Thursday, October 14, 2010

Los Angeles City Council Approves Two New Port Commissioners

The Los Angeles City Council has approved the appointment of two new commissioners to the Port of Los Angeles governing board, one a long-time political confederate of the city's mayor and the other a veteran dockworker.

In September, Mayor Antonio Villaraigosa nominated his former chief-of-staff Robin Kramer to the harbor commission. A month later the mayor nominated longshore union activist David Arian to fill a second vacant seat on the five-member port board.

Kramer, who served as Villaraigosa's chief of staff from 2005 to 2009, also served as former Los Angeles Mayor Richard Riordan's chief of staff from 1994 to 1997. Kramer will fill a seat left vacant by the departure earlier this year of Commission Vice-President Jerilyn Lopez Mendoza.

Arian, a native of San Pedro, began his career as a longshoreman in 1965 and remained an active member of the International Longshore & Warehouse Union for 44 years until his retirement in 2009. In 1991, he was elected to a term as International President of the ILWU. In 2006, Mayor Villaraigosa asked him to sit on the joint port advisory for the Port of Los Angeles and Long Beach’s Clean Air Action Plan. Arian has also served for nearly a decade as president of the Harry Bridges Institute, a San Pedro-based non-profit dedicated to the memory and legacy of ILWU founder Harry Bridges.

Arian will fill a seat vacated abruptly in mid-September by Commissioner Joseph Radisich, also a longtime ILWU member.

Los Angeles Port Commission members can serve two five-year terms, though in the past new mayoral administrations have brought in all new commissioners. Villaraigosa, first elected in 2005 and re-elected in 2009, is termed out and will finish his second term as mayor July 1, 2013. Past history indicates that both Kramer and Arian are unlikely to remain on the commission following the next mayoral election.

TCC to Expand No-Frills China-Los Angeles Service

Ocean carrier start-up The Containership Company has announced that it will expand its no-frills express transpacific service between China and the Port of Los Angeles starting next month.

The carrier said that based on repeated customer requests, the Great Dragon service will expand to include calls in Qingdao, China. The first sailing from Qingdao will be Nov. 15 with a 14-day transit time to Los Angeles using the 2,900-TEU Shenzhen Dragon. The first sailing from Los Angeles will be Oct. 25.

The Great Dragon service started in April and has been promoted by TCC as a new shipping industry model akin to that used by budget airlines like JetBlue. When first launched in April, the Great Dragon service included stops at two ports in the Taicang International Gateway in China and the Los Angeles port's TraPac terminal. The Taicang complex, owned by Modern Terminals Ltd., is located in the major Chinese manufacturing province of Jiangsu. The service has been running with a 96 percent on-time reliability, according to the carrier.

LA/LB Ports' Monthly Box Volumes Climb Again in September

The Southern California ports of Long Beach and Los Angeles, buoyed by sizable import gains, continued to report increased total container traffic volumes in September compared to the year-ago period.

September marks the sixth straight month both ports have reported double-digit percentage increases in total monthly container volumes.

The Port of Long Beach reported handling a total of 574,790 TEUs in September, a 12.4 percent increase over September 2009. The port handled 288,905 loaded inbound TEUs for the month, a 14.2 percent increase, and 109,337 loaded outbound TEUs, an 11.5 percent increase, over volumes reported in September 2009.

Across San Pedro Bay, the neighboring Port of Los Angeles reported handling a total of 711,613 TEUs in September, a 21.9 percent increase over the same period last year. Port officials report that total loaded inbound container volumes increased 20.8 percent over September 2009 to end the month at 373,249 TEUs. Total loaded outbound container volumes fell into the negative at Los Angeles in September, dropping an imperceptible 0.3 percent compared to the year-ago period. The port ended the month with 139,800 loaded outbound TEUs handled.

Upward Growth Trend of California Exports Could Be Faltering

Despite nine months of steady monthly increases compared to 2009, California merchandise exports showed signs of faltering in August, according to the latest monthly analysis by Beacon Economics.

The report, which is based on international trade data released this week by the U.S. Commerce Department, found that although August saw $11.89 billion in exported goods from California – an 18.5 percent increase over the $10.03 billion in August 2009 exports – August’s trade was just 0.2 percent ahead of July’s.

“August 2009 was a lousy month in an exceptionally dismal year for trade,” said Jock O’Connell, Beacon Economics' International Trade Adviser. “So a nominally healthy year-over-year improvement isn’t all that comforting.”

O’Connell said he was particularly concerned with the poor month-over-month numbers, given the historical trends of California exports.

"Over the past decade, California’s export trade each August has exceeded July by an average of 7.0 percent," said O'Connell. "In that context, the 0.2 percent rise from July to August this year is disconcertingly anemic. You have to go back to 2006 to find August exports at this year’s level."

O’Connell warned that the California exports, which accounted for 11.1 percent of all US merchandise exports in August, could see a deceleration in growth through the remainder of this year.

"I’m cautiously pessimistic about the next few months," said O'Connell.

"Worldwide, a combination of tepid consumer spending coupled with government deficit-reduction measures is dampening demand for goods. These forces are acting as a powerful brake on what should be the more salutary impact of moves that have been weakening the dollar and thus making California goods more attractive on the world market," said O'Connell.

Beacon also reported that the state's exports of manufactured products in August were up by 15.6 percent from last August, while agriculture and other non-manufactured products increased by 8.2 percent. Beacon also reported that Commerce Department numbers showed re-exports of items previously imported into California were up 34.6 percent.

Merchandise imports into California, according to the Beacon analysis, totaled $30.35 billion in August, an increase of 26.6 percent over last August. California accounted for 17.8 percent of all US merchandise imports in August.

Tuesday, October 12, 2010

Russian Shipbuilding on the Verge of Big Changes

By Eugene Gerden

If the Russian government’s plan is successful, during the next 10 years the Russian shipbuilding industry will reach European levels of production. Photo by Eugene Gerden.

Russia is hoping to restore its position in the world’s shipbuilding industry through the implementation of a complex long-term domestic shipbuilding program recently initiated by Russia’s President Dmitry Medvedev.

Under the terms of the program, which is expected to run through 2030, Russia plans to increase the attractiveness of its shipyards to the international community, start the development of new types of vessels, and to establish specialized shipbuilding zones that will have a special tax and customs regimes. Particular attention is expected to be paid to the development of the country’s largest centers of shipbuilding, including St. Petersburg, Severodvinsk, Nizhny Novgorod and the Kaliningrad region.

The Russian government is unhappy with the current situation in the domestic commercial shipbuilding industry, where the deterioration of equipment is estimated at 70 percent. At present only 30 to 35 Russian shipyards could be considered competitive. During the period from 2001 to 2009 Russian shipping companies purchased 143 new marine vessels, of which only 17 were made in Russia. To date, there are 168 shipyards in Russia, of which 86 are owned by the state. In 2008, total sales in the Russian shipbuilding industry amounted to 150 billion rubles (USD$ 4.5 billion).

Despite the relatively low cost of the skilled labor force in Russia, (compared with the world’s shipbuilding centers) its current productivity does not meet modern standards, primarily due to technological and organizational backwardness.

According to Felix Ostashevich, former chief of planning departments of the USSR Ministry of Shipbuilding, the current Russian shipbuilding industry is mostly based on the production of ships from foreign components, while some shipyards, especially those located in the border areas of the country, usually prefer to buy not only foreign components, but also metal.

The Russian shipbuilding industry has always paid more attention to the production of warships than commercial shipbuilding. In this regard, most of the country’s shipyards traditionally focused on the implementation of military orders, while commercial shipbuilding has never been developed. During the Soviet period domestic commercial shipbuilding was considered as one of the segments of the military-industrial complex, but since the collapse of the USSR Russia’s need for warships has declined, while its need for commercial vessels has increased.

In the early 1990s the Russian government was unable to re-equip and transform the former Soviet navy yards into commercial shipyards, due to conceptual and technological differences. As a result, all efforts to start the production of commercial ships at navy facilities failed.

Until recently, the majority of Russian shipyards specialized in the production of hulls, importing most of the equipment, engine packages and all the instruments from abroad.

“Russia is experiencing an acute shortage of capacities, especially for large-capacity shipping,” says Vladimir Gorbach, General Director of Russian Technology Center of Shipbuilding and Repair.

“During the Soviet times, in certain years, the volumes of production amounted to 970,000 tons per year. With the present 50 large shipyards, the Russian shipbuilding industry uses about 250,000 tons of metal per year, however by 2016 these figures should be increased up to 1 million tons in order to implement the state project,” he says.

High taxes pose another major problem for the Russian shipping industry, resulting in many Russian shipping companies preferring to register their ships in offshore zones. The situation is aggravated by the lack of guaranteed freight base, due to the fact that the Russian fleet carries only 5 to 6 percent of the total volume of sea cargo trade.

However, everything could change in the near future. Currently, the Russian government is completing the consolidation of the domestic shipbuilding industry through the recent establishment of a giant shipyard holding called United Shipbuilding Corporation (USC). This company, to be comprised of the country’s largest shipyards, is expected to become the biggest holder of shipbuilding, ship repairing and engineering assets in Russia and will be responsible for the implementation of the President’s program.

Roman Trotsenko, CEO of USC said recently that the recovery of the industry is already under way. In 2009 the production grew 62 percent, thanks to the delivery of several large vessels, as well as the ever increasing support from the state.

If the Russian government’s plan is successful, during the next 10 years the Russian shipbuilding industry will reach European levels of production, and by in 2030 Russia will become one of the world’s largest shipbuilding countries, able to compete with China, Japan and Germany.

Surprisingly, the global recession has not had a severe impact on the Russian shipbuilding industry. In contrast to Chinese and South Korean shipbuilders, who traditionally receive their orders from around the world, and whose numbers have dropped dramatically since the beginning of the recession, the main customers of the Russian producers are several local state corporations, realizing their long-term investment programs.

In 2008-2009 the Russian shipbuilding industry, in contrast to the European and Asian rivals, even increased its production volumes. For instance, in Germany five shipyards were closed due to the crisis. The sharp decline in terms of order volumes was observed in many Chinese and Korean shipyards.

In addition, according to some Russian experts, during the next several years many of the world’s largest shipbuilding countries will require huge investments in order to sustain their future growth and, many of them, probably, will not be able to implement some of the earlier announced projects, due to the consequences of the recession.

According to estimates of an analyst published in Russia’s Promvest magazine, during the next several years Chinese shipbuilders will have to invest about USD$60 billion in order to survive and to provide further development of the industry, while South Korea has already invested USD$5 billion in the industry.

According to different sources, the USC project’s total cost at the initial stage, is estimated at 200 billion rubles (USD $7 billion). It involves the construction of more than 260 fishing vessels totaling more than 25 billion rubles, as well as more than 300 ships for the development of hydrocarbon resources of the continental shelf. Overall, more than 1,400 ships are expected to be built in Russia by 2020.

“We are going to focus on the production of technologically advanced ships, including those which will be specially designed for heavy-duty operation, such as tankers, gas carriers, as well as platforms of ice-class,” says USC chief Trotsenko.

According to Industrialist of Russia, one of the country’s leading magazines in the field of maritime affairs, particular attention will be paid to the creation of knowledge and groundbreaking technologies, which should help Russia to narrow the gap with the world’s leading shipbuilders in a relatively short time.

“Russia needs its own niche in the global shipbuilding industry. It should focus on the development of high-tech, innovative ships with high added value. This can be vessels, specially designed for Arctic shelf projects,” said Vladimir Kucherenko, a leading analyst of the magazine.

Vladimir Putin, Russia’s prime minister is optimistic about the project. “We believe that Russia has some good niches in the field of shipbuilding,” Putin says. “Although we are not planning to compete with China and South Korea in the production of heavy-tonnage vessels, Russia could be definitely competitive in the segment of specialized vessels, in particular fishing vessels, ships for geologic exploration and some other types of vessels. And we have good prospects here.”

As part of the project, the Russian government plans to zero the VAT for the domestic shipyards, to reduce profit tax from the current 20 percent to 6 percent, and to abolish taxes on water, land and properties for 20 years. The project also involves the abolition of customs duties and VAT on imported ship components that can’t be sourced in Russia.

In addition, the Russian shipbuilders are planning to accelerate their efforts in the development of shipboard equipment, as well as sharply reducing the supply of imported products from abroad.

Moreover, some Russian analysts stress the need to strengthen cooperation between Russia and the world’s leading shipbuilding countries, in particular China, that could take place through the acquisition of a number of Chinese shipyards, which are put up for sale by the state.

According to Cnship Net magazine, last year there were several shipyards put up for sale by the Chinese government. Due to a strong competition in the industry (with a total number of shipbuilders of more than 1,000) several Chinese shipyards are offered for sale every year. Most of them are purchased by South Korean, Japanese and Singaporean firms, however Russia may also take part in the auctions in the coming years.

There is also an ever-growing Russian-German cooperation in the field of shipbuilding. For instance, recently Nordic Yards, a well-known German shipyard, was bought by a former Russian energy minister who sits on the board of Gazprom. The yard will produce icebreakers and ships for Gazprom’s Arctic fleet.

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

California Scales Back Regulations Due to Bad Estimates

The California Air Resources Board last week announced they would scale back impending regulations regarding off-road diesel vehicles after a study found that data used as the basis for the regulations overestimated the levels of air pollution created by the vehicles by 340 percent.

The regulations were originally adopted in July 2007 and called for engine upgrades and/or the installation of retrofit pollution-control devices on hundreds of thousand of construction and other off-road diesel vehicles starting this year.
In anticipation of the regulations' first-phase deadlines this year, the construction industry is estimated to have spent $10 billion to $12 billion to upgrade their vehicles to the new standards.

On Thursday, CARB officials announced revisions to the original calculations and said that enforcement of the regulations would now be delayed until at least 2014. There will also be a widening of the number of vehicles eligible for exemptions, the agency said.

CARB, which researches and sets air quality standards statewide, said that the overestimate was due to the board calculations of future off-road vehicle pollution generation prior to the economic downturn. Since the global financial meltdown and the resulting collapse in the California construction industry, many of the state's 150,000 such vehicles have wound up sitting idle.

Independent researchers from the University of California, Berkeley and the Lawrence Berkeley National Laboratory first discovered the overestimate and found that the CARB error was not due to the economic downturn but mainly to faulty methods of calculation. The researchers found that even prior to the downturn, CARB's estimates were too high by 310 percent to 450 percent.

The CARB estimates were originally based on the calculation that off-road vehicles and machinery would burn about 1 billion gallons of fuel a year. A revised estimate calculates the amount of fuel to be used at about 228 million gallons- 340 percent lower.

It is the second time in as many months that CARB has had to backtrack on pollution-related estimates.

In late August, CARB officials announced that a CARB researcher had falsified his academic credentials, throwing into doubt his work on developing estimates of statewide premature deaths due to air pollution. A subsequent investigation found the researcher's estimates of 18,000 premature deaths a year due to air pollution were grossly overestimated, with the real calculation being nearly 50 percent less. The statistics were eventually used as the basis for the adoption of some CARB regulations.

San Diego Port Authority Names Interim Top Exec

Commissioners have appointed Wayne Darbeau as interim president and CEO of the San Diego Unified Port District, filling a seat vacated in September by Charles Wurster.

Darbeau, the vice president of administration for the port authority, was sworn in during the Oct. 5 meeting of the seven-member Board of Harbor Commissioners and will serve in the role during a nationwide search for a permanent candidate.

During his 12 years at the port authority, Darbeau, 57, has served in several management positions, including both administrator and senior director.

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.

San Francisco Port Unveils Ship-to-Shore Power System for Cruise Vessels

Port of San Francisco officials have unveiled a ship-to-shore power system that allows cruise vessels to shut off their diesel auxiliary engines while at berth and pull electricity from the less-polluting landside power grid.

The $5.2 million system is the first in California for cruise ships, according to port officials. Currently, the only other ports offering ship-to-shore power for cruise ships are Seattle, Juneau, Alaska and Vancouver, BC. The ports of Long Beach and Los Angeles have systems in place to provide landside power to some cargo vessels.

San Francisco port officials said that each visiting cruise ship can generate up to 140 pounds of particulate matter per 10-hour visit. The new ship-to-shore system is predicted to eliminate more than a ton of particulate matter each year. Large ocean-going vessels can generate up to 50 percent of their total per-call pollution while sitting at the dock.

Port officials said that 15 cruise vessels are currently set up to use the system, but as more of the 50 cruise vessels regularly calling at San Francisco are outfitted to take advantage of the system, the pollution reductions will increase.

Officials said that three of the port's 18 berths are set to be outfitted with the ship-to-shore system by the end of the year. Estimates put the total for equipping the entire port at more than $90 million.

California air quality regulations require that half of all ship calls be provided with ship-to-shore power by 2014.

Dredging Near Portland Oregon Port Delayed Until 2011

The Army Corps of Engineers has decided to postpone dredging a Willamette River bar that could threaten vessels transiting to two Port of Portland terminals until next summer.

Army Corps officials said that the postponement was due to the lengthy process for obtaining the necessary environmental documents and an impending Oct. 31 deadline to complete in-water work. Oregon state fish regulations bar in-water work in the area from the start of November until July to allow salmon migration.

The bar, located about two miles south of the Columbia River and Willamette River confluence, currently stretches across two-thirds of the navigation channel, according to the Army Corps. Concerns have been raised that vessels could run aground on the bar or cause accidents trying to avoid it. The bar was last dredged in 1989.

The Army Corps said that despite the delay, it would continue to monitor the bar closely and may implement an emergency dredging project before next summer if the situation calls for it.

Two bulk/breakbulk terminals at the Port of Portland sit just south of the bar on the Willamette River. The bar does not affect the port’s remaining two terminals. A third bulk terminal is along the Willamette River, but north of the bar, and the port's lone container terminal sits along the Columbia River just east of the two river's confluence.