U.S. East/Gulf Port Strike Postponed for 30 days

It has been agreed to extend the current contract for 30 days, which will postpone the
strike until Jan. 29 (I guess).

I still think there will be a strike, so this will give a chance for everyone to increases their
inventories to get them through the strike.

Why the ILA will strike

As just posted, I think the ILA will go on strike Dec. 30.  At the moment both sides
are meeting with a mediator, but in my opinion, the most that will happen is the contract
will be extended.

If they do this, it is only postponing the strike.   I don't think the ILA will give in.  They want
to continue some stupid payments that were put in place to appease the union when containerzation
came in to place so the union members loaded big containers (you all know what an ocean
container looks like), rather than bags and boxes.

This took place in the 1960's.  That is more than 50 years ago!!

In my opinion, the ILA management is totally out of touch with reality.  Within the last
few years it has been shown there is still mob control of the union, with "Christmas payments"
being made by the membership to the union bosses.

The union bosses need to be replaced.   Only when this occurs will a reasonable contract
come in to place, and the ports and carriers can move forward with needed improvements.

Just saying...

Plan for strike Dec. 30 at U.S. East/Gulf ports.

I think the ILA will strike, and according to Bloomberg, the general belief is Obama will not
intervene (at least in the short term).   The strike will begin Sunday, Dec. 30.

All of the carriers have filed a strike surcharge, so it is the importers and exporters who
will help foot the bill for the additional costs.

The winners will be the railroads, and truckers, who will be moving the cargo from the U.S. West Coast
or Canada to the final destination.

From Bloomberg (click here for link)

President Barack Obama is facing pressure to block a strike that would gridlock eastern U.S. ports and risk damaging industries from retail to manufacturing.
Federal mediators have been pushing for a deal between dockworkers and their employers before a Dec. 29 deadline. Talks between the International Longshoremen’s Association and the U.S. Maritime Alliance broke down last week amid a dispute over container royalty fees, levies that supplement wages.

A dockworker walkout would be the first at East Coast and Gulf Coast ports since 1977, and would halt shipments of containerized cargo, including clothing, frozen foods and car parts. Photographer: Ken James/Bloomberg

1:31

Dec. 27 (Bloomberg) -- Sheila Dharmarajan reports on the possible strike by the International Longshoremen's Association that would stop the unloading of shipping containers in New York. She speaks on Bloomberg Television's "In The Loop."

4:23

Dec. 27 (Bloomberg) -- Matthew Shay, chief executive officer of the National Retail Federation, talks about the possibility that U.S. lawmakers will reach a budget agreement before Jan. 1 and avert the so-called fiscal cliff of tax increases and spending cuts. Shay also discusses a possible strike by U.S. dockworkers and the outlook for U.S. retail sales. He speaks with Erik Schatzker on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

A walkout would be the first at East Coast and Gulf Coast ports since 1977, and would halt shipments of containerized cargo, including clothing, frozen foods and car parts. Obama would be left to choose between forsaking a pro-labor stance by invoking the 1947 Taft-Hartley Act and allowing a union action that could compound the effects of the fiscal cliff.
“To throw that kind of a strike on top of the economy right away in January, I’m sure is something the administration would rather not see,” Mike Asensio, a labor lawyer at Baker Hostetler LLP in Columbus, Ohio, said in a telephone interview. “Would it create that much of a nightmare for him that they would be willing to do something that would anger part of their constituency in organized labor? That’s the $64,000 question.”
Matt Lehrich, a White House spokesman, declined to comment beyond a statement last week that the administration was monitoring the situation and urging the parties “to continue their work at the negotiating table to get a deal done as quickly as possible.”

Salvaging Talks

The Federal Mediation and Conciliation Service, which has guided talks since September, organized a meeting between the two sides this week in an 11th-hour effort to salvage negotiations. All three parties declined to provide further details on the new talks.
“I believe in my president, and I will follow him down whatever road he leads us,” Carl Chiofolo Jr., a union member and clerical worker at New Jersey’s Port Elizabeth, said in a phone interview. “Solidarity is the No. 1 thing here. We have to keep together on this. It literally is a fight for our lives.”
If federal mediation fails, the only remaining tool in the government’s arsenal is Taft-Hartley, which empowers the president to intervene in strikes that are deemed national emergencies, said Phillip Wilson, president and general counsel at the Labor Relations Institute in Broken Arrow, Oklahoma.
The act was last invoked by President George W. Bush in 2002 after a lockout closed West Coast ports for 10 days. The most recent successful use prior to that was in 1971 under President Richard Nixon.

Retail Pressure

The National Retail Federation and Florida Governor Rick Scott have urged Obama to use the law to avoid an eastern port shutdown that they say would cripple an already weak economy.
“The threat to national health and safety that would result from mass closure of the ports cannot be overstated,” Scott, a Republican, wrote in a Dec. 20 letter to Obama. “The Taft-HartAct provides your administration with tools that can help avoid this threat.”
On a conference call with port directors today, Scott said he hasn’t yet received a response from Obama and reiterated his call for an intervention. About 550,000 people depend on Florida ports directly and indirectly for their jobs, he said.
The Port Authority of New York and New Jersey said a strike would cost the region an estimated $136 million a week in personal income and $110 million in economic output.
“Any disruption to port activity will negatively affect tens of thousands of local jobs as well as both the regional and the national economies,” Steve Coleman, an authority spokesman, wrote in an e-mail. “We urge the parties to resolve their differences as soon as possible.”

Labor Support

Even as pressure for action mounts, Obama may hesitate to undermine the union’s bargaining power, Bradford Livingston, a partner at Seyfarth Shaw LLP, said in an interview from Ch


Labor unions “continue to be one of the bigger donors of the Democratic Party,” Livingston said in a phone interview. “As the top Democrat, even though he may not be re-elected, he’s going to want to be a friend to organized labor for the next four years.”
The Longshoremen’s political action committee gave 96 percent of its $549,050 in 2012 election donations to Democratic candidates and committees, according to the Washington-based Center for Responsive Politics. Obama didn’t accept PAC contributions for his re-election campaign.

West Coast

Calls from the Retail Federation for presidential intervention during an eight-day strike last month at the Port of Los Angeles and adjacent Port of Long Beach went unheeded. A strike at East Coast and Gulf Coast ports would need to last at least as long or longer before Obama steps in, according to the Labor Relations Institute’s Wilson.
“The president intervening is a big deal,” he said in a phone interview. “At the end of the day, the way these situations are supposed to work out is the parties inflict whatever pain they can on each other and then they reach a deal.”
Still, with the fiscal cliff of more than $600 billion in spending cuts and tax increases looming at the end of the year, the president won’t be able to linger on the sidelines, said Jock O’Connell, international trade adviser at Los Angeles-based consultant Beacon Economics LLC.
“There’s always the possibility that the mediators will lead the respective parties to come to a solution before the strike,” O’Connell said in a phone interview. “After that, then the clock starts ticking. The precedent in this case is about a 10-day clock before pressure on the White House to invoke Taft-Hartley starts becoming irresistible.”

ILA issues...are they out of their #%@? minds?

From the ILA web-site... click here for link     International Longshoremen's Association, AFL-CIO Contract Issues with United States Maritime Alliance

12/20/2012

THE ISSUE: CONTAINER ROYALTY
International Longshoremen's Association, AFL-CIO wants to maintain Container Royalty Fund as it is in current contract. USMX, the employer group representing ILA employers, wants to put a cash ceiling or CAP on how much money is put into the Container Royalty Fund for current longshore workers and ultimately, eliminate the Container Royalty Fund.
The first container royalties were established in the 1960s as a way to protect members of the International Longshoremen's Association, AFL-CIO (ILA) in New York from job losses created by containerization and its introduction of automated cargo.
Container Royalty came about from negotiations and sacrifices made by ILA members since the late 1960s. Container Royalty supplements the members' income and keeps his benefits package financially strong. Container Royalty eligibility must be earned by an ILA member reaching a certain amount of hours worked each year. ILA work isn't like other professions: no ships mean no work, but employers depend on a strong and skilled workforce when ships need to be worked. Container Royalty helps keep an ILA workforce available.
When containerization started the ILA was faced with a huge displacement of worker whose jobs were eliminated by the ominous steel boxes. The ILA was at a crossroad - allow containerization to be implemented or refuse. The ILA agreed to allow containerization to flourish but negotiated a fee based on the weight of each loaded container to be used for annual payments to the longshore workers whose job opportunities had been compromised due to containerization. As the number of containers being handled increased, the negotiated payment for each worker increased. Rather than being an annual bonus for each worker, as USMX suggests, this payment is compensation for the job opportunities lost by permitting containerization.
United States Maritime Alliance now wants to limit the amount of money that is paid ILA members and goes into various Container Royalty Funds by placing a CAP on the money collected in any given contract year. Container Royalty is collected by the amount of tons of containerized cargo ILA members handle. A total of $4.85 is collected on each ton of containerized cargo handled and is distributed to ILA workers as part of a Wage supplement and to the ILA members' health care fund, called MILA.
USMX ultimate goal is to eliminate Container Royalty, based on their last proposal to end it in 25 years.
ILA has suggested a way for Container Royalty to end now. If the Carriers don't want to pay Container Royalty, then bring back all the warehouses, and start stuffing and stripping again. A Carrier does not have to pay Container Royalty on a Container that has been stuffed and stripped by the ILA.
Automation continues to reduce the number of hours for hard working ILA members. Container Royalty wage supplements are more important today for ILA members than its ever been to keep America's commerce moving with skilled, trained longshore workers.


WAGES:
ILA and USMX have exchanged proposals and demands regarding on Wages based on a tentative six-year contract. The ILA has put in its demands wage increases that are reasonable and would enable our employers to remain competitive.
In its contract proposals to the ILA, USMX continues to treat ILA workers like second-class citizens. In all its public pronouncements on wages, USMX fails to note that longshore labor cost amounts to between 3% and 4% of the shipper's total cost. Unlike other hourly workers who work a 40-hour workweek, most longshore workers make themselves available for work on a daily basis. Early on, the ILA negotiated a guarantee of a day's pay. Otherwise, the employer had no obligation to pay if a vessel did not arrive on schedule. To the employer's benefit, Guarantee Annual Income no longer exists.
Also very important to note: For over 20 years, our employers enjoyed paying tiered wages where newer longshore workers were paid much less than their senior counterparts. The system was unfair and there was never light at the end of the tunnel. History shows that management enjoyed huge savings while ILA members, their locals, the Districts and the International all suffered with reduced revenues.


ILA HEALTH CARE FOR WORKERS:
The ILA's National Health care program is called "MILA"
Part of MILA is funded through Container Royalty money mentioned earlier.
USMX current proposal is that our MILA fund is so solvent that they'd like to defer payment of CR 4 for two years. USMX views this as a loan, promising to pay it back within third year of agreement. Their math is fuzzy. They claim CR 4 contributions down the road will be greater than the current $1.15. We think their contributions would end up being less with even a 5% bump in container growth.
USMX pledged early in negotiations that no matter what we agreed to with MILA, our fund would be sound and secure because they'd automatically pump money into the fund if the current $800 million reserve were to fall below $600 million. They called it a trigger and that it would kick in when the fund went below $600 million. CR-4 would restart.
Somehow, talk of a "trigger" has stopped. Their new formula? They only want a 6-month reserve with no trigger. That formula would take our current $800 million reserve down to the $200 million mark.
They will "Guarantee" the current benefit for the life of the contract if we agree to that two-year deferred payment to CR-4. The ILA asks "What reserve will we have at the end of a contract with this formula?" We are unsure about the impact from OBAMACARE.
ILA refuses to jeopardize the future of our MILA program by shortsighted decisions. Healthcare is extremely important to our members and their families and we want it financially secure.


OTHER ISSUES:
ILA and USMX did reach tentative agreements on automation and container chassis work and on some jurisdiction language.


LOCAL ISSUES:
All local issues and negotiated in the local port area. All ILA ports from Maine to Texas still need to resolve local agreements.

Hamburg Sud and Hapag-Lloyd

 Here is the official press release- notice it doesn't say much, and also notice the official name of Hamburg Sud.

I wonder what name they will have for the merged company.

Merger talks between Hapag-Lloyd and Hamburg Süd

 

Hamburg, 18 December 2012. The Executive Boards of Hapag-Lloyd AG and of Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (Hamburg Süd), in agreement with their shareholders, are investigating if, and under what conditions, a merger of both companies would be of interest. 

------------------------------------------------------

Watch for U.S. East Coast/Gulf strike

I have thought for some time the ILA will strike, but hesitated to say so.

As I have mentioned before, the ILA is totally out of touch with reality.  They do not want to
"give in" to computerization, efficiencies, etc., because this would mean less jobs for their
members.

They also do not want to give  up "royalty payments", which came about after shipping changed
from break bulk to containers.   How long ago was that?  I doubt many people reading this
ever remember a time of  before containers.

Having said this, the ILA also does not realize that the carriers would probably not be hurt
all that much from a strike.  Sure, some of the smaller ones might, but the big carriers will
find other ways to get the cargo to the customers, and, because it will be due to your strike,
they will pass the costs on to the customers.

With the U.S. economy being slow, it's not going to impact things so much.  Freight rates
have been so incredibly low the last few years paying some additional money to get cargo
won't be a huge hardship.

For the carriers, it might give them a chance to negotiate the new rates at a higher level.

So, what I think will happen is the ILA will go on strike.  They will be out maybe 2 weeks,
they will be ordered back to work by the government, and this will continue for some time.

The rail roads have capacity to move containers from the West Coast to the East Coast,
and it will take a little time to get things organized, but because U.S. Customs allows
clearance electronically (hello- wake up ILA), it's not so difficult to divert cargo as it
was say even 5 years ago.

In a couple of weeks we will see if my guess is right or wrong.

Catch ya then.





 

CMA CGM announces surcharges, and makes a profit

I guess since they can't get the rate increases to stick, CMA CGM has now resorted to imposing
"surcharges" to get additional revenue. 

From The Journal of Commerce

French ocean carrier CMA CGM plans to implement "rate restoration surcharges" from Asia to Europe and Africa in the run-up to the Chinese New Year in January.
Effective Dec. 15, the carrier will impose a surcharge of $575 per 20-foot-equivalent unit from all Asian ports, including those in Japan, Southeast Asia and Bangladesh to the west Mediterranean, Adriatic, east Mediterranean, Black Sea and North Africa. It plans another $350-per-TEU surcharge on the same routes on Jan. 10.
The carrier also will impose a "Panama Canal surcharge" of 150 euros per TEU on its Panama Direct service linking Europe and the South Pacific Islands, effective Jan. 14.

And...from Reuters

* French container shipping group posts Q3 profit
* Still profitable in Q4 despite easing freight rates
* Expects bank deal in January on new debt terms
PARIS, Nov 20 (Reuters) - CMA CGM, the world's third-largest container shipping group, said on Tuesday it was on course for a full-year profit and expected to finalise a debt restructuring deal with banks in January.
The French family-owned firm has been through a turbulent three years in a freight sector under pressure from a weak global economy and oversupply of ships.
Volatility in freight has also led A.P. Moller-Maersk , owner of the world's largest container shipping firm, to cut its exposure to this business.
CMA CGM, based in the Mediterranean port city of Marseilles, said it was profitable in the fourth quarter after reporting a cumulative net profit of $310 million in the first nine months of the year.
The market was less favourable in the current quarter, however, with freight rates declining in a sign of renewed pressure from overcapacity, Michel Sirat, CMA CGM's finance director, told journalists.
"The fourth quarter won't be as good as the third quarter. It will be positive (in profits) but not as good," he said.
The company has been in talks with its banks over the past year to change its debt terms to take account of earnings volatility.


CMA CGM now expects to sign a deal in January after agreeing an outline for a debt restructuring with its main banks, Sirat said.
The deal would replace some debt covenants linked to core earnings to ones based on its balance sheet, while also rescheduling some repayments, he added.
Sirat said CMA CGM's financial position would be reinforced by an agreement last month under which France's strategic investment fund FSI is to invest $150 million, and Turkish shareholder Yildirim is to invest a further $100 million.
The group is also pursuing asset sales and plans to sell a 49 percent stake in Terminal Link, its container-terminal operator, Sirat said.
The group's previously announced cost-reduction programme had generated $550 million in savings by the end of the third quarter, ahead of a target of $400 million for the full year, the company added.
CMA CGM reported a net profit of $371 million and core earnings of $617 million in the third quarter, it said in a statement. (Reporting by Matthieu Protard and Gus Trompiz. Editing by Jane Merriman)

In my opinion things will continue to be difficult over the next few years, so there should not be too
much cheering over at CMA CGM.

TSA delays rate increases

The Transpacific Shipping Association (TSA) is a not a conference (those are now illegal), but a
"rate discussion agreement".   Carriers who belong to it are allowed to share certain information,
and to discuss certain things regarding rates.   I am not sure what they can discuss, I think just
general things, not about specific customers.

Anyway, the administrator of the TSA keeps trying to "herd cats", getting all the carriers to
go in the same direction regarding rate increases, policy matter (ie; providing chassis), etc.
Of course if the TSA falls apart the administrator and staff will be out of a job, so they are
doing everything they can to demonstrate the need for their existence.

They have just issued new contract guidelines, delaying the previously announced rate increases
for contract negotiations.

Here it is.....

Managing Market Uncertainty

Sustained volatility in the Asia-US cargo market has delayed development of TSA's annual service contracting program for 2012-13. U.S. economic and retail indicators have remained uncertain, but suggest steady, gradual longer-term improvement in the coming year. As a result TSA lines delayed announcing a formal program of revenue/cost recovery guidelines until February 2012.

In the runup to May 1, 2012, when most new Asia-US service contracts take effect, TSA lines have recommended a schedule of interim, across-the-board rate adjustments aimed at restoring freight rates in the trade to roughly May 2011 levels, as a baseline for subsequent contract rate negotiations going forward. Interim increases include:

- US$400 per 40-foot container (FEU), effective January 1, 2012, with proportionate increases for other equipment sizes, for all tariff and applicable contract cargo.

- US$300 per FEU, effective March 15, 2012, for all tariff and applicable contract cargo.

- US$400 per FEU, effective April 15, for all remaining rates below May 2011 levels.

In addition TSA has announced its 2012-13 guideline revenue program, to take effect no later than May 1, 2012 for all carrier tariffs and service contracts.

Member lines have recommended that new baseline rates be raised by a minimum of US$500 per FEU for cargo to the U.S. West Coast, and a minimum of US$700 per FEU for all other destinations. Additional revenue and cost recovery initiatives will be considered later in the year, after a review of market conditions and outlook for the second half of 2012.

Carriers have further reaffirmed the need for 2012 service contracts to apply per formula rate increases for all equipment sizes, and to provide for collection of full, floating fuel surcharges and other applicable cost-based ancillary charges.

Finally, TSA lines indicated that they intend to apply a peak season surcharge (PSS) later in the year, with a duration and at an amount to be determined based on market conditions approaching the traditional summer and fall peak period.

The overall objective is to ensure carrier viability and service stability in a highly competitive and service-intensive freight market, by a) restoring rates to a baseline of a year earlier and then b) building on that platform in upcoming contracts to cover rising costs; to permit reinvestment in services and operations; and to provide a reasonable measure of profitability.

They say a lot more  boring things regarding how they came up with their formulas etc., trying to
convince either the carriers or their customers (or both, I guess), that they are doing a good job.

I presume what has happened is carriers have "broken ranks" on the previous agreed rate
increases and now the other carriers (through the TSA) are giving the impression the offending
carrier can now right the wrong.

What will really happen is all the carriers will try to get as much business locked up before the
new deadline, and then apologize later.

I guess they still haven't figured out it's all about supply and demand.  Rather than talking about
raising rates, they should be talking about decreasing tonnage.


 

Update, "Will Ocean Carriers Hold the Rates"

I was looking at some of my old postings, and ran across the one entitled "Will Ocean Carriers Hold
the Rates",  quoting this from the JOC article of June 18, 2012.

RS Platou Markets analyst doubts container carriers will engage in rate war Concerns over a slump in container freight rates are overstated because lines are desperate to avoid a rate war and will suppress box slot supply to maintain profits, according to one leading expert.
Rahul Kapoor, a Singapore-based shipping analyst at RS Platou Markets, said concerns about demand were valid but he doubted whether carriers, after already booking poor results in the first quarter of this year, would resort to the same market-share-seeking pricing tactics that pushed them to the brink of collapse late last year.
“We believe the concerns of a rapid decline in freight rates from current levels are greatly exaggerated,” he said, adding that he thought carrier earnings had turned a corner in the current quarter and the industry would see modest profits over 2012.
“We do not see a sharp decline in rates as we believe that market share fights are no longer an option even for the biggest player, Maersk Line,” he said.
“Our view is that the industry cannot fund another price war, the cash buffer in 2012 is absent unlike the start of 2011 when the industry was coming out of a record 2010.”

And my comment was..  ".This is a nice thought, but somehow I don't think all the carriers are this strong willed, and as soon as one breaks rank, the others will follow.

These next 6 months will be worth watching". 

We are not yet at the 6 months mark, and already the carriers reduced rates, and finally started
once again reducing capacity.  

CMA CGM just got a cash infusuion.   Maersk is saying it will concentrate on other areas of 
their business (off shore drilling), rather than fighting for market share in container shipping.

Rumors abound that  the Chinese lines (Costco and China Shipping) will be forced to merge,
and many think it would be a good idea for the German carriers (Hapag-Lloyd and Hamburg Sud)
to merge as well.

I don't know what will happen.  But, be assured, whatever companies emerge from this economic
downturn will be lean and mean.

There might also be some really good innovations during this difficult time, and perhaps
the carriers will finally be forced to stand up to the ILA and get some decent computer systems
working on the U.S. terminals.

Well, that's enough for today.  I think things will be quiet until after the first of the year.  

CMA CGM receives some financial support

CMA CGM and FSI made announcements today regarding FSI's investment in CMA CGM.
As far as I call tell FSI is private investment, not from the government, but I am not postitive.
Here are the press releases.

16 Oct 2012
CMA CGM signs of a Memorandum of Agreement with the French Fonds Stratégique d’Investissement (FSI)

October 16th, 2012 – CMA CGM, the world’s third largest container shipping Group, and the Fonds Stratégique d’Investissement (FSI), have announced today that they entered into a Memorandum of Agreement supporting CMA CGM’s future development. The FSI will subscribe to bonds redeemable in shares for an amount of US$150 million giving right to a 6% stake in CMA CGM upon conversion. At the same time, under the terms of the existing agreement, the Yildirim Group will subscribe to bonds redeemable in shares for an amount of US$100 million giving right to a 4% stake in CMA CGM upon conversion. Jacques R. Saadé, CMA CGM’s Chairman and Chief Executive Officer, said: “We are very pleased to have reached an agreement with the FSI and of the Yildirim Group's renewed support. This agreement is an important milestone for our Group and demonstrates FSI and Yildirim’s level of confidence in its future. It coincides with our Group’s return to profitability in the second quarter and the expectation of an even better operating performance in the third quarter, leading to a profit for the full year.” Rodolphe Saadé, CMA CGM’s Executive Officer, said: “This agreement will help to strengthen the Group’s balance sheet and allow us to accelerate the implementation of CMA CGM’s strategy to prepare for an IPO in the coming years. I am delighted that the FSI will invest in our Group and support its on-going development.”

The ISP is ready to strengthen the equity of CMA-CGM October 16, 2012 Release Date: October 16, 2012 FSI announces the signing of an agreement with the majority shareholder of CMA CGM under which it plans to support the group in its development and in its willingness to go public in the medium term. This agreement, which should be confirmed in the coming weeks, is an important step of the process involves an investment of $ 150m in the form of the ISP ORAs simultaneously to obtain an agreement with its bank group on a financial restructuring. CMA-CGM, based in Marseille, is one of the three world leaders in container shipping. The group has experienced tremendous growth since its inception in 1996, allowing it to become a leading player in its market and to be present on all major routes. The Group employs 18,000 people including 4,300 in France and is known for its operational efficiency. The cyclical nature of the shipping business leads CMA-CGM renforcerson to adapt and balance in order to consolidate in the coming years its leading position in this market.

C.H. Robinson to purchase Phoenix International

Press release

--(BUSINESS WIRE)--Sep. 25, 2012-- C.H. Robinson Worldwide, Inc. ("C.H. Robinson") (Nasdaq: CHRW), today announced that it has reached a stock purchase agreement to acquire Phoenix International, Inc. ("Phoenix") for $571.5 million in cash and approximately $63.5 million in newly-issued C.H. Robinson stock. The agreement is subject to certain customary closing conditions, including regulatory approval. Closing of the acquisition is expected to occur in the fourth quarter of 2012. C.H. Robinson will use existing cash and plans to enter into a revolving credit facility with major banks to finance the cash portion of the purchase price. The acquisition is expected to be modestly accretive in the first year.

Phoenix is a privately-held international freight forwarder. In its most recently completed fiscal year, as of June 30, 2012, Phoenix generated gross revenues of approximately $807 million, net revenues of approximately $161 million and adjusted operating income of approximately $48 million.

Phoenix primarily provides international freight forwarding services, including ocean, air, and customs brokerage, currently serving approximately 15,000 customers globally. Phoenix has approximately 2,000 employees, located in 76 offices in 15 countries. The company is headquartered in Chicago, Illinois. 

click here for link

ILA Agrees to 90 day extention of contract

This from the FMCS web-site

Release Date: 9/20/2012

WASHINGTON, D.C. — "I am pleased to announce that at the close of today’s productive negotiation session, in which progress was made on several important subjects, the parties have agreed to extend the collective bargaining agreement due to expire on September 30, 2012 for a ninety (90) day period, i.e. through December 29, 2012. In taking this significant step, the parties emphasized that they are doing so “for the good of the country” to avoid any interruption in interstate commerce.

"This extension will provide the parties an opportunity to focus on the outstanding core issues in a deliberate manner apart from the pressure of an immediate deadline. The negotiations on the Master Agreement will be conducted during the same time frame as negotiations for local agreements. The negotiations will continue under the auspices of the FMCS. Due to the sensitive nature of these high profile negotiations, we will have no further comment on the schedule for the negotiations, their location, or the substance of what takes place during those negotiations."

click here for link

ILA contract talks to resume Sept. 19, 2012

According to the Baltimore Sun, contract talks between the ILA and USMX (representatives of
the carriers and terminals) will resume today, at a hotel in New Jersey.

It had been reported the locations of the talks would be undisclosed...but, admittedly there are
a lot of hotels in New Jersey.

These negotiations are being mediated by the Federal Mediation and Coalition Services.

The ILA union contract expires Sept. 30th, and the Union membership has already
authorized a strike.

From The Baltimore Sun

The maritime alliance says dockworkers are driving up shipping costs by taking advantage of liberal overtime rules. It says longshoreman are well compensated, making an average of $124,000 annually in wages and benefits, with management paying 97 percent of the cost of their health care plan.
The union says its members do dangerous work, often in adverse weather, and must be protected and retrained as the industry changes.

click here for link to article

Racketeers on the New York/ New Jersey Waterfront

 I don't think I need to add any comments to this.....it kind of says it all.

From The Journal of Commerce

 

Administrative law judge upholds Waterfront Commission ruling

An administrative law judge has upheld the Waterfront Commission of New York Harbor’s decision to revoke a Ports America hiring agent’s license to work in the Port of New York and New Jersey because of association with racketeers.

The Waterfront Commission revoked the license of Pasquale Pontoriero, who was accused of associating with the late Tino Fiumara, a Genovese mob capo, and Stephen DePiro, a Genovese soldier.

Fiumara died in September of 2010; DePiro is serving a federal prison sentence and awaiting trial on federal racketeering charges involving the extortion of ILA members in the port.

Update ILA contract talks

The contract talks between the ILA and USMX are to restart this week, with a mediator.

The locations of the talks are being kept secret.  I presume the day to day outcome of the
talks will only be available from either the ILA, USMX, or the mediator.  I don't really know
what has been agreed.

The USMX web-site,  should post updates on the ILA negotiations, when available.

click here for the link.

So far, nothing has been posted.

Suggested Changes on the Waterfront

The negotiations with the ILA are to start again next week.   This time with an arbitrator from
FMCS.  From their web-site

Release Date: 9/6/2012

Upon the request of the Federal Mediation and Conciliation Service (FMCS), the parties have agreed to resume negotiations under our auspices during the week of September 17, 2012.  Due to the sensitivity of this high profile dispute and consistent with the Agency’s longstanding practice, we will not disclose either the location of the meeting or the content of the substantive negotiations that will take place.

I trust they will address many of the issues raised in the Waterfront Commission report of
March 2012.   It's a lengthy report, but appears to spell out the real problems with the
ILA Union at the ports of NY/NJ.

Of course, this is only one of the ports represented by the ILA, although it is the biggest, and
NJ is where the union is headquartered.

The report has some real gems, such as

Mr. Daggett emphatically testified that shop stewards are entitled to their six-figure
salaries.107 He claimed that shop stewards work twenty-four hours a day and help ensure that
there are “no labor problems” in the Port.108 Mr. Daggett testified that $400,000 “[is] not a lot of
money today,”109 a comment that would appear to be out of touch with reality.

In fact, in my opinion, the report is so damaging I don't know why the government hasn't taken
some action and closed down the ILA.   I guess everyone was waiting for the next round of
contract negotiations.  I don't know.   Of course it's difficult to tackle these problems,
and because the union is contracted by a "collective" and not one company, it's even more
difficult.

Here are the suggestions put forward in the report.   They are very valid, and I trust whomever
from the FMCS is handling the negotiations will read this report, and attempt to put these
changes in to place.

Based on the foregoing, the Commission recommends the following changes by the
shipping industry:

   “Ship time “or “terminal time” payments that go to a single person, whether or not the
person is actually working, should be eliminated. The implementation of a shift system,
rather than a continuous operation system, for all dockworkers would be a highly
advantageous change for Port efficiency.

    “Prime” positions – inflated salaries for little or no work should be eliminated.

     Desirable positions should be fairly distributed based upon sonority and merit. Training
for those positions should be fair and based upon objective criteria that will reduce –
rather than increase – the lack of diversity in the Port.

    Secret ballot elections should be held for shop stewards positions. These positions should
be for a fixed term of years with a clearly delineated process for recall and removal.

    Shop stewards should be assigned the same responsibilities and be paid the salary as their
co-workers. While time off should be given for the purpose of conducting union business,
any additional compensation for such work should be paid by the union under strict rules.

   All elected shop stewards should be trained as to the provisions in the applicable
collective bargaining agreements and their responsibilities in enforcing them.


 Check-in of checkers and longshoreworkers by the timekeeper should be done in a
manner that capable of being audited, which takes advantage of technology and does not
highly compensate favored individuals for little or no work.

Click here for link to complete report.  It is worthy reading.

Carriers continue to collude

It's difficult for carriers to give up the long held practice of colluding on rates.   In the past
it was legal, but no longer.

From The Journal of Commerce

Antitrust investigation also includes car carriers

CSAV said it and some of its employees have received subpoenas from U.S. government authorities and the Competition Office of Canada in connection with an investigation under antitrust law that includes it and a group of car carriers.

Although the Chilean carrier did not identify the car carriers that are also being investigated, they may be among the 10 Japanese, South Korean and Norwegian shipping lines being investigated by the Japan Fair Trade Commission.

CSAV said it notified the Chilean Securities and Insurance Supervisor of the investigation and that its management “has dedicated itself to gather information.” It said its board of directors has instructed the company management to provide maximum cooperation in connection with the investigation.

“The investigation seeks to inquire into the existence of antitrust law violations related to cooperation agreements on prices and allocation of clients between car carriers,” CSAV said.

Additional charges if there is a strike.

From The Journal of Commerce

Surcharges will take effect if ports shut down in labor dispute

Several container ship lines have announced congestion surcharges that will take effect if East or Gulf Coast ports are closed in connection with the International Longshoremen’s Association contract expiration.

The carriers are required to provide 30-day notice of the surcharges, which will be rescinded if the ports stay open. Among the announced surcharges:

-Maersk, for all shipments to from the U.S. and Canada: $800 per 20-foot container, $1,000 per standard 40-footer, $1,125 per 40-foot high-cube, and $1,266 per 45-foot container.
-Cosco, for shipments between Asia and from the U.S. and Canada: $800 per 20-foot container, $1,000 per standard 40-footer, $1,125 per 40-foot high-cube, and $1,266 per 45-foot container.
-NYK Line, for shipments to the U.S. from Asia, the Indian subcontinent and Australia: $1,000 per container.
-Hanjin, for shipments to and from U.S. and Canadian ports, $800 per 20-footer, $1,000 for other sizes.

I don't really know how they can justify these as "congestion surcharges", because no one knows
for sure what ports will be congested.  I really think these should be filed under "strike surcharge",
but of course there could be lots of service contracts which would be exempted from a strike
surcharge, although that would have been pretty foolish on the part of the carriers.

The other thing I would point out...notice how all these charges are "per container", which is
standard in the industry, EXCEPT for the ILA charges.   (see my previous post)
Idiots.

How the ILA gets paid

Contract negotiations between the ILA (union for the longshoremen...and they are mostly men),
and the representatives for the ocean carriers resume next week, thought it would be
interesting to look into their current contract.

The ILA load and discharge vessels, and move the containers around the terminals, at U.S. East and
Gulf Coast ports.

I don't know if there are any ships worked by the ILA which are not containerized, or ro/ro
(roll on-roll off cargo).  I doubt it.
But yet, the union has not conceded to change their pricing based on containerization.  They
still use an outdated method of charging some of their charges based on weight....and not just
weight, but the commodity.  This is used to fund what is called the "Container Royalty Fund".
I don't know the entire history of this fund, but most likely it came into being when
ships went from bulk to containers.

The calculation using weight and commodity  is a throw back to the truck tariffs, which
disappeared around 1980 as trucking was deregulated.  In fact, when the ILA comes to
your office to audit this report, they drag in an old trucking classification book.

If you want to know more about this, I found a bit of the history at ftc/gov.  Click here for the link.

The basis for the calculations is so convoluted and complicated that many carriers hire outside
companies (I think they are old retired ILA guys...but don't quote me on that), to file their reports.
It's something which is very difficult to capture from the computer system.
 Here's what is says in the master contract regarding Container Royalty Payments

.RULE 10 – CONTAINER ROYALTY PAYMENTS
The two Container Royalty payments, effective in 1960 and 1977
respectively, shall be continued and shall be used exclusively for
supplemental cash payments to employees covered by the
Management agreements, and for no other purpose. The remaining
royalty payment effective in 1971, also shall be continued and shall
be used for fringe benefit purposes only, other than supplemental
cash benefits, which purposes are to be determined locally on a portby-
port basis. The Container Royalty payments shall be payable only
once in the continental United States. They shall be paid in that ILA
port where the container is first handled by ILA longshore labor, at
longshore rates. Containers originating at a foreign port which are
transshipped at a United States port for ultimate destination to another
foreign port (“foreign-sea-to-foreign-sea containers”) are exempt
from the payment of container royalties. Container Royalty payments
shall be asserted against all containers moving across the continental
United States by rail or truck in the foreign-to-foreign
“LANDBRIDGE” system.

This is in addition to the hourly wage paid to the employees, which ain't small
change.

Here is the link to the Master Contract of the ILA which was signed in 2009.   Click here.http://www.ilaunion.org/pdf/MasterContractAndMemorandumOfSettlement.pdf

I'll be posting about it and other things about the ILA over the coming days.

ILA and the Mafia

The ILA has a long history of association with organized crime.   It seems everyone has just
accepted this is the way it is, because they certainly have not cleaned it up, although every once
in a while The Waterfront Commission does something to justify their existence.

This was posted on their web-site.   Click here for the link.

Longshoreman Indicted for Multiple Counts of Perjury Suspended by Commission
August 1, 2012
           The Commission voted to temporarily suspend Dominick Dinapoli's registration as a longshoreman pending an administrative hearing on charges based upon his five count indictment for perjury. Dinapoli has been charged with testifying falsely in a Commission investigation regarding Port personnel associating with an organized crime figure and another career offender. The notice of hearing, approved today by the Commission, charges that Dinapoli violated the Waterfront Commission Act by associating with career offenders, convicted racketeers, and members or associates of organized crime groups, including Mario Gallo (an associate of the Bonanno and Lucchese crime Families), Samuel Santiago (a member or associate of the Latin Kings), and five other career offenders.
           The criminal case is being prosecuted by the Manhattan District Attorney's Office.

A big part of the problem with the contract negotiations which will resume shortly, is too many people
are concerned if they cause the union problems, they will be wearing cement shoes in the river.

This is not to be taken lightly.   I know of  people who were threatened by the ILA.  They gave in.

The negotiations really should be moved out of the NY/NJ area.

           
           

ILA and the Waterfront Commission

Below is part of the letter from USMX (who is negotiating with the ILA).  Apparently the ILA
thinks (or maybe it's true) that all they have to do is threaten to strike and they will get what they want.

What I don't understand is the comment in the second paragraph about the Waterfront Commission
of New York and New Jersey.  What's this all about?   The contract covers all of the US East/Gulf
ports.   Is the Waterfront Commission still influenced by the mafia?   

When we met during the week of August 20th, USMX presented the issues that we believed
were critical to successfully reaching an agreement. Those issues all center around inefficiencies
that have crept into our operations over the years. I’m referring to archaic work rules and
manning practices, and the system of guarantees and overtime pay practices that result in
millions of dollars being paid for time not worked. These inefficiencies are causing many of our
ports to become prohibitively expensive, harming our competitive ability and threatening the
long term viability of our operations. USMX was hopeful that we would receive the same
consideration from the ILA as we had given it on its critical issues. Instead, our presentations
were simply rejected without any consideration, and when management objected to this lack of
consideration, the ILA responded with a threat to strike.

Many of these issues are the same ones cited in a recent report compiled by the Waterfront
Commission of New York and New Jersey. I’m somewhat at a loss to understand why the ILA
would appear to be willing to have an outside agency attempt to force a solution on the parties,
rather than have the parties address the issues in the collective bargaining arena, at the
bargaining table, where they properly belong.

click here for link to complete letter

ILA Wages

The ILA goes back to the bargaining table next week.

The United States Maritime Alliance is the group negotiating with the ILA.  This is a group which
represents the carriers, who pay the ILA.   I don't really know of another industry where the
negotiations are not directly between the employer and the employee, so if you know of an
example, post a comment.   It would really seem more logical to have the ILA paid by the
terminal, and the terminal would charge the carrier for the total cost to work a ship.  But,
that's just silly me talking.

Anyway, the carriers have always given in to the ILA in the past, because, after all it's a big
group and it's difficult for a few carriers to convince all, that they need to take a hardline
position and let the ILA strike.  After all, it would really cause a lot of problems for everyone,
and cost a lot of money.   However, times are tough, and maybe now the carriers will
at least ban together, let them strike, and then pass on the additional costs of diverting cargo to the importers
and shippers.

If I had a contract with a carrier, I would certainly be looking at the "strike clause".

Below is from the web-site of the USMX  (United States Maritime Alliance).
As it is said "nice work if you can get it".   I guess these folks do!

Longshore workers are among the best paid union workers in U.S.

Longshore workers have a superior wage and benefits package that places them among the best paid union workers in the country. ILA members on the East and Gulf Coasts earn an average of $124,138 annually in wages and benefits. In wages alone, they make $50 an hour, more than double the average hourly wage of about $23 earned by all union workers in the United States, according to the U.S. Department of Labor’s Bureau of Labor Statistics.
ILA members also have one of the best healthcare plans in the nation, paying no premiums for family medical, dental and vision coverage and only minimal co-pays.  

click here for link to web-site

What's Up?

Or, as the kids say "wasup?".   Meaning, what is new and different?

In the shipping industry, it's not so much what is new, as everything is staying the same.

Carriers keep saying, "OK, it's going to get better", and it does a little, and then  falls back.

I don't know how long they can hold on, but I have been surprised many carriers haven't been forced
to sell out or close down by now.   I think there are still a lot of investors with money, and with
no other options for a good return, are willing to wait it out with shipping.

And shipping does have very, very, long business cycles.  This is the reason only the ones
with "deep pockets" really last through the decades.  

I guess the biggest news recently is the ILA  (International Longshoremen Association),
which is the union which controls the docks on the East Coast of the U.S., has a new
contract coming up for renewal.  They are now negotiating, and talks recently broke down.

It will be really interesting to see if the carriers have the guts to hold the line.  In the past they
 never did, as they didn't really have any other options to move their cargo.   The ILA has a lot
of power, and even blocked ports in Canada from handling ships which tried to divert..

But now everyone is hurting for money, and the U.S. ports are the most expensive in the world.
That's because the union has not allowed new efficiencies, which would allow reduction in staff.

I don't know if it's still true, but it wasn't that long ago that there was still a union position for "water boy"...
someone who took water to the working longshoremen.   Crazy, huh?

The other item of interest is the price of oil.  It topped $100 the first of the year when everyone thought
the economies were improving (and hedge funds were trading in oil), but then it dropped,  and
then came back up.  It's in the 90's now.  It should really be lower, but there is too much manipulation
in the market.

So, that's wassup.

Hope ya'll  (that is U.S. Southern talk for "you all") are doing well. 

Will ocean carriers hold the rates?

 The Journal of Commerce Online - News Story- this analyst believes the carriers will finally
maintain the fortitude necessary to not decrease rates, even when there is excess space.


This is a nice thought, but somehow I don't think all the carriers are this strong willed, and
as soon as one breaks rank, the others will follow.

These next 6 months will be worth watching. 


This is from the The Journal of Commerce

RS Platou Markets analyst doubts container carriers will engage in rate war

Concerns over a slump in container freight rates are overstated because lines are desperate to avoid a rate war and will suppress box slot supply to maintain profits, according to one leading expert.
Rahul Kapoor, a Singapore-based shipping analyst at RS Platou Markets, said concerns about demand were valid but he doubted whether carriers, after already booking poor results in the first quarter of this year, would resort to the same market-share-seeking pricing tactics that pushed them to the brink of collapse late last year.
“We believe the concerns of a rapid decline in freight rates from current levels are greatly exaggerated,” he said, adding that he thought carrier earnings had turned a corner in the current quarter and the industry would see modest profits over 2012.
“We do not see a sharp decline in rates as we believe that market share fights are no longer an option even for the biggest player, Maersk Line,” he said.
“Our view is that the industry cannot fund another price war, the cash buffer in 2012 is absent unlike the start of 2011 when the industry was coming out of a record 2010.”
The formation of four alliances controlling some 85% percent of weekly Asia-Europe capacity should also help maintain liner discipline.
“The alliance partners are not incentivised to undercut prices and benefit from better capacity utilisation and cost efficiencies,” he said.
This would see lines idle ships again after the European peak season, creating a buffer on active supply.
“We expect Asia-Europe spot rates to find support at $1,500 per TEU and see rates closer to those levels for the remainder of the year with still some upside left for Transpacific rates,” he said.
He was positive on trans-Pacific demand, with a demand recovery gaining a foothold as a nascent housing market recovery boosts imports, but warned there remained the possibility of negative demand growth on the Asia-Europe trade.
“A resolution of the European crisis remains the key for global container shipping recovery,” he said.

CMA CGM downgraded by S & P

Update - see post CMA CGM- 2015 3rd quarter results

The Journal of Commerce reports

S&P Downgrades CMA CGM Credit Ratings

Peter T. Leach, Senior Editor | Jun 14, 2012 12:50PM GMT

The Journal of Commerce Online - News Story 

|

Issues ratings remain on CreditWatch

Standard & Poor’s Ratings Services on Thursday lowered its long-term corporate credit rating on CMA CGM’s debt to “CCC plus” from “B minus”, saying its liquidity position deteriorated in the first quarter of 2012.
“We expect that it will remain under strain over the coming months in the absence of corrective actions,” S&P said in its announcement.
The French carrier posted a first-quarter loss of $248 million earlier in June but said it expects to make a full-year profit.
S&P also lowered its issue ratings on CMA CGM’s debt to “CCC minus” from “CCC”. The ratings remain on CreditWatch with negative implications, “reflecting the possibility of another downgrade within the next three months.”
“The recovery rating on the debt is ‘6’, indicating our expectation of negligible (0 percent to 10 percent) recovery in the event of a payment default,” S&P said.

CMA CGM has stated they expect to make a full year profit, but in my opinion, this is wishful
thinking.

Rough Seas Ahead

Unfortunately 2012 will be a rough year again for shipping companies.

There is still too much tonnage coming on stream, and not enough being scrapped.

As previously stated, expect to see more VSA's (vessel sharing agreements), and
IF the carriers are smart they won't dramatically increase tonnage. I think Maersk
has had a change of heart with swearing they will maintain market share at all
costs, but who knows. They tend to flip-flop quite a lot.

And the price of oil will weigh heavily on the profits of companies. It's not easy
to get an increase in bunker surcharges when there is too much capacity.

The price of oil is coming down slightly, but I don't think we will see a big drop.
I continue to predict oil will be around $100.00 a barrel for 2012.

Investor shuffle for Hapag-Lloyd

TUI has been trying to sell off it's remaining holdings of Hapag-Lloyd.
Bloomberg News has the inside scoop of what might be reported within a couple of days.

The city-state of Hamburg may become the largest shareholder of shipping company Hapag-Lloyd AG, Frankfurter Allgemeine Zeitung reported, without citing a source for the information.

Hamburg may pay 420 million euros ($555 million) to TUI AG (TUI1) to boost its stake in Hapag-Lloyd to more than 37 percent from 23.6 percent, the newspaper said in an advance copy of an article in tomorrow’s edition.

Billionaire shipping magnate Klaus-Michael Kuehne is ready to pay TUI 160 million euros to increase his 24.6 percent stake while insurers Hanse-Merkur and Signal Iduna plan to pay 13 million euros and 7 million euros respectively for shares in the shipping company held by TUI, the newspaper said.

The plans are part of an agreement with TUI that may be completed on Feb. 14, FAZ said. TUI’s stake in Hapag-Lloyd will probably shrink to around 20 percent from 38.4 percent, the newspaper said.

Daniel Stricker, a spokesman for Hamburg’s financial authority, and Robin Zimmermann, a spokesman for TUI AG (TUI1), both said separately that TUI and Hamburg-based Albert Ballin’s investment group, which comprises Hamburg’s state government, Kuehne, Signal Iduna, Hanse-Merkur, M.M. Warburg & Co. and HSH Nordbank AG, are in “advanced talks.”

Details reported on the stakes are “pure speculation,” said Stricker, who also said he can’t exclude that TUI may make an announcement on a possible agreement on Feb. 15 at its annual shareholder meeting.

Drewry Forecast

The Journal of Commerce gives a synopsis of the recent report from Drewry,

giving their forecast of the container industry.

They think that if carriers don't lay up tonnage by the mid of 2012, there will

be severe consequences. I think there is some truth to this, but I also think

the big carriers are going to try and play their hand and force out the smaller ones,

who really should have gone bust in 2009. We shall see

Here's the article from the Journal of Commerce.

Container shipping lines could lose as much as $5.2 billion in 2011 despite a projected growth in global demand of 6.5 percent, according to Drewry’s latest quarterly Container Forecaster.

Drewry based its dismal forecast on carriers’ third-quarter losses and industry fundamentals, which have deteriorated sharply since 2010, when carriers’ earned estimated profits of $20 billion.

Vessel overcapacity, poor headhaul growth on the major east-west routes and the continued fight for market share among the largest carriers caused spot rates to fall by more than 50 percent on the key headhaul routes by the end of 2011.

Even attempts by carriers to cull capacity during November and December did not lift rates by any meaningful margin. Spot rates improved a little as of early January, but this is still likely to be a temporary phenomenon driven by the annual spike before Chinese New Year.

The New Year will be another challenging year for liner operators as delivery of big ships will continue to be a problem and carriers’ future lay-up strategies will dictate if they make money or not. “We believe that at the current burn rate, carriers’ cash reserves will run out during the second half of 2012. If they do not put a substantial amount of tonnage into lay-up by this time, the consequences could be dire,” said Neil Dekker, Drewry’s head of container research.

The industry will continue to change its structure as all stakeholders adapt to the difficult conditions, but Dekker does not foresee any company acquisitions. “Consolidation is more likely to happen through the disappearance of small players,” he said.

Drewry said the current supply/demand fundamentals on the key east-west trades are not strong enough for carriers to push through any sustained revenue increases. Some shipper contracts have been signed on the Asia-Europe trade this year for around $1,100 per 40-foot equivalent container unit including all surcharges, levels that are below break-even.

At the moment, relatively few vessels from suspended services are being laid up or idled, with most being re-chartered or absorbed into other routes. Drewry estimates that idling could reach as much as 8 percent of the global fleet during the second half of 2012, which would be equal to about 1.3 to 1.4 million 20-foot equivalent units.

“Carriers will at some stage in 2012 be forced to idle tonnage, even if the lead players are showing no inclination to do so at the moment,” Dekker said. “This will enable a partial recovery in spot rates during the second half of this year.”

Oil Price History

In my predictions I said oil will be between $80 and $130 a barrel in 2012.

I disagree with Byron Wien, who predicts oil will drop to $85 a barrel in 2012. He missed his prediction for 2011 when he said oil would climb to $115 a barrel. Unless of course these predictions are based on a one time occurrence, and not a trend or average.

From Bloomberg News

Blackstone Group LP (BX)’s Byron Wien, whose prediction for the U.S. economy and stock market in 2011 proved too optimistic, said oil will slip to $85 a barrel this year and the Standard & Poor’s 500 Index will exceed 1,400.

Here is the oil history for WTI for the last 3 years.
click here for the source, which gives a much longer history.


2009-01-01 41.740
2009-02-01 39.160
2009-03-01 47.980
2009-04-01 49.790
2009-05-01 59.160
2009-06-01 69.680
2009-07-01 64.090
2009-08-01 71.060
2009-09-01 69.460
2009-10-01 75.820
2009-11-01 78.080
2009-12-01 74.300
2010-01-01 78.220
2010-02-01 76.420
2010-03-01 81.240
2010-04-01 84.480
2010-05-01 73.840
2010-06-01 75.350
2010-07-01 76.370
2010-08-01 76.820
2010-09-01 75.310
2010-10-01 81.900
2010-11-01 84.140
2010-12-01 89.040
2011-01-01 89.420
2011-02-01 89.580
2011-03-01 102.940
2011-04-01 110.040
2011-05-01 101.330
2011-06-01 96.290
2011-07-01 97.190
2011-08-01 86.330
2011-09-01 85.610
2011-10-01 86.410
2011-11-01 97.210
2011-12-01 98.570

Zim misses deadline to obtain concessions

It's difficult to say how much this will impact Zim's future. If they continue
to lose money, they will need to get cash from somewhere. Obviously the banks who lent them money don't want to make the required adjustments at this time.

From The Journal of Commerce

Zim Integrated Shipping Services failed to meet a Dec. 31, 2011 deadline to obtain concessions or amendments to financial covenants with its creditor banks, the Israeli ocean carrier’s parent said.

As a result, Israel Corp. may have to record Zim’s debt on its balance sheet as short term debt for the fourth quarter of 2011, which in theory means the shipping operation could be liable for repayment immediately rather than over the long term.

The change in the status of the debt is technical but it could affect Israel Corp.’s financial ratios and financial covenants with its own banks, according to Israeli reports.

Zim has no financial covenants that are based on classifying debt as short term or long term, Israel Corp. said in a statement to the Tel Aviv stock exchange.

Zim is believed to owe around $2 billion to mainly foreign banks.

Zim swung to a $66 million net loss in the third quarter of 2011 from a year earlier profit of $37 million swelling losses for the first nine months to $245 million compared with a $42 million loss in the 2010 period.

Israel Corp, which owns more than 99 percent of Zim, injected $50 million into the carrier in November and the controlling Ofer family provided an additional $50 million. Israel Corp contributed $450 million to the carrier’s restructuring in 2009

.

Forecast for 2012

It's time for the predictions for 2012!

I have done fairly well with my forecasts the last few years.

In 2009 I said we would be in a recession until 2011.

Of course, the word "until" is a bit subjective. 2011 is over.

The U.S. appears it is now starting to come out of the recession,
but things in Europe are looking worse.

I predicted oil prices would be between $50-$100 a barrel. That has
proved to be pretty accurate, although I certainly gave myself a wide
variable!

So, for 2012, what lies ahead?

It's really a tough call. The U.S. no longer is the biggest driver
to the world economy. China is slowing down.

Having said this, this is my best guess.

Shipping companies will continue to struggle. Many of the Greek companies
operating bulk ships will go bust. These are the ones who have their stocks
listed in the U.S., so the investors will get burned.

As for the container companies, that's a difficult call. Everyone has
formed their alliances in an effort to reduce costs. But I don't
think they are managing to control the capacity as will be needed, to get
their rate increases to stick. So, I think these VSA's will allow most
of the carriers to survive 2012

However, I believe ZIM and CSAV might be in jeopardy.
It depends if they can get more money from somewhere. And who
knows the answer to that? There is a lot of cash sitting on the sidelines, looking for a decent investment.

I think the price of oil will be between $80 and $130 a barrel.

I predict the Euro will survive, but the U.S. dollar will once again become stronger. Everyone talks about how bad off the Euro is, but I remember when
it and the dollar were on par.

I think the middle class in China and India will continue
to grow, and living conditions there will improve. So, that at least
is some good news for 2012.

Happy New Year!