Reynolds Hutchins, Associate Editor | Dec 08, 2016 3:54PM EST
Additional reporting Rick Eyerdam
An agreement between the South Florida Container Terminal and Port of Miami Terminal Operating Company could be the first of many at US ports.
WASHINGTON — US regulators are reviewing a proposed agreement between two marine terminal operators at the Port of Miami that would allow the terminals to jointly negotiate terms and conditions with container lines — a first for the United States.
Although the port of Seattle and Tacoma came together operationally as the Northwest Seaport Alliance in 2015, this is the first time two marine terminals have sought the Federal Maritime Commission’s blessing to create their own alliance. Miami’s South Florida Container Terminal and Port of Miami Terminal Operating Company want to jointly negotiate, set, and approve terminal rates, charges, rules, and regulations, and rates of return between the terminals.
South Florida Container Terminal is an APM terminal, in essence, with the added benefit of a common user terminal designation. POMTOC was PortMiami’s only common user terminal until the port made all three terminals common user, including the Sealand Terminal.
But as Maersk withdrew from its APM terminals and sold interests in them, the benefit of Maersk’s exclusive calls at it’s terminals was displaced by a need for greater warf space and increased need for limited SuperpostPanamax cranes. Rather than compete for the limited resources at PortMiami and drive down costs in the competition the two adjacent terminals decided it would be easier to collaborate.
The terminals’ request parallels the vessel-sharing agreements container lines have formed to pool their cargo in larger ships in order to mitigate overcapacity and broaden their networks. Through the alliances, the container lines still compete with fellow members, and are forbidden from jointly marketing, selling, or contracting with third-parties, such as tug operators and stevedores.
According to FMC Commissioner William Doyle, agreements such as that in Miami are a direct response to the Ocean Alliance, a VSA between China Cosco Lines, Evergreen Line, CMA CGM, and Orient Overseas Container Line set to take sail in April.
The Miami terminals did not respond to requests for comment from JOC.com.
“Since the Ocean Alliance is allowed to jointly negotiate as an alliance with marine terminals who agree to do so, some marine terminal operators and port authorities may want to explore options for entering into their own alliances where they could jointly negotiate terms and conditions with the ocean carriers,” Doyle said at a North Atlantic Port Association meeting outside of Washington, DC. last week.
FMC commissioners say they have also been approached by others, including the South Carolina Ports Authority, regarding a potential partnership with another Southeast port operator.
“We’re absolutely going to have more agreements,” FMC Chairman Mario Cordero told JOC.com this week.
Doyle said the Miami terminals’ discussion agreement is a step beyond that of the Northwest Seaport Alliance, which gained the FMC’s green light in July 2015, because it will also allow those terminals to jointly negotiate terms and conditions for services with the ocean carriers.
Language in the proposed agreement includes conference and rate-setting authority that would allow the terminals to discuss and agree on matters of rates, charges, rules, and regulations through joint or individual marine terminal operator agreements with ocean common carriers. Additionally, the proposal would authorize the terminals to meet individually or as a group with one or more users, including ocean common carriers, to discuss any matters related to rates, charges, rules, and regulations.
The agreement appears to allow the terminals to jointly meet with a group of ocean common carriers, like an alliance grouping, and come to a joint agreement for services, Doyle said.
The draft agreement submitted on Nov. 16 is still under review, but has received some positive feedback from the likes of Doyle and Cordero. As with vessel-sharing agreements and the agreement for the Northwest Seaport Alliance, the FMC is expected to publish the language of the agreement for a public comment period. The FMC will then have 45 days to request additional information before making a decision.
“At the end of the day, you can’t have major ports in the same region independently trying to address issues in the supply chain,” Cordero said. “This agreement allows the FMC to monitor this in such a way that it doesn’t border collusion or anticompetitive behavior.”
Contact Reynolds Hutchins at email@example.com and follow him on Twitter: @Hutchins_JOC.
Friends and associates:
Early in June things were looking good. I was preparing my book marketing agenda (Inside NASA’s Quest for Life in Space) with hopes of appearing at the Miami Book Fair.
The recurring pain in my legs was improving to such an extent I was ready to start working on the stationary bike. And I quit smoking! Then, at the end of June I had a stroke.
Baptist Hospital was wonderful and my recovery was swift with few residual signs of damage. I had problems with complicated thought and recovering the correct terms for concepts and nouns, still do. The stroke knocked the book marketing plans akimbo because I could no longer speak with confidence on behalf of my book. That situation is improving, however.
The stroke had another unexpected consequence. When I began to recover enough to get out of bed while still in the hospital, my leg pain was excruciating. Fortunately, a wise attending ARNP suggested an MRI and from that MRI, I learned that separate from the stroke, I also have a cyst on my spine and spinal stenosis.
Since June I have been relatively immobile, taking meds four times a day to stabilize my blood pressure, watching TV, sleeping and going for tests leading to spinal surgery. Thank God for American Pickers!
Now that the blood pressure is stabilized and the tests are concluded I have scheduled my surgery for Dec. 28th at Baptist. They will separate my spine, cut out the cyst and offending bone/vertebrae, emplace a spacer then lock it all in place with titanium bolts. It seems a daunting procedure but I am assured it happens all the time with a high rate of success.
The surgery will be followed by three or four days of hospitalization while the pain is controlled then weeks of rehab at a Baptist-related facility.
My doctor made no bones about my situation. I am a 68-year-old car with flat tires and a screwed up drive shaft. He can fix the tires and straighten up the drive shaft but I am never gonna be a new car again.
My wife, Debbie has been an anchor throughout all of this. She smiles through it all and wakes me each morning with the pitter patter of my pills and a look of encouragement that could never be replaced. So I’m blessed, truly blessed.
Still, wish me luck; and for those of you who pray, add me to your list.
According to vesselsvalue.com, Hamburg Süd’s fleet of 44 vessels, all operating north-south services in the Latin America market, is valued at $1.44bn.
By Mike Wackett 01/12/2016
Maersk Line today announced it is to acquire Hamburg Süd in a cash deal one analyst claims could be worth up to $5bn.
“We estimate the takeover price in a range from $3bn-$5bn, which would increase Maersk’s leverage from 1.2x to around 1.6x full year 2017 EBITDA,” said Jeffries in a research note.
Maersk’s acquisition of the world’s seventh-biggest carrier would lift its capacity to 3.8m teu, from its current 3.1m teu, giving it an 18.6% global share.
The financial implications are harder to gauge, given the highly secretive nature of Hamburg Süd as part of Germany’s private Oetker Group.
“Profitability of Hamburg Süd hasn’t been disclosed, but we suspect it is depressed in the low container freight rate environment,” Jeffries said.
“As a result, the takeover would only create value if profitability would recover, through a combination of significant cost synergies and a potential recovery of container freight rates,” added the analyst.
The deal, following a recent wave of industry consolidation, will leave only 13 global carriers, compared with 20 at the start of the year.
According to vesselsvalue.com, Hamburg Süd’s fleet of 44 vessels, all operating north-south services in the Latin America market, is valued at $1.44bn.
The carrier recently made a foray into the east-west trades, but Maersk Group chief executive Soren Skou said today that “no decision had been made” on whether these services would continue after the completion of the acquisition of the German carrier at the end of next year.
Mr Skou told The Loadstar this morning that the “strong Hamburg Süd, Alianca and CCNI brands” would be maintained in Latin America, subject to regulatory approval, and that the east-west business “would fall within the 2M [alliance]”.
According to Alphaliner, Hamburg Süd purchases more than 2,000 slots a week from UASC, Cosco and APL as part of its global liner service offering on the Asia-Europe, transpacific and transatlantic trades.
These slot-charter agreements are set to end next April with the formation of the new vessel-sharing alliance structure, and it is difficult to see how Hamburg Süd could maintain its east-west market.
“Hamburg Süd is a very well-run and highly respected company with strong brands, dedicated employees and loyal customers,” said Mr Skou. “It complements Maersk Line, and together we can offer our customers the best of two worlds, first of all in the north-south trades.”
Chairman of Hamburg Süd Group, Dr Ottmar Gast, said the decision to “divest its engagement in shipping”, which can be traced back for 80-years, “was not an easy decision for my family”.
A separate statement from Oetker Group said continuing “active participation” in the shipping sector “would entail an even higher capital requirement”, which would “make the balancing of risk within the Oetker Group business portfolio more cumbersome”.
It added that in its view Maersk was “the ideal partner to preserve and further develop the shipping company’s successful business model”.
Mr Skou confirmed that the Hamburg Süd head office in Hamburg would be maintained, although he did not elaborate on integration of offices around the world, or the carrier’s 6,000-strong workforce, other than to pledge a “light touch”.
Mr Skou also hoped for synergies for Maersk’s terminal operation, APM Terminals, from the takeover.
He refused to be drawn on the acquisition price, other than to confirm that it was an “entirely cash transaction” with “no need to sell assets”.
Subject to obtaining regulatory approval from China, South Korea, Australia, Brazil, the US and the EU etc – a process expected to last until the latter part of next year, Maersk hopes to close the transaction by year-end 2017.
Product tankers, tramp, and other shipping-related operations made up around 7% of Hamburg Süd’s $6.7bn revenue in 2015. Mr Skou said there were “no plans for them as yet”. It is assumed they will be disposed of shortly after the takeover.
Oct 27, 2016
Cuba in the 40s and 50s was a playground for the rich and famous. The country’s economy was fueled by U.S. investment: some legal, some not so legal. A rich trade in coffee and tobacco found its way to America and the Cuban middle class imported everything from wearing apparel to washing machines. All that ended in 1959 when rebels under Fidel Castro tossed out Batista and threw Cuba into the dark ages.
Castro and Cuba’s Economy
Upon seizing power, the government nationalized factories and plantations; cutting free enterprise and reducing trade with the West. Commerce with the United States ceased to exist. During the next five decades policies of isolationism and heavy reliance on aid from China and Venezuela further reduced Cuba’s trade with the outside world. A once vibrant import and export market shrunk, taking infrastructure with it and placing the nation’s transportation resources far below those of the West.
Cuba’s Emerging Market
Economic reform begun under Fidel’s brother Raul led to increased privatization of business and growth within the middle class. A 2013 Brookings Institute study indicated 30 to 40% of Cuba’s population could be considered middle class when judged against other Latin nations. The report further acknowledged that consumption of foreign goods hampered by trade restrictions with the U.S. would change once embargos were lifted. Cubans aspire to own many of the products other middle class societies take for granted.
The Healing Process Continues
In December of 2014 President Obama and President Raul Castro announced the normalization of relations between Cuba and the United States. This step marking the beginning of trade recovery comes at a time when ocean carriers are placing larger vessels directly in Cuba’s path. What this will mean to Cuba’s economy depends on how much development ports and infrastructure will need to be accomplished to bring the nation up to speed.
Under Fidel, Cuba relied heavily on Russian aid to help keep her railway running. After the breakup of the Soviet Union and waning interest from socialist trading partners in Europe, Cuba’s railroad fell into disrepair. In the early 1960s British Rail began funding the purchase of locomotives to upgrade the system. This endeavor was halted by the U.S. embargo. During the early 21st century China and Venezuela invested in the system and modest improvements were made. In preparation for an economic boom that trade with the West might bring, the government is investing $1.3 billion through 2021 to modernize its railroad. In addition to track work and new engines, the national railway will add computers and upgrade its communications with a fiber optic network.
Are Cuban Sea Ports ready for Big Ships?
As trade between Cuba and the Western Hemisphere increases, containers will hit the quays at the nation’s ports. There are three container ports in Cuba: Santiago de Cuba, Havana and Mariel.
Santiago de Cuba, a Traditional Port
The City of Santiago de Cuba was established by conquistadors in 1516. The port grew as the city prospered and modernized to handle cargo as needed. In 2015 Chinese investments totaling $120 million funded expansion of the Guillermón Moncada Port to create a multipurpose facility. Scheduled for completion in 2018, the new terminal will feature 758 linear feet of pier capable of handling smaller Panamax class vessels up to 40,000 dwt.
Port Havana Maintains its Footprint
Looking at the profile for Havana, it becomes evident the government is content to maintain status quo. Port of Havana Container Terminal features 1476 feet of berth with a 32-foot depth alongside. Three gantry cranes and one mobile shore side crane are Panamax class. Operating on 45 acres, the port appeals to local business because of its proximity to the city center and liberal hours of operation. Yard equipment is sufficient to handle what will soon be considered small container ships operating in the Caribbean trade. It becomes obvious that the Port of Mariel located less than 35 miles from Havana will receive funding needed to bring that facility up to speed.
Mariel, a rising star on Cuba’s Map
Nine hundred and sixty three nautical miles north/northwest of Cristobal lies the Port of Mariel Cuba. Interestingly enough it is only 43 miles north of the Dominican load center of Santo Domingo. In terms of serving the Caribbean, Mariel is in range. Built on the site of an old submarine base, Mariel is big ship ready and the government is aggressively promoting expansion to maximize trans-load cargo. Built in 2014 by the Brazilian conglomerate Odebrecht S.A., the port is operated by PSA Ports International. Four Post Panamax cranes cover 2,296 feet of quay giving the port an annual capacity of 800,000 TEUs. Within the next four years an additional 984 feet of berth will be added supported by two Neo-Panamax cranes. The main channel currently deep enough for Panamax ships will be dredged by 2017 to accommodate VLCS class Neo Panamax vessels. Brazil has helped to finance just under $600 million of the ongoing construction, which will add an additional 5,577 feet of quay and facility upgrades boosting the annual capacity to over 3 million TEUs.
Closer to the U.S. Gulf and South Atlantic than other trans-load points in the region, Cuba will be an asset for carriers looking to connect cargo from intermediary ports to the U.S.
This year the Cuban government and the Virginia Port Authority signed a cooperative agreement to increase trade and establish a direct service between Virginia and Cuba. With deep water, a sizable throughput capacity and Super Panamax Cranes, Mariel’s transition from national to international port is assured. Who will be the first to offer direct container service from Mariel to the United States?
By Gavin van Marle
Prospects of the Cuban port of Mariel capturing US transhipment volumes have significantly improved since the US government last week lifted a ban on foreign vessels calling at US ports within 180 days of calling at Cuba.
The US Treasury’s Office of Foreign Assets Control (OFAC) and Commerce Department’s Bureau of Industry and Security (BIS) issued a general licence, waiving the restriction as part of the ongoing programme to restore relations between the two countries.
Treasury Secretary Jacob Lew said: “President Obama’s historic announcement in December 2014 charted a new course for a stronger, more open US-Cuba relationship. The treasury department has worked to break down economic barriers in areas such as travel, trade and commerce, banking, and telecommunications.
“Today’s action builds on this progress by enabling more scientific collaboration, grants and scholarships, people-to-people contact, and private sector growth. These steps have the potential to accelerate constructive change and unlock greater economic opportunity for Cubans and Americans.”
Secretary of Commerce Penny Pritzker added: “These amendments will create more opportunities for Cuban citizens to access American goods and services, further strengthening the ties between our two countries.
More commercial activity between the US and Cuba benefits our people and our economies.”
The lifting of these restrictions is also key to the development of the deepwater container terminal at Mariel, close to the Cuban capital of Havana, which has set itself the target of winning US transhipment cargo from the new neo-panamax vessel sizes now using the enlarged Panama canal.
At the recent TOC Americas Container Supply China event, Charles Baker, general director of TC Mariel, the PSA International-managed container terminal at the port, said lifting the embargo would “allow shippers and their 3PLs to reconsider the overall cost of their deepsea supply chains”.
While some ports on the US east and Gulf coasts have invested heavily in dredging access channels to accommodate the larger ship sizes, others that have yet to complete these programmes, and Mr Baker claimed the Cuban port was ideally located to serve as a first port of call on Asia-US east coast services and act a as a feeder point for ports such as Mobile and New Orleans.
“The normalisation of trade between Cuba and the US is something that is good for the entire region because more investment will come into the region from US companies,” he added.
Up for Grabs - Trans-loading in the Caribbean
Before its expansion, the Panama Canal was sending 4,500 TEU ships into the Caribbean with containers for trans-loading and final destination. Larger 8,500 TEU vessels transiting the Suez brought a little more volume to island hubs.
Terminals in Jamaica and the Dominican Republic became trans-load centers for the Caribbean and US port range, while facilities in Colon could swing cargo to a wide range of destinations including South America.
Trans-shipment in the Caribbean Sea
The port of Kingston, Jamaica is getting a facelift with the infusion of $600 million for upgrades and expansion to Kingston Container Terminal (KCT). Terminal Link, a subsidiary of CMA CGM and the Jamaican Government, entered into a partnership called Kingston Freeport Terminal Ltd. (KFTL). KFTL will operate the port jointly for 30 years before turning the facility back to Jamaica. Terminal Link will invest $460 million on reinforcing 394 feet of the wharf to meet Euro Code standards and dredging alongside 2,625 feet of the quay to 51 feet. The remaining funds will be spent on terminal expansion and upgrades. In addition the government will seek private partnerships to spend $130 million to dredge Kingston’s harbor to accommodate Neo-Panamax vessels arriving from the canal. The government believes partnering with Terminal Link will bring a major dynamic to the table through CMA CGM’s world-class service with strong ties to Caribbean and Latin Markets.
The Dominican Republic
Prior to the canal’s expansion, the Port of Rio Haina in the Dominican Republic was capable of handling trans-load traffic for the region. With just under 1,731 linear feet of usable wharf face, the Puerto Hiana Oriental facility could accommodate one Panamax vessel working it with two shore-mounted cranes. Thirty minutes east of Santo Domingo lay the suburbs of Boca Chica and Andres. On the adjoining coast sits the Port of Caucedo. Operated by DP World this facility is fully capable of handling the largest ships the Panama Canal can throw at it. Opened in 2002 the port had from its inception counted on the growth in traffic an expanded canal would bring to the Dominican Republic. A 3,280-foot quay comprising three berths with 49.2 feet of water alongside each is sheltered from the open sea by 2,952 feet of breakwater. DP World holds a 50-year concession on the facility and intends to expand its capacity from 700,000 TEUs to over one million containers. The consortium of NYK, Evergreen and Hyundai operating joint services in the Caribbean have spent $15 million to create a Caucedo Logistics Center to improve their competitiveness in the region. The Center will coordinate the discharge and trans-loading of containers destined to various ports served by the three partners.
The Colon Connection
While port expansion in Balboa has taken center stage in recent years, the three terminals comprising the Atlantic port of Colon should not be overlooked.
Hutchinson Port Holdings (HPH) Cristobal: HPH operates two terminals in Panama, one on each coast.
Placing emphasis on the cruise industry, Hutchinson added a state of the art berth number 6 to Cristobal Port, which can handle two of the largest ships, which enter or exit the canal. The container terminal has 11 berths with a total of 14,468 feet of wharf. Thirteen Panamax and Post Panamax cranes handle vessels drawing up to 42 feet of water. The facility’s annual capacity is 2 million TEUs.
Manzanillo International Terminal (MIT): Built on the old Coco Solo Sur Naval Base, MIT is operated jointly by Carrix Inc. (SSA Marine) and the Motta and Heilbron families. A multimodal facility, the container terminal is equipped with 19 Post and Neo Panamax cranes on 5,380 linear feet of quay. The current depth alongside is 42 feet but can be dredged to 49 feet in the future. MIT has an onsite logistics park adjacent to the FTZ (Free Trade Zone) and easy access to the Panama Canal Railway. The terminal handles around 3.5 million TEUs per year.
Colon Container Terminal (CCT)
Operated by Evergreen Marine, CCT can handle 2.4 million containers per annum. The depth at the newly completed Berth 4 is 54 feet. Three Neo Panamax cranes discharge vessels loaded with 23 containers across their beam. Plans to deepen Berth 3 and extend both 3 and 4 will bring the total useable wharf up to 2,559 feet allowing the facility to handle two 13,000 TEU ships at the same time. CCT has easy access to the FTZ and near dock connection to the railway.
The Next Generation of Hub and Spoke Shipping
As the Caribbean gears up for Very Large Container Ships (VLCS), ports will have to become more competitive. The winners will be those terminals, which can turn boxes quickly and efficiently. It will require a combination of deep draft, available cranes and skilled labor. Wider beam VLCSs will need cranes with greater out-reach. Crane operators will also have to be conscious of lift and discharge time. Today’s facilities are only achieving 28 to 32 lifts per hour. To turn transition cargo quickly the terminal will need to either increase lifts per hour or add additional cranes to each vessel worked. The container boom is just beginning in the Caribbean Basin. Will that momentum reach the trans-load ports of Latin America?
Intermodal Fortress Investment Group LLC is exploring a sale of Florida East Coast Railway Corp., the coastal freight operator it took private in 2007, according to people familiar with the matter.
Asset manager Fortress is working with Barclays Plc and Morgan Stanley to weigh options for Jacksonville-based Florida East Coast Railway, the people said, asking not to be named as the details aren’t public. The company is likely to attract interest from other private equity firms, infrastructure firms and railway operators, the people said.
A spokesman for Barclays declined to comment.
Representatives for Fortress and Morgan Stanley didn’t immediately respond to requests for comment. The holding company of Florida East Coast Railway—Florida East Coast Industries Inc.—was taken private in 2007 by funds managed by Fortress in a transaction valued at about $3.5 billion.
The fund later spun off the railway operations into a separate company, leaving real estate, logistics and telecommunications assets under the FECI umbrella. Fortress, based in New York, had about $70.2 billion in assets under management as of June 30, according to its website.
Florida East Coast Railway can trace its roots back to 1895, when industrialist Henry M. Flagler bought the Jacksonville, St. Augustine, Halifax, and Indian River railroads to create a transportation route along the state’s coastline. It now operates about 350 miles of freight rail.
A statement from CMA CGM said: “Reflecting on new possibilities, maritime companies can rethink their routes, including that from Asia to the US east coast. For example, on the journey between New York and Hong Kong, the choice to sail by Panama or Suez canal is subtle: there is just one day difference. “Until now, the canal dimensions limited the size of ships and impacted the region’s technological and commercial strategies. With the lifting of such constraints the evolution of vessels is probable, initially from 5,000 to 9,000 or to 10,000 teu or even larger. The traffic is not likely to rise, but volumes in transit will probably increase.” The line added it would now look to develop the Jamaican port of Kingston as its central hub in the region. Last year it signed a $509m deal worth with Port Authority of Jamaica that transferred ownership of its container terminals to CMA CGM on a 30-year build-operate-transfer model. This will see the terminal expanded in two phases, with capacity taken successively up to 3.2m teu and 3.6m teu, and the port’s draught deepened to 14.2 metres by the end of 2016, and then to 15.5 metres. CMA CGM has formed a special purpose vehicle to bid for the project – Kingston Freeport Terminal – comprising its remaining port business, CMA Terminals, and Terminal Link, its container terminal operating company in which China Merchants has a 49% stake. Luc Portier, CMA CGM’s director of studies, projects and development, said: “A widened canal will bring new opportunities for world trade. CMA CGM has foreseen these changes and made Kingston a strategic base: modernisation works will allow the group to operate all larger vessels sailing in the area, and make Jamaica a transhipment hub for the whole sub region.”