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Special Industry Review MAY 2018


Trade trends with the US bright, new tariffs excepted By Warren head New Zealand is in a ‘sweet spot’ for prospective growth in its trade, with our major trading partners sustaining economic strength, notably in the United States. GDP growth in our major trading partners is expected to average 3.7% in 2018, 3.6% in 2019, and 3.3% in 2020. The Reserve Bank said in the recent Monetary Policy Statement, “Trading partner growth (has) increased, and by early 2018 there were signs of global inflationary pressure building. Export prices recovered, contributing to record-high terms of trade.” The US economy remains strong. “Confidence and activity indicators suggest the economy will grow above its potential rate in 2018,” said the Reserve Bank. In Indiana this week, US Vice-President Mike Pence stated “over the past five months, more than 500 companies have announced bigger raises, better benefits, and a tax-cut bonus for more than 5.5 million Americans was passed out at the end of the year.” However, the downside is that geopolitical tensions, including a global trade war, could reduce global GDP growth and trade, and reduce New Zealand’s export volumes. US President Donald Trump has had China in his sights for several years, criticising its trade practices and alleging theft of intellectual property as far back as 2010. Part of his 2016 election pledge to ‘make American great again’ was premised on curtailing China’s trade surplus with the US. Which has created recent tension. The situation was stabilising as this special report was finalising — but remains very fluid, as the past week’s Chinese-US talks show. A White House release was non-specific in noting a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China. Both sides agreed on ‘meaningful increases’ in US agriculture and energy exports. The United States will send a team to China to work out the details. The delegations also discussed expanding trade in manufactured goods and services. There was ‘consensus on the need to create favourable conditions to increase trade in these areas’. Again there were no specific details. This week (ending May 26), the US and China have agreed not to place tariffs on goods imported from each other. The Chinese intend to buy more US goods, including energy and agricultural products, which they do anyway. US Treasury Secretary Steven Mnuchin said the United States has postponed its proposal to put tariffs on up to $150 billion in goods from China.

The Port of Los Angeles (above: Pier 300-400). However, Chinese have denied that they had agreed to reduce the US trade deficit by “at least” US$200 billion. How the current trade row between the US and China plays out will determine whether shipping lines carry more trans-Pacific cargo or possibly a lot less than at present. Businesses in the import-export supply chain have watched with increased trepidation the rising tension which tripped into tit-for-tat tariffs. After the Trump administration drafted duties on 1300 Chinese products, China selectively announced retaliatory tariffs of up to 25% on 106 American goods. China buys roughly half of the US soybean exports, or about $14 billion annually. China and Hong Kong together are the third-largest market for US pork (~US$1.1 billion), with Iowa, Illinois and Minnesota the main producer states. New Zealand trade in aluminium and steel was caught in the cross-hairs, with proposed US tariffs still on the horizon. There is a “level of nervousness within the container shipping industry,” said To page 16

NZ port security review by US Coast Guard By IAIN macintyre International maritime security at two New Zealand ports was peer reviewed by the US Coast Guard in December last year at the invitation of Maritime New Zealand (MNZ). MNZ maritime security and incident response manager Renny Van Der Velde says a team of four assessed both CentrePort Wellington and Ports of Auckland to assess their compliance to the International Ship and Post Facility Security (ISPS) Code. “The US Coast Guard went into each site with a list of questions they put to staff about how they conduct security, which they followed up with a tour of the port,” Mr Van Der Velde told the Special Industry Review. “The US Coast Guard team enjoyed touring CentrePort in particular to see how the port’s resilience had been tested by the earthquake. “Both ports passed with flying colours, with the US Coast Guard

May 26, 2018

conducting a thorough inspection of their security processes.” This coming March an MNZ security advisor will perform a reciprocal visit to understand how the US Coast Guard conducts security at Honolulu’s ports. A month prior to the local ports audit, the two agencies also partnered in a training exercise for port facility security officers in Fiji at the invitation of the Maritime Safety Authority of Fiji in collaboration with Fiji Ports Corporation. The exercise delved into potential threats and challenges to Fiji ports, the roles and responsibilities of port facility security officers, cruise ship best practices and how to conduct security risk assessment. US Coast Guard international ports security liaison officer Zeke Lyons, who undertook the training alongside MNZ maritime and security advisor Craig Cheriton, comments: “I visit Fiji at least once a year to share best practices about port security and learn how port security is implemented here and help them get

US Coast Guard Rear Admiral Pat DeQuattro and MNZ maritime security and incident response manager Renny Van Der Velde inspect the back container gate departure point at CentrePort Wellington. better if needed. “I get to travel around the world to see what they are doing. There is an international port security code that each country is responsible for implementing and Fiji is one of those and we are here to help them get better, safer and more secure.” The ISPS Code is an amendment to the Safety of Life at Sea (SOLAS)

Convention (1974/1988) on minimum security arrangements for ships, ports and government agencies. It prescribes responsibilities to governments, shipping companies, shipboard personnel and port/facility personnel to “detect security threats and take preventative measures against security incidents affecting ships or port facilities used in international trade.”

The New Zealand Shipping Gazette



General cargo rates give some relief to carriers By Dave macintyre There has been good news for carriers on the NZ-North American tradelane in terms of their bottom line, says ANL. Chris Sidwell, the line’s Commercial Manager, North American Trades, says that while the market is relatively flat northbound and southbound, “minor rate increases have been achieved on general cargo” — albeit, he says, “reefer rates have been at a standstill”. “Northbound volumes to both east coast and west coast reduced in 2017 against the 2016 volumes. Southbound volumes were in line with previous years’ movements.” Mr Sidwell says there has been stability also in the alliances on the West Coast North America services since

Maersk left the OVSA in 2015. “There have been no changes on the West Coast [ports of call], since PNW dropped the Long Beach call in September 2016. Nor any ongoing port congestion issues. West Coast schedules were impacted by Australian port issues in November/December 2017, however, vessels are currently back on window.” The widening of the Panama Canal has not had any direct impact on ANL’s NZ services yet. “However, the cascading of tonnage may well result in larger ships calling New Zealand in the near future,” he said. In terms of trends impacting upon the performance of carriers in the trade, Mr Sidwell says the USA/Oceania trade is essentially a cross trade, with North America and Oceania having the same container-type imbalances. “Depending on seasonality, there can be a demand for

northbound or southbound empty reefer movements. As southbound volumes are significantly larger than northbound, excess units are evacuated back to deficit areas. “For example in both Oceania and North America empty 40’ high-cube containers are evacuated directly back to China.” Asked what are the areas of competition between lines, Mr Sidwell points to “quality customer service levels including documentation accuracy and documentation turnaround times, combined with competitive ocean freight rates” as being the key. Looking ahead, he says ANL is continuing to review all aspects of its service from overall schedule reliability and design, through KPIs on container availability, turnaround times, quoting, booking and documentation processes.

US drought pressure on beef returns

The likely forced slaughter of US cattle due to drought is set to pressure global beef trade and prices, posing a threat to New Zealand beef returns, a visiting North American cattle industry expert has warned local producers. Rabobank’s US senior animal protein analyst Don Close, who has been in New Zealand for a series of presentations, said forced herd liquidation in the United States — along with the risk of recessionary pressures in the US economy — would directly impact New Zealand producers. “The US is both the dominant export destination for New Zealand beef, as well as a fierce competitor with New Zealand in other export markets, including Japan and South Korea, he said. “In addition, the United States and New Zealand, along with Australia, will potentially be fighting it out for market share in China in the future.” Mr Close — who is based in St Louis, Missouri — said the US beef herd had staged an aggressive rebuild in recent years, with the majority of stock located in parts of the country under severe drought stress. “After bottoming out at 28.7 million cows in 2014, there has been aggressive herd rebuilding and the US

beef herd is now sitting at around 31.7 million head. And I estimate this cycle will peak somewhere between 32 million and 32.5 million head,” he said. “However, currently 70% of our US beef herd are residing in areas of extreme drought. While we still have a window of opportunity for rain, the likelihood we will see some level of forced liquidation before the end of the US summer is very high. If we see cow slaughter rates increase because of forced liquidation, there is a very real risk that there will be too many cattle for the system.” Currently, beef cow slaughter rates are up 10.5% above year ago levels, but this could rise to between 12 and 15%, he said. Compounding the number of beef cattle on the market is the liquidation of dairy cows, with the poor economic returns for US dairy farmers. Mr Close said with US production of beef — and also pork — up by 5%, there was “a tonne of protein coming at us” in the US, but also globally. “New Zealand is going to have to work harder to find a home for their product in the US,” he said. “Already we have seen New Zealand and Australia’s share of total US beef To page 22

Trade with the US bright, new tariffs excepted From page 15 Simon Heaney, senior manager of container research at Drewry in the UK. The burden of a tariff war would fall across a number of sectors, he says, not just in container shipping,” with an especially hard impact on agriculture-related cargo. That is worth billions of dollars annually to major West Coast ports and is also significant to the East Coast and Gulf Coast seaports. “We are monitoring the situation closely,” Philip Sanfield, at Port of Los Angeles told Shipping Gazette™. “Obviously a trade war with China has the potential to have a significant impact on the Port of Los Angeles. “China is by far the Port of Los Angeles’ largest trading partner. In 2017, US$284 billion worth of goods passed through the Port of L.A (all trade with all countries). Of that amount, US$145 billion in trade, more than half, was with China.” PortLA handled US$134.3 billion in import cargo from China (furniture, apparel, electronics, footwear) and sent US$11.2 billion is export cargo (paper, pet/animal feed, scrap metal, fabrics) America’s West Coast ports convey


The New Zealand Shipping Gazette

agricultural products worth billions of dollars annually. Combined, the ports of Long Beach and Los Angeles equate to the world’s tenth-busiest port complex by container volume. China is the biggest trade source at ~50% of trade. Trade between New Zealand and the US is in recent equilibrium: $16 billion, divided 50-50 exports/imports. The US ranks as our third largest market. New Zealand’s trade is primarily via Long Beach, PortLA in the West and PhilaPort on the East Coast. While Matson has boosted the connection with Hawaii. The era of bigger ships is impacting both New Zealand and the US and one of the winners is the New Zealand primary sector (See Zespri story). In the adjacent article we report on the upside for the kiwifruit trade with America. The growth of shipping in the horticulture sector is a key factor. The apple industry is marking one of its best seasons and the US is again in the equation. In 2016 New Zealand sent around 49,000mT to the US worth about US$90 million, last year 39,000mT worth US$75 million.

Zespri is unfolding a marketing strategy to boost kiwifruit exports to the United States.

Zespri making push for US volume lift By warren head Zespri’s increased focus on the US market has plenty of impetus in readiness for the 2017-18 kiwifruit shipments now arriving from New Zealand. Zespri formally opened a panAmerica office at Newport Beach, California, in 2017 to target an uplift in seasonal sales in a market with huge growth potential. Zespri has geared up to tackle the US market and grow demand, with 12 staff now aboard, including market development managers for AsianAmerican retail, southern California, New York state and Ohio (Midwest). While China and Japan are the big markets for kiwifruit, the US is seen as the new frontier, with SunGold in the vanguard. Exports from Port of Tauranga are at a high point half-way through the current harvest. Growth in the SunGold crop has been strong and Green production too has been good. SunGold sales in the US were up more than 100% over the previous two years. Around 40% has been sold into the Asian-American retail market, while marketing is improving take-up by mainstream retail channels. The work focus is on lifting the relatively modest ranking (at number 21) that the fruit has held with US consumers. Glen Arrowsmith, market manager – Zespri North America, told Shipping Gazette™, that in the Asian markets Zespri is in the top 10 for fruit consumption, while in America “it is still a minor set in the tropical fruits”. The ambition is to grow fruit sector market share. “It might take five years to play out but even at 15th ranking the

value would be four times bigger. Our mission is to mainstream the fruit. “One step at a time; right now we’re excited that we’re getting really good response from retailers and as demand grows it will mean a lot more ships on the trade.” Last year (2017-18 season) trays of SunGold sold in the US increased by 36%, supported by Green and Organic sales. A big push on category development with a strong support package including increased market spend and consumer engagement could see volume for the 2018-19 season (shipping now) grow by a further 50%, said Mr Arrowsmith. “We are aiming to ship 70% more volume by the end of June 2018 and we’re well on the way to achieving that.” By “front-loading” the season, more fruit will be sold into market ahead of US summer rivalry from other fruit “and we should carry our momentum through the summer”. Zespri expected to export a record 930 40ft containers from Tauranga this week. A key distributor — handling around 90% of Zespri fruit — is Vancouverbased Oppenheimer Group. Zespri is working with them on target regions and with key retail partners. Mr Arrowsmith said Zespri has deployed regional marketing campaigns and merchandising in a ‘very highly targeted’ programme, putting in more marketing effort in those priority regions where distribution is weighted.” The kiwifruit reefer services provided by CMA CGM and Hamburg Süd provide the maritime backbone of the fruit trade. CMA CGM stepped up in 2017 when Seatrade exited the Meridian To page 22

May 26, 2018


Service reliability a key factor for Maersk There





between the carriers who focus on a dedicated US service and those who treat the US as a waypoint on their European services, with service reliability an interesting yardstick, said Maersk’s Oceania Trade and Marketing director Hennie van Schoor.

Maersk puts great focus on service reliability.

By Dave macintyre Discussing the areas of competition between carriers, Mr van Schoor says that for Maersk the focus remains on providing customers with a dedicated service with high schedule integrity which is important to all, but especially to reefer customers. “The results of this are clear where from the publicly-available SeaIntel Maritime analysis, Maersk Line schedule integrity is generally well above 90% and in many months is actually 100%. “To put a finer comparison on it, the most recent SeaIntel report schedule reliability for January 2018, reported the Maersk Line OC1 service from Oceania to the US was 93.8% on time, while in comparison some of the other services were as low as 50%.” Mr van Schoor describes the US trade with New Zealand and Australia as stable and would argue it is in a healthy supply-demand balance. “Most changes are typically driven by commodity swings. While the latest changes driven by the Seatrade departure and resulting expended services did not add capacity to the market, it does consolidate more capacity with a single shipping line.” Giving an overview of the trade, he says the extended drought in Queensland is putting a question mark on the volumes and seasonality of beef ex-Australia to the US. “We overall still expect a slight increase of beef volumes to the US while farmers liquidate some of the capital stock, but likely most of the surplus will be taken up by key markets like Japan and emerging China. “This culling into capital stock then asks the question for the seasons ahead as it takes time for herds to rebuild. “Overall rates have remained stable in the US trade due a healthy supply-demand balance. Lately though we have seen some downward pressure in the market as a result of some competitive service changes.” Operationally, Mr van Schoor says the terminals that Maersk Line serves on the US East Coast service have largely remained stable. “We have not seen a major exposure to congestion or other disruptions, although of course schedules were impacted somewhat by the terrible storms the US East Coast has been lashed with lately.”


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May 26, 2018

The New Zealand Shipping Gazette SIR Mar18 Shipping at your Fingertips.indd 1


13/03/2018 11:48:28 AM


‘America’s Port’ vital in US economic revival By Warren head The Port of Los Angeles is a major catalyst for the American economy and it is getting better every year. In 2017 the port moved more cargo than in any time in the port’s 110-year history. The port is also leading one of the greatest waterfront transformations in US history. The port is local government owned. The mayor of Los Angeles appoints a five-member Board of Harbor Commissioners. The city’s growth-oriented mayor Eric Garcetti has no doubts about the importance of having a successful port helping to drive job creation. Mr Garcetti said, “We are powering Los Angeles’ economy to new heights every year.” He is backing the port to help propel LA to a primary position in world terms. “The success of our port tells the story of a city whose moment has arrived — and we will continue pushing forward as we expand our role in the global economy.” Management has taken to calling the Port of LA “America’s Port” and the data is supportive of the claim. The San Pedro Bay port complex operations and commerce generate one in nine jobs in the five-county Southern California region. In 2017 the port racked up 9,343,192 TEUs, a 5.5% increase over 2016’s record-breaking year and the most cargo moved annually by a Western Hemisphere port. The port facilitated US$284 billion of trade. Over 20% of imports by America flow through the two ports at San Pedro and Long Beach. Port of Los Angeles is vital to America’s economic recovery. It has its own police force to protect it, cyber-security strategies to counter vulnerability and a natural

disaster response plan. In 2016 ships in-bound to the US backed up in San Pedro Bay for months during a West Coast US industrial dispute on western docks. The issues that caused the disruption have been resolved. The workforce has played a key role in keeping the San Pedro Bay port complex the number one trade gateway in the US, said Mark Mendoza, president of the International Longshore and Warehouse Union 13. “The cargo volume for 2017 reflects the importance of the Port of Los Angeles, not just to the regional economy but the nation,” said John McLaurin, president of the Pacific Merchant Shipping Association. “2017 was a year beyond expectations but it was not by chance,” said Port of Los Angeles executive director Gene Seroka. “Our growth is a direct result of a concerted, multi-year effort by the port and its many partners to maximize efficiency throughout the supply chain. All the collaborative work by a broad range of global maritime stakeholders has delivered these remarkable results.” Supply chain efficiencies have included technology upgrades, like the new “Port Optimiser” digital information portal developed in collaboration with GE Transportation. The optimizer aggregates key cargo data online to facilitate better cargo tracking, projections and productivity. Infrastructure upgrades like those recently completed at TraPac Container Terminal and Yusen Terminals, Inc. have boosted the port’s ability to service increasingly larger ships, as well as to more efficiently facilitate cargo movement throughout its terminals. The port commissioners established a separate division for waterfront and commercial development and in the last four years since there has been substantial progress, Mr Seroka told a community hall-style briefing in March. The port’s leadership in waterfront development involves a massive effort to transform old docklands into

Port of Los Angeles has taken a lead in reducing air emissions with new technology featuring in vehicles using the port in Southern California.


The New Zealand Shipping Gazette

The giant container ship CMA-CGM’s Benjamin Franklin’s call at Port of Los Angeles opened a new era in big ships.

‘The success of our port tells the story’ of Los Angeles preeminence — LA

mayor, Eric Garcetti.

vibrant retail and commercial activity along miles of new ocean promenades. LA City 15th District councilman Joe Buscaino says that since 2004 US$600 million has been invested in transforming the waterfront Wilmington to San Pedro. The port commits 10% of annual income to public access and infrastructure development. Private capital is being attracted to a raft of projects, including AltaSea which plans an ocean research campus. A resurgent US economy creates an obvious virtuous circle, but as Shipping Gazette™ found in an interview with Port of LA executives Mike DiBernardo, Mike Keenan and Phillip Sanfield in Los Angeles earlier this year, there are also operational factors. Mr DiBernardo, deputy executive director, Marketing and Customer Relations, said that the port’s San Pedro base, together with the region’s other port at Long Beach, provide the gateway to southern California and beyond. He attributes leaping volume to stronger consumer confidence and a re-alignment of alliances in the Long Beach-San Pedro area. “A long portion of the cargo coming through Los Angeles is destined for the mid-western states,” said Mr

View Port of Los Angeles Waterfront video 2018.

Keenan, director of Planning and Strategy. “Time sensitive and higher value cargoes e.g; electronic, move through here. “There was a labour contract that got resolved.” And last year there was a three-year contract extension between the International Longshore and Warehouse Union and terminal operators. “With that element, we are embarking in supply chain optimisation and improve cargo velocity with the shipping, trucking and terminal communities at the Port of Los Angeles and the port of Long Beach so we can move more cargo through the ports in an efficient manner. “All that put together, a stable labour force on a contract out to 2021, and consumer confidence, is driving volumes at a good level.”


Every terminal in LA has on-dock rail and where cargo is headed for freight hubs at Atlanta, Chicago, Dallas the cargo loads to on-dock trains. Cargo for smaller destinations such as Denver and Salt Lake City is trucked to the rail-yard and there moved out by train. A third of the cargo crossing Ports of LA wharves is heading into the Los Angeles area, another third is moved by rail via the Alameda Corridor to distribution hubs in the Inland Valley of San Bernardino and Riverside, and another third goes into trans-load distribution centres, reworked into bigger containers and moved by rail to other DC’s. 

To page 19

May 26, 2018


‘America’s Port’ vital in US economic revival From page 18 “About two-thirds gets trucked out and a third goes to on-dock rail.” The on-dock rail is factored into the terminal infrastructure costs, near-dock rail is invested by Union Pacific and BNSF (Burlington Northern Santa Fe). The port has provided capex on infrastructure upgrades, while shipping lines have invested in on-ship crane raising programmes and port terminals have been buying new generation cranes required for bigger ships. In the US context, the ports provide the infrastructure and private terminal operators purchase equipment such as cranes. Mr DiBernardo noted that the port recently provided 53ft (16 metres) of berth depth and added rail track at NYK Terminal, where the operator invested in new cranes. “We are seeing fewer but larger ships,” said Mr DiBernardo. “We see 8000 TEU ships on average but ships with 14,000 to 16,000 TEUs using some of our terminals that have larger (post-Panamax) cranes and deeper water. “We have 53ft of water in the main channel of the harbour.” Dredging is providing 53ft of water right up against berths. When CMA CGM’s 399m Benjamin Franklin container vessel (capable of 18,000 TEU) called on December 26, 2015 it marked the first time a ship of that size had been used in North America. The ship drew 16 metres. Across its 3000ha (7500 acres) port tenants operate 27 cargo terminals including nine container terminals, two passenger terminals and 113 miles (182 kms) of on-dock rail. Each terminal serves a number of shipping lines. “Another project was at Evergreen Terminal where we provided a 53ft deep berths and in return they bought new cranes. “At the Yang Ming CT the port is replacing infrastructure with a better wharf and they will buy new cranes to handle the new generation of ships.” TraPac was the first terminal in the world to implement automated straddle carriers and stacking cranes, in a $207 million project. Unions have agreed that terminals can implement automated equipment. But it is a huge investment for both terminal operator and port. “Converting a conventional port to automation infrastructure could cost US$2 million an acre on the infrastructure and that’s before the equipment the customer has to go out and buy,” said Mr DiBernardo. Automating the entire TraPac terminal would cost more than $1 billion in public and private funds. The automatic straddle carriers also move containers to an onsite rail yard for loading onto freight trains that connect to the national rail system via a 20-mile (32 kms) below-grade rail line through central Los Angeles. The TraPac CT is studying robotics and artificial intelligence as possible ways to process boxes brought by the massive new ships. What is the attitude of the community towards port expansion? Community groups opposing expansion was an issue southern California ports encountered a decade ago. The Clean Air Action Plan of 2007 resulted in community acceptance that the ports could grow “as long as they were growing green and expansion improved the environmental impact of the ports,” said Mr DiBernardo.

May 26, 2018

Philip Sanfield, director of media relations, told Shipping Gazette™, “Every project that we do we undergo California law of environmental review, each taking 18-24 months to prepare and look at air emission and traffic component, and we get a lot of community comment and we try to mitigate those impacts. “We look at reducing emissions to try to get near-zero emission, by look at plugging in the ships at berth, slowing down the ships when they come into in the harbour. We look at the tugs, use of the cleanest locomotive engines and trucks running on the highest grade of diesel. We’re looking at other fuels like LNG, hydrogen fuel cell or battery powered trucks.” And also natural gas. “The Clean Air Action Plan for Los Angeles and Long Beach looks at where we’d like to see we’d like to see equipment go by 2030-35.” A willingness to lead in new technologies has empowered the port to positively impact on emissions. “We would like to see near zero emission equipment, whether that’s electric, battery, LNG, hydrogen

related air pollution emissions in San Pedro Bay have dropped 87% for diesel particulate matter, 56% for nitrogen oxides, and 97% for sulphur oxides. An update in 2017 calls for even more aggressive reductions and to ultimately transition to zero emissions operations over the next 20 years. A 3-year pilot programme by the port into digitalisation of maritime data will eventually build a dashboard of the entire port supply chain. Then there is the role the port plays in urban revitalisation. Mr Seroka has built a broad consensus for transformation of the Wilmington to San Pedro waterfront. The dimension of the revitalisation could be profound. In his annual stateof-the-city speech mayor Garcetti revealed that pioneering SpaceX will lease 19 acres inside the port zone and from a new facility it will manufacture its planned new exploratory rocket. SpaceX CEO Elon Musk says the rocket will carry out missions into Earth orbit and eventually to the moon and Mars.

fuel cell. We want to get to zero or near-zero emission. “If a terminal chooses to go with automated strads we’ll work with them on that in lieu of stacking cranes. We work with the terminals on what they want to do and we react to that with the infrastructure that they may need.” Under state law every project requires environmental review. The San Pedro Bay Ports Clean Air Action Plan (CAAP), adopted in 2006, was a landmark effort aimed at lowering health risks from air pollution. Since 2007, the two ports (Los Angeles and Long Beach) have distributed over $21 million in funds to advance the commercial availability of technology that will help lower health risks posed by air pollution from ships, trucks, harbour craft, cargo handling equipment and rail locomotives serving the Ports. Last month the ports offered money to foster new goods-movement technologies that improve air quality, as part of the port’s Technology Advancement Programme. Compared to 2005 levels, port-

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US demand stable for Hamburg Süd Despite some ups and downs in the NZ/Australia/US trade, and some variations in exchange rates, the trade is relatively stable without large swings in growth over the least few years.

By Dave macintyre

On the US East Coast, Hamburg Süd and Maersk are partners with vessel sizes in the 3400-3700 TEU range. The major change in the USEC market in the last couple of years has been Seatrade’s short-lived entry to the trade, followed by their departure, and CMA CGM going weekly as a result. The US West Coast has seen vessel sizes rise from 2900 TEUs to an average 4000-4200 TEU size in the last four or five years on the weekly PSW

The PSW service to America has been underpinned by higher northbound cargoes.

string where ANL, Hapag-Lloyd and Hamburg Süd are the vessel providers with MSC taking slots. PIL also joined a few years ago after ending their triangular Australasia-AsiaUSWC service, and now operate southbound from the US only. The fortnightly PNW string has stayed with vessels from 2200 TEUs to an average 2900 TEUs. Hapag-Lloyd and Hamburg Süd are the vessel providers with ANL taking slots. Hamburg Süd’s Simon Edwards says that even with the change of administration in the US with more “protectionist” leanings, demand out of the US for New Zealand export goods has been steady. “Northbound liftings of meat, fruit, dairy products and forestry underpin the export market. But there are also regular pockets of manufacturing and consumer goods seen each week into both coasts and the Midwest regions. “New Zealand apple exports were hit by a very wet 2017 season which restricted size and colour development but we are currently seeing a strong rebound this season given market expectations. “Overall we are looking for a steady increase in general freight volumes on the US-NZ tradelane, both ways.” The benefits of the direct services from NZ to the US East Coast, have given Hamburg Süd and Maersk a strong market presence. “The USEC trade serves the perishables trade well because that is the gateway to the major distribution

and population centres in the North American (USA and Canada) East and Mid West,” said Mr Edwards. “Philadelphia is the predominant gateway for perishables on the East Coast, and with direct calls in Charleston, which has developed into a key South East logistics hub including warehousing and USDA meat inspection facilities, the service scope is excellent. “In the reefer market we see our direct services valued by NZ perishables exporters. Shippers of such high-value foodstuffs prefer not to rely on a relay service for the majority of their shipments, when direct services are doing the job well and are valued as a premium-service offering. “More so because the amount of reefer slots available to the market has reduced as a result of the changes that have occurred through Seatrade’s entry and exit from the trade.” For non-perishables, transhipment hubs are important to the East Coast trade because they offer an alternative to the South East Asian hub ports from NZ and give the opportunity to relay cargoes to not only ECNA, the US Gulf, Central America and the Caribbean but also to the Mediterranean, Europe and South America. Different lines have focused on three key hub ports – Cartagena (Colombia — Hamburg Süd), MIT (Manzanillo – Hamburg Süd and Maersk) and Cristobal (Panama – MSC) to service the US Gulf Coast, Florida and East Coast outports.

Matson expands New Zealand connections US-based Matson has marked the fifth anniversary of its arrival in New Zealand and the South Pacific by expanding its service between the North Pacific and the South Pacific through Hawaii, and by starting to move freight from New Zealand to Hawaii and the US West Coast.

By DAVE macintyre Matson is an independent, standalone containership operator that has served the US West Coast–Hawaii market for 136 years, developing operations designed to provide a frequent, reliable just-in-time service that the islands rely on for food and everyday goods. Its experience in the South Pacific traces to the late 1920s, when it acquired Oceanic Steamship Company and operated luxury passenger cruises in the 1930s, 40s and 50s, helping to establish tourism there, having already done so in Hawaii. Over the past 10-12 years, the company has looked for opportunities to leverage this expertise to expand into similar adjacent markets throughout the Pacific. Services now connect the US West Coast with China and Alaska as well as the South Pacific, where its core service is the NZX trade that provides direct service between Auckland and Fiji, Samoa, American Samoa, the Cook Islands, Niue and Tonga. Matson’s director of corporate communications, Keoni Wagner, says rates and the competitive landscape in the Pacific vary widely, depending on


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the market and the commodity. “When we acquired the assets of Reef Shipping in 2013, we continued serving the ports of call that Reef was calling while we analysed the different markets. Over time, Matson has streamlined the route structure somewhat and strengthened the service that we provide with the focus on establishing reliable, high-quality service in the region. “In 2016, Matson realised the longterm goal of connecting its established northern Pacific network with its newer operations in the South Pacific with its South Pacific Express (SPX) service via Honolulu.” The same-day-of-week service provides arrivals every 28 days, calling in Apia, Samoa; Pago Pago, American Samoa; Nuku’alofa, Tonga; Suva, Fiji and Lautoka, Fiji before returning to Honolulu. Last month, Matson improved the SPX schedule with a second vessel, adding Tahiti and enhancing opportunities for exports from New Zealand to Hawaii and the US West Coast. Mr Wagner says Matson competes on the consistency and reliability of its operations and world-class customer-focused service. In terms of operational challenges, he says there is occasionally

Matson services now connect from the top of the Pacific Ocean to the South Pacific island states. congestion at Pacific ports but more often, the challenge is getting into some ports during inclement weather — particularly those that have no dock facilities and where cargo has to

be transferred to barges offshore. “These markets are not easy to serve, but we are an island carrier, dedicated to serving the unique needs of island communities,” he said.

May 26, 2018


Mainfreight targets America’s turnaround By IAIN macintyre Mainfreight group managing director Don Braid is expressing positivity about the prospects for his firm’s Americas operation, despite a recent downturn which has seen it under-perform financially against the results of the overall group and its constituent regions. Although stating in the firm’s recent annual report he was “disappointed” at the financial performance from the Americas region, Mr Braid says the North American market presence “remains key to our global network development and expansion activities”. “In every country where we reside we always attempt to intensify our domestic network — increasing the number of cross-dock facilities across more locations and developing our warehousing footprint to cater for our customers’ logistics requirements,” he told the Special Industry Review. “We have said for a long time that we expect more than just satisfactory growth in these large markets, where opportunities abound. We do need to be cognisant of the time we have been ‘in market’ in America — just some ten years — and when compared to the 40 years we have had in New Zealand, there remains much to do to build the maturity and market share that the American market provides. “Our focus remains on organic growth and network development for all four of our products — domestic distribution, warehousing, international freight-forwarding and ocean non-vessel operating common carrier (NVOCC) services under our CaroTrans brand. “Our business in the Americas continues to be a major area of development for us, and is a crucial connection for our network around the world.”

Within the “targets, progress and achievements” section of Mainfreight’s 2017 annual report, the following Americas market-specific targets for 2018 and corresponding status information is detailed: • United States revenue of US$500 million earning a rate of return of 7% — current revenue at US$436 million, with return on revenue target “likely to take more time”. • The group’s American and European interests earning more profit than its Australian and New Zealand operations — “unlikely before 2020”. • Investing capital in the group’s American market to build suitable infrastructure to support its growth and quality ambitions — “likely from 2020 onwards, once financial and operational performance dictates”. In Mainfreight’s “Team Review” newsletter published in December, Americas regional manager John Hepworth lamented that too many of the region’s branches had relied upon “one or two key customers” and not spent sufficient time building sustainability. However, noting changes implemented had begun to deliver rewards, he outlined the following six-point message for his team in 2018: • We must embrace sales at all levels and be actively selling every day. • It is about quantity in number of sales calls per week as this helps build many quality opportunities. • All branches must have a strong sales pipeline of large, quality opportunities with at least ten potential clients close to closing or in the final stages of the sales process. • We are in the biggest market in the world, we need to aim much higher — be bold and believe in the great products we have, they are world class. • Continue to build our future leaders, all must go through sales, as we need to build depth in our branches to cope with our growth. • Be true to our culture, live our KPIs and believe in the Mainfreight way that has proven so successful over the past 40 years.

At 11,000 TEU the MSC Avni was (in January) the largest vessel ever to call at Port of Philadelphia.

Deepening PhilaPort boosts East Coast trade

The deepening of the main shipping channel at Philadelphia’s historic port on the Delaware River has been a long-held goal for PhilaPort. Now the port cranes that will enliven an era of big ship calls are about to be commissioned. Deeping the channel from 40 to 45 feet will allow the port to accept substantially more of the new class of Ultra Large Container Vessels (ULCVs) with their 10,000-20,000 TEU capacities. The first two super post-Panamax cranes destined for the Packer Avenue Marine Terminal arrived from Shanghai Zhenhua Heavy Industries (ZPMC) in late March. The huge 119m (391ft high — 31 stories — with boom up) have been bought by PhilaPort and terminal operator Astro Holdings. Port of Pennsylvania Governor Tom Wolf’s US$300 million Port Development Plan launched in 2016 has enabled Philaport to reduce the 165kms (102.5-miles) long main channel of the Delaware River to 45-foot-depth. The project began in 2008 and is near completion. “The arrival of the cranes is a perfect example of public/private investment into the State’s critical infrastructure,” he said. “Every transportation professional knows how important speed to market is to logistics. These new cranes will ensure that we keep pace with other US seaports . . .” All up, public-private investments

in terminal upgrades, a deeper Delaware River channel and other related infrastructure enhancements is at US$1 billion. “For over a year we have been working hard to prepare the terminal for these cranes and it is great to see them here,” said Jeff Theobald, executive director and CEO of PhilaPort. “Last year we hit an East Coast record of 19% container growth. To sustain that type of growth, these new cranes are a necessity.” Two more ZPMC super-postPanamax gantries are due to arrive at Packer Avenue in March 2019. Created in 1701, the port (renamed PhilaPort in 2017), is the gateway for trade with several Midwest and Eastern states and major cities such as Chicago and Boston. It is an entry for significant maritime trade from New Zealand. Cargo volumes are surging. In C2017 PhilaPort surpassed the halfmillion TEU milestone, handling 548,000 containers. and has a goal of one million inside a decade. The largest containership that ever called the port, the 12,200 TEUs M/V MSC Shuba B, arrived from the West Coast in February, carrying perishable fruit from Chile and Peru.This is the largest class of vessel that MSC currently has calling the US East Coast. The Pilots’ Association for the Bay and River Delaware has run simulation training for the new class of 12,00014,000 TEUs vessels.

Book Advertising Space for


Mainfreight sees much more to do in taking up opportunities in the American market for logistics services.

May 26, 2018


June 2018

Container vessel review (Horticulture season review).


July 2018

North Asia (China, Japan, Korea).


September 2018

Australia - Pacific.


November 2018


Booking space is now available. Contact: Warren Head. MG Publications. Ph: 03 358 3219 M:(021) 340650 E: The New Zealand Shipping Gazette



Weekly offering a boost for CMA CGM For CMA CGM, the launch of a weekly product to the East Coast of North America this year is clearly the largest recent development in the trade.

By Dave macintyre Taking over the Seatrade service and bringing it into its PAD service (operated with partner Marfret) has given it a long-desired weekly offering. “It represents the only service on the market to offer such coverage on a weekly basis,” said a company spokesperson. “It provides a direct and weekly offer to Papeete and Noumea from Northern Europe and the East Coast of the United States, and provides the only fast, direct and dedicated reefer service from Oceania to Europe. “We have seen good growth in these tradelanes generally and with the advent of our weekly product to the US East Coast from fortnightly, we foresee the opportunity to develop further.” The spokesperson says the service incorporated the port of Nelson from February 24 which is an exciting new development for CMA CGM. “With our new rotation and transit times we are very excited by the opportunities at the top of the South Island to grow our market share. “In addition, our network does offer pre-feeder opportunities from most of the other remaining ports. A total of 13 ships with a nominal capacity between 2200 and 2500 TEUs will be deployed on this weekly service.

CMA-CGM has been winning a bigger share of the North American market, “Each will have about 600 reefers on board, necessary to transport refrigerated goods such as fruits, meat or dairy products.” Although CMA CGM has taken a bigger share of the NZ-North American market, it concedes that even with some industry consolidation, the US-Australasian trade remains highly competitive. Critical areas of competition include customer relationships and a deep understanding of their business. “The advent of digitisation and focus on quality measurement and performance will set carriers apart in their performance. It is one area this year CMA CGM is focused on leading and accelerating transformational change.

“The CMA CGM Group has identified a number or areas for immediate focus across the group to enable our competitive position globally. In addition to our impending upgraded weekly PAD service at Nelson, our digital transformation is a key element this year, fundamentally improving the way, and how, we transact with customers. “‘Customer-centricity’ is one of the group’s top priorities and we are working on a new range of products to improve our relationship with customers as well as their experience with CMA CGM. “At the end of 2017, we launched for example Serenity, an innovative offering to deal with any kind of unforeseen events during freight

US drought pressure on beef returns From page 16 market fall from between 12 and 14%, down to four per cent, because the US is generating more of its own beef.” US competition US product is also generating a premium over New Zealand beef, Mr Close said. Reducing the incentive to buy New Zealand product, he said, this was creating vulnerability for New Zealand’s beef exports into the US, but also in key export markets. “In 2017, the US exported 11.06% of their beef production, a ‘monster number’ as beef exports have never been above 10%, and we have broken through the glass ceiling that was limiting exports,” he said. “With total US protein now at levels we can’t consume all at home, the US dependency on exports is becoming increasingly important.” And this will have a significant impact on New Zealand as an exportoriented producer, he said, with New Zealand exporting around 80% of its production. Recessionary pressures While the US was currently enjoying its second-longest period of economic


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expansion in history (at 108 months), Mr Close said, the market would likely be “stress-tested” by recessionary pressures in the near future. “I have very serious doubts that we will reach the all-time record of 120 months, as we are starting to see the yield curve flatten out close to parity or even discount, with virtually full employment creating inflation,” he said. “So within the next year or 18 months, the likelihood of US recessionary pressure is very high.” Mr Close said this recessionary risk, together with increasing gasoline prices, was likely to impact US consumers’ discretionary income, and their demand for beef — particularly more premium cuts — at a time when US beef production was on the rise. Positive longer-term Despite the headwinds facing US and global beef markets, Mr Close remained bullish about the longerterm outlook for global beef, saying he had never in his 45-year career “seen the global marketplace as exciting and ready for change”. “While there will be downward pressure on beef prices this year, the global beef market remains dynamic,

with increased activity in trade and changing suppliers as global demand for beef continues to expand,” he said. “The overall direction will be driven by the increasing demand for animal protein. And we are talking about the 300 million in China’s emerging middle class, but also South-East Asia and southern Africa — where the opportunities are incredible. “We are also seeing rapid changes in consumer demand, and the insatiable demand for convenience. Rarely a day goes by without a new development in home delivery or meal kits.” Rabobank New Zealand animal proteins analyst Blake Holgate said while New Zealand manufacturing beef going into North America would be put under pressure by increased US cow kill and production, prime cuts exports would be sheltered to a certain degree by demand in the higher-value Asian markets, particularly China. “Almost half (47%) of New Zealand’s beef exports (191,000 tonnes) went to the United States in 2017 — primarily in the form of manufacturing beef. China, New Zealand’s second largest, export market accounted for 21% of total beef exports,” he said.

transport. ‘SERENITY by CMA CGM’ allows businesses shipping their goods with CMA CGM to be more efficiently protected through a range of value-added products, which have been designed to meet customers’ expectations and needs. “With this innovation, CMA CGM relieves its customers of all the administrative and procedural complexities in case of unforeseen damage to their cargo,” said the spokesperson. CMA CGM has also just launched its new Reefer offer — REEFLEX, which allows for the transportation of liquids (juices, milk, compotes, syrup and all kind of oils) in a single bag with a capacity ranging from 12,000 to 24,000 litres. Available on 40ft reefer containers, REEFLEX is installed in just three minutes and the bag is filled and emptied in 35 minutes thanks to its adapted design. REEFLEX represents an ideal alternative to breakbulk and it will allow exporters and importers to carry their liquid goods by containers, thus improving the conditions of transportation and delivery. Another element in the group’s development strategy is the recent announcement of the creation of Ze Box, its first startup incubator in Marseilles, where CMA CGM’s head office is located. At its opening in June, Ze Box will welcome 15 startups coming from around the world. The group also recently hired Rajesh Krishnamurthy, one of the world’s top experts in digital transformation. In 2017 a worldwide team of chief digital officers was appointed to CMA CGM Ventures, the corporate venture structure dedicated to investments in innovative technologies. Partnerships were developed with major e-commerce groups. The group is highly committed in the industry’s digital transformation.

Zespri making push for US volume lift

From page 16 shipping routes to northern Europe and East Coast North America. Zespri shipping manager Mike Knowles told Shipping Gazette™ Zespri is using the PAD service and CMACGM, with 6500-7000 TEU vessels calling at Tauranga. The trade is 60% to East Coast US with Port of Philadelphia as primary destination for fruit destined for the Northeast states, while 40% is headed for the West Coast, via Port of Long Beach, California. At Long Beach, TEU are placed in on-dock coolstore, and repacked into consumer packaging, before being trucked to retail distribution. At PhilaPort in Pennsylvania, Zespri cargo heads off-port into Zespri-dedicated storage at Manfredi coolstores. The transfer of a Zespri shipping contract from Seatrade to CMA-CGM was timely in several ways. Mr Knowles said “It is an efficient weekly service, with fast transit of 15 days the West Coast and 22 to Philadelphia.” CMA-CGM vessels calling at Philaport continue to Zeebrugge with cargo for northern Europe markets. And the 7-day cycle for vessels is integral to the fast dedicated supply chain. Expanding sales in the US and ambitious growth targets indicate Zespri will soon be pushing the logistical limits.

May 26, 2018

Trade News NZ North America Special Industry Report 2018  

Trade News NZ North America Special Industry Report 2018

Trade News NZ North America Special Industry Report 2018  

Trade News NZ North America Special Industry Report 2018