive,” he said. At the same time, the ice conditions in the Barents Sea and the western part of the Kara Sea are quite favorable and allow the passage of ice-class tankers without escort of icebreakers for most of the year. In addition, said Pazovsky, the Northern Sea Route can arrange transportation of fertilizers from the Kola Peninsula to the East Asia and in particular to China.
According to Vovk, during the next 10-15 years the ice edge would go far enough, to start the use of Northern Sea Route (NSR) for 6 months of the year.
One of the main advantages of NSR is that it is almost half as long as other sea routes from Europe to the Far East: the distance from Hamburg, Germany to Yokohama, Japan through the NSR is 11,880 km, while the alternative through the Suez Canal is 20,520 km.
According to experts of the St. Petersburg Rosbalt business journal, after the collapse of the USSR the NSR was abandoned, and now its recovery requires billions of dollars of investment. Moreover, as recently stated by the governor of the Murmansk region Dmitry Dmitrenko NSR will be only profitable if the volume of its cargo shipments don’t fall below 4 million tons per year.
However, some Russian experts have already expressed their doubts, regarding with the ability of the Northern Sea Route, in its present conditions, to pass large volumes of transit shipments. Among the main reasons for their skepticism are the need for the use of specialized ice-class vessels, lack of awareness of foreign ship owners about the ports, located along the Northern Sea Route, the lack of reliable ice-breaker and information systems and traditional Russian bureaucratic formalities. In addition, representatives of the Suez Canal Authority have repeatedly stated its readiness to compete with the Northern Sea Route through the reduction of its tariffs.
At the same time the development of the Northern Sea Route is not the only way to expand the current Russian share in the global market of transit cargo shipments.
According to a recently adopted Marine Transport Program in Russia, by 2015 the level of investments in further development of all Russia’s largest seaports is expected to reach 630 billion rubles (USD $19 billion).
In the case of Black Sea South ports, particular attention is expected to be paid Novorossiysk port, Russia’s largest port, which has an annual capacity of 100 million tons. The port has a good geographical position, being located on the northeast coast of the Black Sea and at the intersection of transportation corridors linking Russia with the Middle East, America, the Mediterranean, South and South-East Asia.
In addition, the port is deep and does not freeze all year round, which allows for uninterrupted navigation. In this regard, during the next several years, new rail and automobile roads are expected to be built near Novorossiysk. There is also a possibility of further expansion of its container terminals and an increase of their capacity up to 2.5 million tons by 2015.
In addition to Novorossiysk, the government plans to accelerate the development of other Russian major Black Sea ports, including Taman, through the construction of a new dry cargo port area, as well as “Rostov Multifunctional port”, an expected universal multi-modal transport and logistics hub. By 2015, the volume of transshipment cargo at both ports should reach 40 million tons and 16 million tons, respectively.
With regard to the Northern ports, the turnover of the Murmansk port is expected to increase from 35 million tons in 2009 to 80 million tons by 2015, while in Ust-Luga from the current 10 million tons to 120 million tons.
In the case of Caspian, the government is ready to start further development of local Olya and Makhachkala ports, while in the Far East a new Vostochny-Nakhodka transportation hub is expected to be established. The latter project involves gradual construction of new container terminals with a total eventual capacity of 10 million TEUs a year, as well the establishment of a special economic port zone at the Sovetskaya Gavan port.
According to Alexei Klyavin, Head of the Department of State Policy for Maritime and River Transport Ministry of Transport of Russia, implementation of all of these projects will help to increase the total annual cargo turnover of the Russian ports to 750 million tons by 2015.
At the same time, the use of the enormous potential of Russia in the sphere of transit shipments is impossible in the absence of reforms of already existing legislation. According to some experts, Russia is one of the world’s most unfavorable countries in terms of customs procedures. For instance, while in Russia customs inspections apply for 44 percent of delivered cargo, in Germany and the US, these figures are less than 3 percent, while in the UK even 2 percent. Moreover, the companies must submit an average of 8 documents for exports of cargo from a Russian port and no more than 13 for imports, twice what is required in developed countries.
However much may change in the near future. At present the Russian Ministry of Transportation is completing the development of the bill, which should significantly simplify all the customs procedures in the Russian seaports.
Julia Zvorykina, an Assistant Minister of Transport, recently said that the Russian government is considering creating a single electronic customs database, which will simplify paperwork and reduce processing time of customs declarations.
“Such a system already exists in world major sea ports,” Zvorykina said. However, the timing of the introduction of this system was not disclosed.
Eugene Gerden is a free-lance writer based in Moscow, Russia who has covered the European maritime industry for 10 years. He can be reached at gerden.eug@googlemail.com.
December 2010
Russia is planning to become an active player in the global marine cargo shipping market, by expanding its share of international transit shipments and increasing the cargo turnover of its seaports, according to statements recently made during a St. Petersburg, Russia conference, “The Future of Russian Ports.”
Russian seaports are steadily recovering from the effects of the global recession, which is expected to result in an increase of their total cargo turnover of up to 525 million tons this year, compared with 426 million tons in 2009.
Russia’s large seaport capacity includes about 100 km (62 miles) of total length of its ports’ quay front and more than 1,000 gantry cranes, as well as several thousand different transshipment possibilities. Technical capabilities of the country’s transshipment complexes allow its facilities to handle about 10,000 of cars a day, while the total storage capacity of the country’s ports is estimated at 15 million tons of cargo.
Despite these figures, Russia still has a shortage of seaports, and the existing capacities can’t cope with the ever-growing exports of hydrocarbons, petroleum, grain, fertilizers and other products.
Oleg Bukin, director of “Management of Transport Assets” company, which operates several stevedoring companies in Russia, in an interview with the local “Transport of Russia” paper, said further development of the Russian seaports is mainly hampered by undeveloped infrastructure near the ports.
“Most of the roads have low capacity, being in poor condition. This reduces the efficiency of port land and impedes the work of railway transport. The lag in the development of port infrastructure has already resulted in a significant portion of foreign trade cargo being delivered to Russia by sea to the ports of neighboring countries in Western and Eastern Europe, and handled in these ports. This leads to lost profits of the Russian ports and a decrease in tax payments to the budget”, Bukin said.
Russia’s current share in the global market of transit shipments remains low. According to the head of the Investment Department of the Federal Agency of Maritime and River Transport (RosMorRechFlot) Viktor Vovk, in 2009 Russia provided services for carriage of only 9 percent of global transit cargo shipments. However, the transit capacity between Asia and Europe is estimated at US$600 billion, and Russia’s share could theoretically increase up to 15 percent of this value, especially in the case of an active use of the Northern Sea Route (NSR).
The interest of Russian and foreign shipping and business communities to the Northern Sea Route is determined by two major factors. First of all, it can become more profitable alternative for other shipping routes between the ports in Europe, the Far East and North America.
According to V. Pazovsky, a senior fellow of the Far Eastern State Maritime Academy, the Northern Sea Route is interesting for foreigners as a transport artery for the transportation of minerals from the Arctic regions of Russia.
“These areas contain up to 35% of global oil and gas reserves. Starting transportation of the Russian gas and oil by sea may be more advantageous than building gas and oil pipelines. In addition, these pipelines to Western Europe can only pass through the former Soviet republic, whose policies are not always predictable, while transportation through their territories is quite expensive,” he said. At the same time, the ice conditions in the Barents Sea and the western part of the Kara Sea are quite favorable and allow the passage of ice-class tankers without escort of icebreakers for most of the year. In addition, said Pazovsky, the Northern Sea Route can arrange transportation of fertilizers from the Kola Peninsula to the East Asia and in particular to China.
According to Vovk, during the next 10-15 years the ice edge would go far enough, to start the use of Northern Sea Route (NSR) for 6 months of the year.
One of the main advantages of NSR is that it is almost half as long as other sea routes from Europe to the Far East: the distance from Hamburg, Germany to Yokohama, Japan through the NSR is 11,880 km, while the alternative through the Suez Canal is 20,520 km.
According to experts of the St. Petersburg Rosbalt business journal, after the collapse of the USSR the NSR was abandoned, and now its recovery requires billions of dollars of investment. Moreover, as recently stated by the governor of the Murmansk region Dmitry Dmitrenko NSR will be only profitable if the volume of its cargo shipments don’t fall below 4 million tons per year.
However, some Russian experts have already expressed their doubts, regarding with the ability of the Northern Sea Route, in its present conditions, to pass large volumes of transit shipments. Among the main reasons for their skepticism are the need for the use of specialized ice-class vessels, lack of awareness of foreign ship owners about the ports, located along the Northern Sea Route, the lack of reliable ice-breaker and information systems and traditional Russian bureaucratic formalities. In addition, representatives of the Suez Canal Authority have repeatedly stated its readiness to compete with the Northern Sea Route through the reduction of its tariffs.
At the same time the development of the Northern Sea Route is not the only way to expand the current Russian share in the global market of transit cargo shipments.
According to a recently adopted Marine Transport Program in Russia, by 2015 the level of investments in further development of all Russia’s largest seaports is expected to reach 630 billion rubles (USD $19 billion).
In the case of Black Sea South ports, particular attention is expected to be paid Novorossiysk port, Russia’s largest port, which has an annual capacity of 100 million tons. The port has a good geographical position, being located on the northeast coast of the Black Sea and at the intersection of transportation corridors linking Russia with the Middle East, America, the Mediterranean, South and South-East Asia.
In addition, the port is deep and does not freeze all year round, which allows for uninterrupted navigation. In this regard, during the next several years, new rail and automobile roads are expected to be built near Novorossiysk. There is also a possibility of further expansion of its container terminals and an increase of their capacity up to 2.5 million tons by 2015.
In addition to Novorossiysk, the government plans to accelerate the development of other Russian major Black Sea ports, including Taman, through the construction of a new dry cargo port area, as well as “Rostov Multifunctional port”, an expected universal multi-modal transport and logistics hub. By 2015, the volume of transshipment cargo at both ports should reach 40 million tons and 16 million tons, respectively.
With regard to the Northern ports, the turnover of the Murmansk port is expected to increase from 35 million tons in 2009 to 80 million tons by 2015, while in Ust-Luga from the current 10 million tons to 120 million tons.
In the case of Caspian, the government is ready to start further development of local Olya and Makhachkala ports, while in the Far East a new Vostochny-Nakhodka transportation hub is expected to be established. The latter project involves gradual construction of new container terminals with a total eventual capacity of 10 million TEUs a year, as well the establishment of a special economic port zone at the Sovetskaya Gavan port.
According to Alexei Klyavin, Head of the Department of State Policy for Maritime and River Transport Ministry of Transport of Russia, implementation of all of these projects will help to increase the total annual cargo turnover of the Russian ports to 750 million tons by 2015.
At the same time, the use of the enormous potential of Russia in the sphere of transit shipments is impossible in the absence of reforms of already existing legislation. According to some experts, Russia is one of the world’s most unfavorable countries in terms of customs procedures. For instance, while in Russia customs inspections apply for 44 percent of delivered cargo, in Germany and the US, these figures are less than 3 percent, while in the UK even 2 percent. Moreover, the companies must submit an average of 8 documents for exports of cargo from a Russian port and no more than 13 for imports, twice what is required in developed countries.
However much may change in the near future. At present the Russian Ministry of Transportation is completing the development of the bill, which should significantly simplify all the customs procedures in the Russian seaports.
Julia Zvorykina, an Assistant Minister of Transport, recently said that the Russian government is considering creating a single electronic customs database, which will simplify paperwork and reduce processing time of customs declarations.
“Such a system already exists in world major sea ports,” Zvorykina said. However, the timing of the introduction of this system was not disclosed.
Eugene Gerden is a free-lance writer based in Moscow, Russia who has covered the European maritime industry for 10 years. He can be reached at gerden.eug@googlemail.com.
Thursday, December 16, 2010
CA Port Volumes Slow, But Well Above 2009 Levels
While container volumes at two of California's three major ports slid to pre-peak season levels in November, monthly volumes at all three easily surpassed volumes from the year-ago period in 2009.
Total container volumes at the ports of Los Angeles and Oakland in November slid to levels close to those seen in May, just before container volumes at both ports began to ramp up significantly for the peak shipping season which traditionally runs from June to October. However, the Port of Long Beach, while seeing a sizable drop off in total container volumes in November compared to October, still turned in numbers equal to the other peak season months of 2010. This may indicate that at least some cargo owners are shipping early for the winter season to avoid the typical shipping slowdowns related to the Chinese New Year, which occurs somewhat early in 2011.
In addition, all three ports have experienced an out-of-cycle jump in the number of loaded export containers handled over the past two months. Export numbers for October and November at all three ports have increased to levels typically seen in the early months of the year, the traditional export peak season as raw materials head to foreign manufacturing centers in anticipation of producing finished goods for return to the US months later in the back-to-school and holiday seasons.
The Port of Long Beach moved a total of 558,307 TEUs in November, a 24.6 percent gain over November 2009. The port handled a total of 274,480 loaded import TEUs during November, a 20.2 percent increase over the year ago period. The port also moved a total of 142,628 loaded export TEUs, a 24.8 percent increase over the same month in 2009.
Long Beach remains on track to end the year with well above 20 percent growth, with 5,740,188 TEUs handled in the first 11 months of 2010, or 24.8 percent higher than the January to November period last year.
Across San Pedro Bay, the Port of Los Angeles in November handled a total of 666,971 TEUs, a 15 percent increase over November 2009. Los Angeles officials report handling 333,710 loaded import TEUs in November, an 11.7 percent increase over the year-ago period. The port also handled 170,319 loaded export, a 14.2 percent increase over November of last year.
Los Angeles has moved just over 1 million TEUs in the calendar year, a 16.7 percent increase over the first 11 months of 2009.
Up the coast in the Bay Area, the Port of Oakland reported moving a total of 201,530 TEUs in November, a 16.2 percent increase over November of last year. Oakland officials report moving 67,342 loaded import TEUs in November, a 14.1 percent increase over the year-ago period. The port also handled 88,212 loaded export containers in November, a 2.8 percent increase over the same month last year.
Oakland has moved 2,142,249 TEUs during the first 11 months of this year, a 15.3 percent increase over the January to November period in 2009.
Total container volumes at the ports of Los Angeles and Oakland in November slid to levels close to those seen in May, just before container volumes at both ports began to ramp up significantly for the peak shipping season which traditionally runs from June to October. However, the Port of Long Beach, while seeing a sizable drop off in total container volumes in November compared to October, still turned in numbers equal to the other peak season months of 2010. This may indicate that at least some cargo owners are shipping early for the winter season to avoid the typical shipping slowdowns related to the Chinese New Year, which occurs somewhat early in 2011.
In addition, all three ports have experienced an out-of-cycle jump in the number of loaded export containers handled over the past two months. Export numbers for October and November at all three ports have increased to levels typically seen in the early months of the year, the traditional export peak season as raw materials head to foreign manufacturing centers in anticipation of producing finished goods for return to the US months later in the back-to-school and holiday seasons.
The Port of Long Beach moved a total of 558,307 TEUs in November, a 24.6 percent gain over November 2009. The port handled a total of 274,480 loaded import TEUs during November, a 20.2 percent increase over the year ago period. The port also moved a total of 142,628 loaded export TEUs, a 24.8 percent increase over the same month in 2009.
Long Beach remains on track to end the year with well above 20 percent growth, with 5,740,188 TEUs handled in the first 11 months of 2010, or 24.8 percent higher than the January to November period last year.
Across San Pedro Bay, the Port of Los Angeles in November handled a total of 666,971 TEUs, a 15 percent increase over November 2009. Los Angeles officials report handling 333,710 loaded import TEUs in November, an 11.7 percent increase over the year-ago period. The port also handled 170,319 loaded export, a 14.2 percent increase over November of last year.
Los Angeles has moved just over 1 million TEUs in the calendar year, a 16.7 percent increase over the first 11 months of 2009.
Up the coast in the Bay Area, the Port of Oakland reported moving a total of 201,530 TEUs in November, a 16.2 percent increase over November of last year. Oakland officials report moving 67,342 loaded import TEUs in November, a 14.1 percent increase over the year-ago period. The port also handled 88,212 loaded export containers in November, a 2.8 percent increase over the same month last year.
Oakland has moved 2,142,249 TEUs during the first 11 months of this year, a 15.3 percent increase over the January to November period in 2009.
Beacon Analysis: California Sets Export Record in October
California exporters turned in their best performance ever for the month of October, beating the previous record set back in October 2007 by 1.1 percent, according to a Beacon Economics analysis of the most recently available foreign trade data from the U.S. Commerce Department.
"Our export trade is now operating at a pace not seen since the onset of the Great Recession," said Jock O'Connell, Beacon Economics' International Trade Adviser.
Golden State businesses shipped $12.91 billion in goods abroad in October, surpassing the $11.08 billion in goods exported in the same period last year by a sizable 16.5 percent margin.
Exports from California manufacturers also jumped in October, climbing 10.7 percent compared to October 2009 and shipments of Golden State agricultural goods and other non-manufactured products increased a significant 34.6 percent over the year-ago period. Re-exports of items previously imported into the state, said the Beacon report for October, also jumped by 25.2 percent.
October, in which California accounted for 11 percent of all U.S. merchandise exports, marked 12 straight months year-over-year increases in the state's export trade.
Loaded export container volumes at the Southern California ports of Long Beach and Los Angeles increased by 11.8 percent from October 2009, while Los Angeles International Airport saw a 31.4 percent increase in exported air freight tonnage.
In the Bay Area, loaded export container volumes at the Port of Oakland rose by just 0.3 percent while exported air freight tonnage through San Francisco International jumped up by 15.8 percent from last October.
Beacon also reports that U.S. Commerce Department data shows that California’s merchandise import trade totaled $28.85 billion in October, an increase of 7.2 percent over last October. The Golden State accounted for 17 percent of all U.S. merchandise imports in October.
Beacon's O'Connell was optimistic about strong employment growth resulting from the increase in export activity.
"At some point, you would naturally expect higher exports to goose the employment numbers," said O'Connell. "However, California firms have made great strides in efficiency, enabling them to do more with less. Bear in mind that, while manufacturing output in this state increased by about 50 percent in this decade, employment in our manufacturing sector declined by one-third."
According to Beacon's analysis of California Employment Development Department data, there are currently about 4,800 fewer workers in the manufacturing sector and 6,800 fewer in the transportation and warehousing sector than there were last October.
"Exporters are also likely to be worried about the outlook for California exports going into the New Year," O'Connell observed. "Austerity measures across Europe, an appreciating Japanese currency, unrest in Mexico, and renewed efforts by Chinese authorities to slow down their economy could all put a serious damper on California exports," he explained.
"Our export trade is now operating at a pace not seen since the onset of the Great Recession," said Jock O'Connell, Beacon Economics' International Trade Adviser.
Golden State businesses shipped $12.91 billion in goods abroad in October, surpassing the $11.08 billion in goods exported in the same period last year by a sizable 16.5 percent margin.
Exports from California manufacturers also jumped in October, climbing 10.7 percent compared to October 2009 and shipments of Golden State agricultural goods and other non-manufactured products increased a significant 34.6 percent over the year-ago period. Re-exports of items previously imported into the state, said the Beacon report for October, also jumped by 25.2 percent.
October, in which California accounted for 11 percent of all U.S. merchandise exports, marked 12 straight months year-over-year increases in the state's export trade.
Loaded export container volumes at the Southern California ports of Long Beach and Los Angeles increased by 11.8 percent from October 2009, while Los Angeles International Airport saw a 31.4 percent increase in exported air freight tonnage.
In the Bay Area, loaded export container volumes at the Port of Oakland rose by just 0.3 percent while exported air freight tonnage through San Francisco International jumped up by 15.8 percent from last October.
Beacon also reports that U.S. Commerce Department data shows that California’s merchandise import trade totaled $28.85 billion in October, an increase of 7.2 percent over last October. The Golden State accounted for 17 percent of all U.S. merchandise imports in October.
Beacon's O'Connell was optimistic about strong employment growth resulting from the increase in export activity.
"At some point, you would naturally expect higher exports to goose the employment numbers," said O'Connell. "However, California firms have made great strides in efficiency, enabling them to do more with less. Bear in mind that, while manufacturing output in this state increased by about 50 percent in this decade, employment in our manufacturing sector declined by one-third."
According to Beacon's analysis of California Employment Development Department data, there are currently about 4,800 fewer workers in the manufacturing sector and 6,800 fewer in the transportation and warehousing sector than there were last October.
"Exporters are also likely to be worried about the outlook for California exports going into the New Year," O'Connell observed. "Austerity measures across Europe, an appreciating Japanese currency, unrest in Mexico, and renewed efforts by Chinese authorities to slow down their economy could all put a serious damper on California exports," he explained.
Bellingham Port Inks Site Cleanup Deal With Oil Firms
Officials from the Washington-state Port of Bellingham and three oil firms have worked out a preliminary deal to clean up a contaminated parcel of port-owned property.
The site, located at 2801 Roeder Ave. near Squalicum Harbor, has operated as a bulk fueling terminal by various operators for more than 70 years.
The facility is currently operated by the Bellingham-based Yorkston Oil Co., Inc., which owns and operates Yorky's markets in Whatcom County, Washington, Commercial Fuel Network sites in Whatcom and Skagit counties, distributes to unbranded dealers, and serves numerous independent and commercial accounts with heating fuels, industrial/motor oils, marine fuels, and on- and off-road fuels.
The port has worked out a cleanup cost-sharing deal with Yorkston, and previous facility operators Chevron and ExxonMobil. Under the terms of the preliminary deal, Yorkston will pay 40.5 percent of the cleanup, Chevron 36.9 percent, ExxonMobil 12.6 percent and the port 10 percent.
While port officials cite no evidence that ground contamination from the facility have leeched into Squalicum Creek, the Bellingham Herald reports that previous studies have found fuel-related materials in the soil and groundwater on the site. These environmental investigations, the Herald reports, are high enough to trigger a mandatory cleanup under Washington state environmental laws.
Port officials said that the cleanup project is likely to cost in the neighborhood of $1 million and take several years to complete. Yorkston will continue operating at the site during the cleanup.
The site, located at 2801 Roeder Ave. near Squalicum Harbor, has operated as a bulk fueling terminal by various operators for more than 70 years.
The facility is currently operated by the Bellingham-based Yorkston Oil Co., Inc., which owns and operates Yorky's markets in Whatcom County, Washington, Commercial Fuel Network sites in Whatcom and Skagit counties, distributes to unbranded dealers, and serves numerous independent and commercial accounts with heating fuels, industrial/motor oils, marine fuels, and on- and off-road fuels.
The port has worked out a cleanup cost-sharing deal with Yorkston, and previous facility operators Chevron and ExxonMobil. Under the terms of the preliminary deal, Yorkston will pay 40.5 percent of the cleanup, Chevron 36.9 percent, ExxonMobil 12.6 percent and the port 10 percent.
While port officials cite no evidence that ground contamination from the facility have leeched into Squalicum Creek, the Bellingham Herald reports that previous studies have found fuel-related materials in the soil and groundwater on the site. These environmental investigations, the Herald reports, are high enough to trigger a mandatory cleanup under Washington state environmental laws.
Port officials said that the cleanup project is likely to cost in the neighborhood of $1 million and take several years to complete. Yorkston will continue operating at the site during the cleanup.
WWII Munitions Cleanup Begins at Seattle Cruise Facility
While falling short of saying that old military munitions found on the seabed under a Port of Seattle cruise terminal presented no danger, a commander for the Army Corps of Engineers said Wednesday that the explosives were not a major threat.
While the munitions need to be addressed, said Army Corps commander of the Seattle area Col. Anthony Wright, his office said in a statement that, "There is a low explosive hazard risk associated with discarded military munitions and no explosive hazard risk associated with munitions debris."
The World War II-era debris, including live munitions and non-explosive debris from various munitions, were discovered by port police divers performing routine underwater security sweeps in April. Additional dives by the US Coast Guard in the summer located more munitions. The munitions, which have been removed as they have been found, have all been located near the berthing area at the port's Terminal 91 cruise facility.
The U.S. Navy used the pier between the 1930s and 1970s, in part, to load ammunition aboard Navy vessels. It is speculated that the munitions and debris fell overboard or was discarded during these loading procedures. They sat hidden in the muck on the bottom until, in the most accepted scenario, the bow thrusters of modern cruise ships calling at the pier uncovered the munitions.
The Army Corps is leading a $10 million cleanup effort in conjunction with the Coast Guard, EPA, Navy and port. The Army Corps began the project on Dec. 14 with an assessment of the areas around piers 90 and 91 using sonar, remotely operated vehicles, and divers.
"This assessment will provide the basis for using digital geophysical mapping and divers to perform a surface and subsurface removal of military munitions," said an Army Corps statement.
The cleanup project is expected to be complete by April 15, 2011, just prior to the start of the cruise ship season.
While the munitions need to be addressed, said Army Corps commander of the Seattle area Col. Anthony Wright, his office said in a statement that, "There is a low explosive hazard risk associated with discarded military munitions and no explosive hazard risk associated with munitions debris."
The World War II-era debris, including live munitions and non-explosive debris from various munitions, were discovered by port police divers performing routine underwater security sweeps in April. Additional dives by the US Coast Guard in the summer located more munitions. The munitions, which have been removed as they have been found, have all been located near the berthing area at the port's Terminal 91 cruise facility.
The U.S. Navy used the pier between the 1930s and 1970s, in part, to load ammunition aboard Navy vessels. It is speculated that the munitions and debris fell overboard or was discarded during these loading procedures. They sat hidden in the muck on the bottom until, in the most accepted scenario, the bow thrusters of modern cruise ships calling at the pier uncovered the munitions.
The Army Corps is leading a $10 million cleanup effort in conjunction with the Coast Guard, EPA, Navy and port. The Army Corps began the project on Dec. 14 with an assessment of the areas around piers 90 and 91 using sonar, remotely operated vehicles, and divers.
"This assessment will provide the basis for using digital geophysical mapping and divers to perform a surface and subsurface removal of military munitions," said an Army Corps statement.
The cleanup project is expected to be complete by April 15, 2011, just prior to the start of the cruise ship season.
Tuesday, December 14, 2010
Appeals Panel Agrees to Speed Up Los Angeles Port Truck Plan Suit Appeal
A federal appellate panel has reversed its earlier decision and agreed to speed up an appeals hearing of ongoing litigation over the Port of Los Angeles clean truck program.
In mid-November, the United States Ninth Circuit Court of Appeals denied a request to expedite an appeal regarding the truck program litigation. Immediately after the decision, the trucking industry defendant in the case, the American Trucking Associations, asked the appellate court to reconsider the request.
The expedited schedule for the appeals hearing will push the case forward by about two months, according to ATA officials.
The appellate panel order now sets the deadline for the opening ATA brief on December 28, 2010; the port answering brief is due January 31, 2011; and the optional ATA reply brief is due within 14 days after service of the answering brief. The Ninth Circuit stated that after the briefings are complete, the case "shall be calendared as soon as possible.”
The ATA sued the port over key components of the truck program in 2008, claiming that the part-environmental, part-social justice program violates federal interstate commerce laws.
District Court Judge Christina Snyder ruled against the ATA in the suit in September, arguing that the port is exempt for federal commerce laws because it operates as a "market participant" in port drayage. In her ruling she also dissolved an injunction against portions of the truck plan. At the request of the ATA, Judge Snyder subsequently reinstated the injunction against the employee mandate until the appeals court can hear the case.
In her reinstatement ruling Judge Snyder said that while confident of her earlier ruling in favor of the port, she recognized that "the interpretation and the application of the 'market participant doctrine' in this case presents substantial and novel legal questions."
She also determined that the trucking industry was likely to suffer "irreparable harm" if the employee-only mandate was allowed to be implemented by the port and was later overturned.
The original ATA suit centers around a Los Angeles port truck program that took effect in October 2008 requiring port-servicing drayage firms to sign so-called concession agreements to gain access to port terminals. Firms without such an access license are barred from entering port facilities. The truck plan was originally conceived by the port (at the time including the Port of Long Beach) as a means to bar older polluting trucks and force port-servicing trucking firms to use newer and cleaner burning vehicles, thereby cutting port-generated diesel emissions.
However, Los Angeles port officials included non-environmental criteria in the concession agreements, such as financial, maintenance, insurance, safety, parking and labor criteria. Critics of the truck program's non-environmental components, such as the employee-mandate, have accused the port of engaging in social engineering above and beyond their role as a commercial entity.
The Port of Long Beach, which helped develop the truck plan and was a defendant in the original ATA lawsuit, reached a court-approved settlement with the ATA in 2009 that allowed the Long Beach port to implement all of the environmental aspects of the truck plan, as well as most of the non-environmental aspects. The Long Beach version of the truck plan never called for an employee-only mandate.
In mid-November, the United States Ninth Circuit Court of Appeals denied a request to expedite an appeal regarding the truck program litigation. Immediately after the decision, the trucking industry defendant in the case, the American Trucking Associations, asked the appellate court to reconsider the request.
The expedited schedule for the appeals hearing will push the case forward by about two months, according to ATA officials.
The appellate panel order now sets the deadline for the opening ATA brief on December 28, 2010; the port answering brief is due January 31, 2011; and the optional ATA reply brief is due within 14 days after service of the answering brief. The Ninth Circuit stated that after the briefings are complete, the case "shall be calendared as soon as possible.”
The ATA sued the port over key components of the truck program in 2008, claiming that the part-environmental, part-social justice program violates federal interstate commerce laws.
District Court Judge Christina Snyder ruled against the ATA in the suit in September, arguing that the port is exempt for federal commerce laws because it operates as a "market participant" in port drayage. In her ruling she also dissolved an injunction against portions of the truck plan. At the request of the ATA, Judge Snyder subsequently reinstated the injunction against the employee mandate until the appeals court can hear the case.
In her reinstatement ruling Judge Snyder said that while confident of her earlier ruling in favor of the port, she recognized that "the interpretation and the application of the 'market participant doctrine' in this case presents substantial and novel legal questions."
She also determined that the trucking industry was likely to suffer "irreparable harm" if the employee-only mandate was allowed to be implemented by the port and was later overturned.
The original ATA suit centers around a Los Angeles port truck program that took effect in October 2008 requiring port-servicing drayage firms to sign so-called concession agreements to gain access to port terminals. Firms without such an access license are barred from entering port facilities. The truck plan was originally conceived by the port (at the time including the Port of Long Beach) as a means to bar older polluting trucks and force port-servicing trucking firms to use newer and cleaner burning vehicles, thereby cutting port-generated diesel emissions.
However, Los Angeles port officials included non-environmental criteria in the concession agreements, such as financial, maintenance, insurance, safety, parking and labor criteria. Critics of the truck program's non-environmental components, such as the employee-mandate, have accused the port of engaging in social engineering above and beyond their role as a commercial entity.
The Port of Long Beach, which helped develop the truck plan and was a defendant in the original ATA lawsuit, reached a court-approved settlement with the ATA in 2009 that allowed the Long Beach port to implement all of the environmental aspects of the truck plan, as well as most of the non-environmental aspects. The Long Beach version of the truck plan never called for an employee-only mandate.
SoCal Floating Petroleum Terminal Wins 30-Year Lease Extension
The California State Lands Commission on Friday approved a 30-year lease extension for a Southern California offshore petroleum terminal to oil giant Chevron, despite opposition by environmentalists and members of the public citing the recent BP oil disaster in the Gulf of Mexico.
The State Lands panel voted 2-1 to approve the $1.3 million per year lease for 221 acres of tidelands at the El Segundo Marine Terminal, which allows tankers to moor 1.5 miles west of the Los Angeles coastline at two locations and discharge petroleum products to an onshore refinery via underwater pipelines. The lease also calls for annual adjustments to the base lease amount based on the Consumer Price Index.
The offshore facility, one of the few of its type remaining in California, is used for handling imported petroleum, gasoline and other finished fuels to the Los Angeles area.
Supporters of the lease extension cited the crucial importance of the facility in providing Los Angeles regional fuel needs and the overall importance of Chevron to the local economy.
Opponents of the lease raised concerns about potential oil spills at the facility similar to the BP spill, which supporters of the facility dismissed by citing a nearly exemplary safety record for many years with only one sizable spill of 21,000 gallons since 1980, when the facility's last major spill released 105,000 gallons of oil.
Opponents also called for a much shorter 10-year lease extension and wanted to see some of the facility's cargo handled at the nearby Port of Los Angeles, though Chevron said this was not possible due to the lack of connecting pipelines from the port to the on-shore El Segundo refinery. The Chevron refinery processes about 275,000 barrels of oil per day.
The State Lands panel voted 2-1 to approve the $1.3 million per year lease for 221 acres of tidelands at the El Segundo Marine Terminal, which allows tankers to moor 1.5 miles west of the Los Angeles coastline at two locations and discharge petroleum products to an onshore refinery via underwater pipelines. The lease also calls for annual adjustments to the base lease amount based on the Consumer Price Index.
The offshore facility, one of the few of its type remaining in California, is used for handling imported petroleum, gasoline and other finished fuels to the Los Angeles area.
Supporters of the lease extension cited the crucial importance of the facility in providing Los Angeles regional fuel needs and the overall importance of Chevron to the local economy.
Opponents of the lease raised concerns about potential oil spills at the facility similar to the BP spill, which supporters of the facility dismissed by citing a nearly exemplary safety record for many years with only one sizable spill of 21,000 gallons since 1980, when the facility's last major spill released 105,000 gallons of oil.
Opponents also called for a much shorter 10-year lease extension and wanted to see some of the facility's cargo handled at the nearby Port of Los Angeles, though Chevron said this was not possible due to the lack of connecting pipelines from the port to the on-shore El Segundo refinery. The Chevron refinery processes about 275,000 barrels of oil per day.
San Diego Port Names Darbeau as President/CEO
Commissioners have appointed Wayne Darbeau as president and chief executive officer of the San Diego Unified Port District, filling a seat abruptly vacated in September by Charles Wurster. Darbeau has served as interim president and CEO of the port authority since October.
Darbeau, who has served in several key executive position since joining the port in 1998, most recently served as the port authority's vice president of administration prior to being named interim president and CEO.
"We considered a nationwide search for this position, but we realized that the person who has the best qualities to move this organization forward was right here," said Robert Valderrama, Chairman of the Board of Port Commissioners. "We're elated that we found someone of such high caliber within the organization to lead us into the future."
In his new role, Darbeau will oversee the 600-plus member staff of the port authority, which manages the Port of San Diego and the public lands along San Diego Bay. The port authority manages two primary cargo facilities, a cruise terminal and more than 400 leases with various port-property tenants. Last year, the port reported revenues of $134 million.
Former port authority president and CEO Wurster resigned abruptly and without explanation on Sept. 24. The board later said the departure was a mutual decision between the commission and Wurster.
Darbeau, who has served in several key executive position since joining the port in 1998, most recently served as the port authority's vice president of administration prior to being named interim president and CEO.
"We considered a nationwide search for this position, but we realized that the person who has the best qualities to move this organization forward was right here," said Robert Valderrama, Chairman of the Board of Port Commissioners. "We're elated that we found someone of such high caliber within the organization to lead us into the future."
In his new role, Darbeau will oversee the 600-plus member staff of the port authority, which manages the Port of San Diego and the public lands along San Diego Bay. The port authority manages two primary cargo facilities, a cruise terminal and more than 400 leases with various port-property tenants. Last year, the port reported revenues of $134 million.
Former port authority president and CEO Wurster resigned abruptly and without explanation on Sept. 24. The board later said the departure was a mutual decision between the commission and Wurster.
State Audit Critical of Seattle Port Real Estate Deals
The Washington state auditor's office on Monday released its second major audit in three years of the Port of Seattle, finding that while the port may have addressed many problems since the first audit in 2007, there remains room for improvement.
The 42-page report included a performance audit report that reviewed the Port’s real estate purchases and leases, crane management and Fishermen's Terminal management, strategic planning and three programs' accountability and compliance with laws and regulations. The audit also included an accountability report, which found the Port did not adequately monitor management contracts and another accountability report, which reviewed the Industrial Development Corporation of the Port of Seattle and found that the Corporation adequately safeguarded public assets.
The performance review portion of the audit found numerous oversight and management failing in regards to real estate transactions.
For example, the audit found an accounting error that led to a $4.1 million undercharge on a port property land transaction.
During the 2004 sale of the 28-acre Terminal 106E, port officials had the property appraised at $27.7 million--which the port later lowered to $23.7 to reflect approximately $4 million in improvements the buyer said were to be done of the facility.
According to the audit, port staff inadvertently subtracted the roughly $4 million from the sale price on two separate occasions, leading to a $4.1 million loss for the port.
The 42-page report also highlighted the port's $5.5 million purchase of a steel mill, done, according to the audit, without fully assessing the property's environmental contamination which in turn lead to the port abandoning development at the site.
In light of such transactions, and other identified problems such as the use of outdated market data resulting in low lease rates, the audit recommends that the port commission take over direct control of the Real Estate Management Division.
The state auditor made the same recommendation in 2008, after a 350-page audit of port operations between 2004 and 2007 found nearly 50 indications of financial and contracting irregularities or fraud. In addition, the 2007 audit found that the port wasted nearly $100 million in taxpayer money through improper construction contracting. Released in December 2007, the audit led to a United States Department of Justice investigation into the accusation of fraud at the port. At the time, the state auditor’s office was unable to prove fraud due to state regulations putting the collection of substantiating evidence outside the legal mandate of the office.
Following the scathing 2007 audit, the port adopted numerous oversight and accountability measures, including more direct oversight of port operations by the port commission.
In all, the recent audit made 10 recommendations to the port, with most centered around port leadership providing more oversight, more consistent application of port policies, and additional diligence by port staff.
The 42-page report included a performance audit report that reviewed the Port’s real estate purchases and leases, crane management and Fishermen's Terminal management, strategic planning and three programs' accountability and compliance with laws and regulations. The audit also included an accountability report, which found the Port did not adequately monitor management contracts and another accountability report, which reviewed the Industrial Development Corporation of the Port of Seattle and found that the Corporation adequately safeguarded public assets.
The performance review portion of the audit found numerous oversight and management failing in regards to real estate transactions.
For example, the audit found an accounting error that led to a $4.1 million undercharge on a port property land transaction.
During the 2004 sale of the 28-acre Terminal 106E, port officials had the property appraised at $27.7 million--which the port later lowered to $23.7 to reflect approximately $4 million in improvements the buyer said were to be done of the facility.
According to the audit, port staff inadvertently subtracted the roughly $4 million from the sale price on two separate occasions, leading to a $4.1 million loss for the port.
The 42-page report also highlighted the port's $5.5 million purchase of a steel mill, done, according to the audit, without fully assessing the property's environmental contamination which in turn lead to the port abandoning development at the site.
In light of such transactions, and other identified problems such as the use of outdated market data resulting in low lease rates, the audit recommends that the port commission take over direct control of the Real Estate Management Division.
The state auditor made the same recommendation in 2008, after a 350-page audit of port operations between 2004 and 2007 found nearly 50 indications of financial and contracting irregularities or fraud. In addition, the 2007 audit found that the port wasted nearly $100 million in taxpayer money through improper construction contracting. Released in December 2007, the audit led to a United States Department of Justice investigation into the accusation of fraud at the port. At the time, the state auditor’s office was unable to prove fraud due to state regulations putting the collection of substantiating evidence outside the legal mandate of the office.
Following the scathing 2007 audit, the port adopted numerous oversight and accountability measures, including more direct oversight of port operations by the port commission.
In all, the recent audit made 10 recommendations to the port, with most centered around port leadership providing more oversight, more consistent application of port policies, and additional diligence by port staff.
