A Corporate Struggle for Russia's Largest Port

By Eugene Gerden

Novorossiysk Commercial Sea Port (NCSP), Russia's largest sea port and one of the largest in Europe may be in the center of a corporate fight between its major shareholders, which may negatively affect its activities and result in the decline of revenue.

So far, the port has been controlled equally by Transneft, a Russian state-controlled business responsible for the national oil pipelines and Summa Group, a diversified private holding, specializing in investment activities in port logistics, engineering, construction, telecommunications and the oil and gas sectors, however both companies have recently announced their plans to split up the business.

Nikolay Tokarev, President of Transneft, said yesterday that Transneft plans to become a sole owner of the port's oil terminals, while Summa Group will focus on the transshipment of dry cargo.

According to Tokarev, in addition to the split, the companies are discussing the division of the spheres of influence, where each company will nominate its deputy general director to oversee each of the directions.

The conflict between the owners of the port began earlier this year. In February Mr. Tokarev, in an interview with Russian business paper Kommersant, sharply criticized its partner for the ways of the port's management. After that, Transneft initiated a change of the port's CEO and its board.

The controlling stake in the port (50.1 percent) is currently owned by Novoport Holding Ltd, which is a joint venture of Transneft and Summa. At the same time Transneft itself holds another 10 percent stake in the port, while the remaining 20 percent is held by the Russian government via the Federal Property Agency.

In the meantime, there is a possibility that the current uncertainty in the port's management could play into the hands of Rosneft and ExxonMobil, as the partners have repeatedly expressed an interest in the acquisition of the state's 20-percent stake in the port and, if possible, to increase it in due course.

According to Igor Sechin, head of state-owned Rosneft, the Russian company and ExxonMobil are interested in the acquisition of the port, as the companies are looking for a base for the development of the Black sea shelf.

Several weeks ago Sechin sent an official letter to Russia's President Vladimir Putin, asking to approve the potential deal.

Formally, state-owned companies are barred from participating in the privatization of assets, but there is a mechanism to avoid such a restriction, in the case of a sale of such assets in favor of a particular investor without an auction. In the case of the Novorossiysk Port, which has a strategic status, the decision must be taken by presidential decree.

At the same time the current owners of the Novorossiysk Port have already opposed the possible arrival of the oil companies in the list of its major shareholders, believing that this may result in the revision of the strategy of development of the port until 2018, which was recently approved by its management. There is also a possibility that the current corporate conflict may also result in the revision of the strategy.

The strategy involves a significant expansion of the current capacities of the port, through the building of new terminals and the expansion of existing facilities.

At present the annual cargo turnover of the port is estimated at about 90 million tons, however there is a possibility that it can be increased up to 200 million tons by 2020, in the case of a successful implementation of the strategy.

Total volume of investments is estimated at RUB 30.9 billion (USD$1.1 billion), of which 4.8 billion rubles will be invested already in 2014. Particular attention will be paid to increasing the transshipment of high paying freight, taking into account that currently up to 60 percent of the port's space is occupied by cargo, which generates only 20 percent of EBITDA.

Meanwhile, in the Russian port industry overall, last year total volume of cargo transshipment increased by 3.9 percent, compared to 2012, and reached 589 million tons, according to the official data of the Russian Association of Sea Trade Ports.

The biggest growth was observed in the segment of coal, whose transshipment volume increased by 13.3 percent over 2012 and reached 101.1 million tons. The growth was also observed in the segment of fertilizers (up 24 percent to 12.9 million tons) and containerized cargo (up 4.1 percent to 44.4 million tons). The transshipment of crude oil increased by 4.6 percent to 207.5 million tons, while ore was down by 2.8 percent to 7.4 million tons.

In the case of geography, the biggest growth rates observed were at the seaports of the Arctic basin, where the transshipment increased by 20 percent. At the same time, according to analysts' predictions, the volume of transshipment through the Russian Arctic seaports will continue to grow, due to the planned construction of a new port at Sabetta and associated with the increase of cargo through the Northern Sea Route.

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@gmail.com.

Crowley Buys Ship Management Company

By Mark Edward Nero

Crowley Maritime Corp. said April 7 that it has acquired majority ownership of Accord Ship Management Ltd. and Accord Marine Management Pvt. Ltd.

Accord, which has offices in Hong Kong, India and the Netherlands, manages 23 vessels and has 55 employees. The acquisition is expected to result in a combined fleet of over 60 vessels managed. The deal also increases the size and scope of Crowley’s technical ship management group while supporting the company’s expansion into the international ship management market. It also makes Crowley one of the rare US companies that provide third-party international crewing and technical ship management.

“After several visits to observe their culture and operations, we are convinced that Accord is the right fit to complement Crowley’s existing operations,” Mike Golonka, Crowley’s vice president of ship management said in a statement announcing the acquisition. “Accord has built a team that allows access to trained, qualified mariners without the additional expense of third-party crewing companies, something potential customers are demanding.”

The Accord acquisition will be managed by Crowley’s ship management group, which provides all phases of commercial ship management along with full technical management and government contracting.

The Accord acquisition provides Crowley with an immediate international book of business and an established entry into the international ship management market. Accord also offers Crowley the opportunity to provide additional and more regionalized support to its worldwide operations, including its solutions, liner, logistics, petroleum services and salvage.

San Diego Shore Power Project Wins Award

By Mark Edward Nero

The shoreside power system at the Port of San Diego’s Tenth Avenue Marine Terminal was selected in March as a public works 2014 Project of the Year by the American Public Works Association, a not-for-profit, professional association of public works agencies, private companies and individuals.

The shore power system, which was dedicated Feb. 24, aims to improve air quality and reduce greenhouse gas emissions by allowing cargo vessels to plug-in and use electrical power from San Diego Gas & Electric instead of relying on diesel fuel engines while in port.

Construction on the $4.25 million project began in mid-2013 and was funded by the port’s Capital Improvement Program. The contractor was San Diego-based NEWest Construction.

The project was undertaken as part of a mandate set forth by the California Air Resources Board requiring California ports and terminals to provide shore power to container, passenger and refrigerated-cargo ships.

The Port of San Diego is already equipped to provide shore power to cruise ships that berth at both its B Street Pier Cruise Ship Terminal and Broadway Pier.

“The port is proud to be honored for a project that contributes to our environmental stewardship around San Diego Bay,” Board of Port Commissioners Chair Bob Nelson said in a statement.

Puget Sound Maritime Achievement Award

By Mark Edward Nero

The 2014 Puget Sound Maritime Achievement Award Selection Committee is accepting nominations for this year’s award to be announced at the Seattle Propeller Club’s May Seattle Maritime luncheon. The Puget Sound Maritime Man of the Year award began in 1951 when the newly formed Puget Sound Maritime Press Association decided to honor maritime leaders deserving special recognition. The association started the Maritime luncheon as a venue for presenting the award, which was renamed the Puget Sound Maritime Achievement Award in 1993, in recognition of the increasingly important role of women throughout the maritime industry.

Nominations must be received by April 14, 2014 and may be e-mailed to Rich Berkowitz at rberkowitz@trans-inst.org. Nominations should include specific achievements of the candidate, particularly those impacting the Puget Sound maritime community, and a brief biography of the nominee. Industry segments represented by past recipients include steamship lines and agents, tug and barge operators, marine architects, passenger and fishing vessel operators, port authorities, stevedores, and labor. Several paragraphs about the nominee are sufficient.

You may also send your nominations for the recipient of the Public Official of the Year Award recipient. Each year the Seattle Propeller Club recognizes a local elected or public official whose outstanding work or service has made a significant contribution to maritime commerce in the Pacific Northwest. A brief summary of the nominee’s qualifications for the award is welcome.

Contact Rich Berkowitz at (206) 443-1738 with any questions about either award nomination.

US Transportation Secretary Names New Members to Maritime Industry Advisory Panel

US Transportation Secretary Anthony Foxx today announced the appointment of 10 new members to the Marine Transportation System National Advisory Council (MTSNAC). Established in 2010, MTSNAC is comprised of leaders from commercial transportation firms, trade associations, state and local public entities, labor organizations, academics, and environmental groups that advise the Secretary on policies to ensure that the US Marine Transportation System is capable of responding to projected trade increases.

Four representatives from the West Coast are on the list:

• Richard Berkowitz, Director of Pacific Coast Operations, Transportation Institute, Seattle, Wash.
• Captain Lynn Korwatch, Executive Director, Marine Exchange of the San Francisco Bay Region, San Francisco, Calif.
• Wayne Darbeau, President and CEO, San Diego United Port District, San Diego, Calif.
• Gary Lee Moore, Interim Executive Director, Port of Los Angeles, Los Angeles, Calif.

Other appointees include:

• Charles Fabrikant, Executive Chairman, SEACOR Holdings, Inc., Fort Lauderdale, Fla.
• William Friedman, President and CEO, Cleveland-Cuyahoga County Port Authority, Cleveland, Ohio
• Gary Love, Vice President for Sales and Marketing at FAPS, Inc., Port Newark, N.J.
• Betty Sutton, Administrator, Saint Lawrence Seaway Development Corporation (SLSDC), Washington, D.C.
• Kevin Schoeben, Deputy Director, Office of Planning and Programming, Illinois Department of Transportation, Springfield, Ill.
• William Cook, Director, Worldwide Logistics and Customs, Chrysler Group, LLC, Auburn Hills, Mich.

“The Obama Administration is committed to ensuring that America’s ports and waterways are capable of meeting the growing demands of moving freight in the 21st century,” said Secretary Foxx. “This advisory council will help guide us as we continue to invest in American transportation and in America’s future.”

Since 2009, this Administration has awarded over $420 million in TIGER funds to 33 ports and marine highway projects. These projects are large and small – inland and coastal, and handle 75 percent of America’s exports and imports. These investments have helped the maritime industry move these exports and imports by water, waterborne transport, and maritime industrial services, which play a vital role in our nation’s economy. MTSNAC policy recommendations have led to the expansion of the Marine Transportation System, the integration of Marine Highways in the surface transportation system and the improvement and streamlining of the Title XI ship financing process.

“This Council is an excellent example of a coordinated approach with the private sector,” Acting Maritime Administrator Paul N. Jaenichen said. “Their expertise and insight inform key decisions as we work to spark growth and ensure the greater efficiency of our Marine Transportation System.”

MTSNAC is comprised of 29 members from commercial transportation firms, trade associations, state and local entities, labor organizations, academics and environmental groups. Council members will serve 2-year terms, with no more than two consecutive term re­appointments, and approximately one-third of members' terms of office shall expire every 2 years.

The Department strives to select dynamic individuals with in-depth knowledge of their respective industries or government sectors. Members are nominated through a full and open process published in the Federal Register.

G6 Alliance Passes Regulatory Review

By Mark Edward Nero

The Federal Maritime Commission said April 2 that it has concluded a comprehensive review of the proposed amendment to the G6 Alliance Agreement, clearing the way for the agreement to move forward this week as planned.

The agreement between American President Lines, Hapag Lloyd AG/USA, Hyundai Merchant Marine, Mitsui OSK Lines, Nippon Yusen Kaisha, and Orient Overseas Container Line expands the current geographic scope to allow G6 operational cooperation in the trades between the Far East and the US West Coast, and between North Europe and all US coasts.

The agreement authorizes the involved parties to charter and exchange space on one another’s vessels and to coordinate and cooperate transportation services and operations in order to improve efficiency and save costs.

The Commission’s unanimous decision allowed the agreement to become effective as scheduled on April 4.

The Commission said its decision was based on a determination that the agreement isn’t likely, via a reduction in competition, to produce an unreasonable increase in transportation cost or an unreasonable reduction in transportation service under the Shipping Act.

“The Commission’s action on the G6 Alliance is based on an extensive, competitive analysis conducted by the Commission’s staff and comments received by shippers and other industry participants,” Maritime Commission Chair Mario Cordero said, while maintaining that the Commission will continue to review the competitive impact of global alliances.

“This alliance will considerably increase available capacity in the expanded geographic scope, and has the potential to generate operational efficiencies and positive environmental benefits,” Cordero said.

The text of the agreement can be read at http://www2.fmc.gov/agreement_lib/012194-002-P.pdf.

Growth Projected for Long Beach Port in 2014

By Mark Edward Nero

Container imports at the Port of Long Beach are expected to grow by five to seven percent this year, while exports are projected to increase four to six percent compared to last year, according to a forecast provided during Long Beach’s annual peak season forecast breakfast on March 2.

If the prediction holds up, the growth would be a moderate increase from 2013, when import growth was 2.5 percent and export growth was 2.4 percent.

Walter Kemmsies, chief economist for Long Beach-based engineering company Moffatt & Nichol, said the port has everything working in its favor, with the exception of geo-political problems and the weather, which can’t be predicted.

However, he warned that rising interest rates are expected to increase freight movement volatility.

“Higher inventory costs will increase the demand for speed,” he said.

Kemmsies was one of eight speakers during the event, which was held at the Long Beach Convention Center and attracted between 500 and 600 attendees. The other presenters included: Long Beach Board of Harbor Commissioners Vice President Rich Dines’ National Industrial Transportation League President & CEO Bruce Carlton; Federal Maritime Commission Chair Mario Cordero; and John Kaiser, the Vice President and General Manager for Intermodal with Union Pacific.

Carlton said one issue on the horizon causing some angst is the upcoming labor negotiations between the Pacific Maritime Association and the International Longshore & Warehouse Union. The current six-year pact between the two is scheduled to expire June 30 and negotiations are expected to begin in May.

“They’re watching, they’re nervous,” Carlton said of NITL members. “Everybody knows there will be some theatre.”

The contract affects about 23,000 dockworkers at ports throughout Washington, Oregon and California.