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.