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LSCMS Blog

Blog for updates and happenings in logistics in the Asia-Pacific region

December 27, 2011

Shanghai world’s busiest port in 2011

Filed under: China,Logistics,Newsletter — admin @ 2:20 am

China’s financial hub, Shanghai, has remained the world’s busiest container port for a second year, the city government said. The port saw its container throughput hit a record of 30 million standard 20-foot units this year, after it become the No.1 container port and handled 29.07 million units last year, boosted by international trade, the government said in a statement on its website.

The city aims to become an influential financing and shipping hub by 2020 and has rolled out a number of financial products to help exporters and shipping companies manage growing volatility in freight rates.

The Shanghai Shipping Exchange for example,  plans to expand its shipping derivatives market over the next few years after it launched derivatives based on container freight this year.

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December 23, 2011

New fatigue management rule for US trucks

Filed under: Logistics,Newsletter — admin @ 6:06 am

The final rule for truck drivers’ hours-of-service (HOS) was issued by the Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) earlier this week.

The rules changes have received mixed reviews in terms of their potential impact, in terms of its potential for an increase in the cost of doing business, as well as questions from trucking industry stakeholders as to whether or not these rules need to be changed from their current version, which have been in effect since 2004.

The final HOS rule is comprised of the following, according to FMCSA:

-the maximum number of hours a truck driver can work within a week has been reduced by 12 hours from 82 to 70;

-truck drivers cannot drive after working eight hours without first taking a break of at least 30 minutes, and drivers can take the 30-minute break whenever they need rest during the eight-hour window;

-the final rule retains the current 11-hour daily driving limit (the FMCSA was considering lowering it to 10 hours) and will continue to conduct data analysis and research to further examine any risks associated with the 11 hours of driving time;

-truckers who maximize their weekly work hours to take at least two nights’ rest when their 24-hour body clock demands sleep the most—from 1:00 a.m. to 5:00 a.m. This rest requirement is part of the rule’s “34-hour restart” provision that allows drivers to restart the clock on their work week by taking at least 34 consecutive hours off-duty. The final rule allows drivers to use the restart provision only once during a seven-day period; and

– carriers that allow drivers to exceed the 11-hour driving limit by 3 or more hours could be fined $11,000 per offense, and drivers could face civil penalties of up to $2,750 for each offense.

FMCSA officials said that commercial truck drivers and companies must comply with the HOS final rule by July 1, 2013

“Trucking is a difficult job, and a big rig can be deadly when a driver is tired and overworked,” said Transportation Secretary Ray LaHood in a statement. “This final rule will help prevent fatigue-related truck crashes and save lives. Truck drivers deserve a work environment that allows them to perform their jobs safely.”

As has been the case over the last year, the debate over HOS regulations has been somewhat polarizing.

On one side are safety advocates that maintain making these changes is the right and safe thing to do. 

The American Trucking Association has howver blasted the final HOS rule. In a statement by it’s President, he was reported as syaing “What is surprising and new to us is that for the first time in the agency’s history, FMCSA has chosen to eschew a stream of positive safety data and cave in to a vocal anti-truck minority and issue a rule that will have no positive impact on safety. From the beginning of this process in October 2009, the agency set itself on a course to fix a rule that’s not only not broken, but by all objective accounts is working to improve highway safety. Unfortunately, along the way, FMCSA twisted data and, as part of this final rule, is using unjustified causal estimates to justify unnecessary changes.”

Michael A. Regan, president of TranzAct Technologies, chairman of the NASSTRAC Advocacy Committee, and point man for the planned February 1 Washington, D.C. “fly-in,” entitled Stand Up For Trucking, which will lobby Washington policy makers and legislators on the importance of maintaining and improving productivity in the trucking industry, said in an interview that this ruling will present major challenges for the shippers’ supply chains but noted it also cold have been worse.

“It is not as bad as it could have been,” said Regan, “and I don’t think it is over yet. One thing that is going to be very difficult is the change in the restart provision, which will present a very interesting dynamic for scheduling. There is a real incongruity in this decision and that is that the FMCSA says it wants to make the roads safer; as part of that you need to deal with congestion. Yet this rule is structured to maximize congestion after 5 p.m.”

At the end of the day, these rules will increase congestion, costs, and emissions in the interest of safety. Whether they are too excessive remains to be seen and will certainly be a point debated at length over the next 18 months to implementation.

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December 21, 2011

Filipino pilots could lower pilot salaries further

Filed under: Education,Jobs,Newsletter — admin @ 11:48 pm

Air pilot training school Alpha Aviation Group Philippines said it plans to expand operations in the Philippines to exploit the burgeoning demand in the low-cost carrier market, reports Manila’s Philippine Star.

Currently eighty per cent of its graduates fly with Airphil Express, Cebu Pacific, Zest Air and SEAir. International clients also include Air Arabia and Jet Airways, said the report but this expansion could see the school supply pilots to fly for other regional airlines. Like it has done in the maritime sector, qualified pilots from the Philippines could help drive down salaries of pilots for carriers like Tiger, Jetstar and the new low-cost offering from Qantas.

“We have invested in the state-of-the-art Airbus A320 Level D full flight simulator,” said Kunal Sharma, chief operating officer of the flight school at the Clark Freeport Zone in Pampanga.

“This is a multimillion-dollar investment that demonstrates our commitment to the Philippines, Philippine aviation, and training Filipinos for high-paying, professionally fulfilling jobs,” Mr Sharma said.

The company, which operates an Airbus A320 simulator at its four-bay simulator facility, is banking on the projected growth of the local commercial aviation industry. The new flight simulator will provide the company with the capability to deliver 6,000 hours of training annually – enough to train 300 new pilots.

Alpha Aviation Group commenced operation in 2006, and claims to be the world’s largest provider of Multi-crew Pilot License (MPL) pilots. The sector is currently driven by stiff competition among an expanding field of budget airlines, and an equally bullish regional market.

“Graduates of Alpha Aviation Group have established successful careers in the aviation industry. The training we provide is based on international standards, which prepares cadets to work anywhere in the globe,” said Capt Andrew McKenchnie, chief training officer.

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Diesel prices down 4 straight weeks in a row

Filed under: Logistics,Newsletter,Supply Chain Management — admin @ 11:34 pm

Diesel prices in the US market continued heading down, decreasing 6.6 cents to $3.828 per gallon, according to the Department of Energy’s Energy Information Administration (EIA).

This marks the fourth straight weekly decline, following decreases of 3.7 cents, 3.3 cents, and 4.6 cents, respectively, for an 18.2 cent cumulative decline over that period. The price per gallon for diesel fuel has been down five of the last seven weeks. And prior to this four week decline, prices were up a cumulative 12.3 cents over a two-week period. The question on the minds of Logisticians in the Asia Pacific region, is whether we will experience a similar trend in this part of the world.

While prices in the US are trending down on a weekly basis over the past month, it was not long ago that prices were north of $4 per gallon, reaching $4.01 the week of November 21. This represented the first time diesel hit the $4 per gallon mark since checking in at $4.061 the week of May 16.

Additionally, despite the recent weekly declines in the price per gallon for diesel, many shippers have reported they are forecasting for steady fuel increases in their supply chain and transportation budgets should diesel prices continue to hover around the $4 per gallon mark.

This was evident in the results of a recent Logistics Management reader survey, which found that nearly 40 percent of 344 respondents said their average fuel surcharges are 20 percent or more above base rates.

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Malaysian institute & MIT conduct halal study

Filed under: Newsletter,Study & Reference,Supply Chain Management — admin @ 2:56 pm

The Malaysia Institute for Supply Chain Innovation (MISCI) plans to commence a new research project into the halal logistics sector given growing demand for such services, and the need for consistency in maintaining certain food handling conditions.

MISCI was formed earlier this year as a joint venture between the Malaysian government and the Massachusetts Institute of Technology’s Centre for Transportation and Logistics in the US.

“We are engaged in discussions with industry partners and seeking to appoint personnel who are active in the halal logistics space,” said Mahender Singh of the MISCI according to London’s Containerisation International. “Our excellence as a world class centre for supply chain education and research, and the fact that Malaysia is a leading country in the halal trade, puts us in a unique position to understand these fast-growing supply chains.”

Mr Singh said halal logistics represents a major opportunity for manufacturers and service providers. “This is at a time when many companies are searching for new growth opportunities around the globe with two billion Muslims,” he said.

One problem with halal food is that companies handling it need to adhere to Sharia law. The report said that traceability of cargo from origin to destination is becoming a critical concern as it offers a means of monitoring contamination during its journey.

It said that 30 per cent of halal trade is expected to involve food items, and according to Sharia law these products must be kept “clean and pure and segregated from non-halal goods”.

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Index linked container contracts gain popularity

Filed under: Logistics,Newsletter — admin @ 2:39 pm

Large importers and exporters are starting to make greater use of index-linked container contracts (ILCCs) in their freight agreements with ocean carriers, according to Drewry’s Container Freight Rate Insight.

Whilst fixed-rate agreements remain the norm for most annual contracts, index-linked contracts benefit importers and exporters by using external indices to enable price adjustments in multi-year agreements. This would allow contractual relationships to remain in place for longer periods without needing renegotiation when the market changes.

Allowing the price to fluctuate with the market, decouples it from the operational part of the contract, said London-based Drewry. This, it said, reduces the risk of carriers refusing to honour capacity or contract commitments, which can result in rollovers and disruptions to supply chains.

Index-linked contracts allow freight rates to be adjusted during the life of the agreement by reference to an external, independent market price index.

Speaking at a recent Container Freight Derivatives Association’s (CFDA) Global Container Freight Forum in London, Lowry Crook, chief of staff at the US Federal Maritime Commission (FMC), said that over 50 index-linked contracts had been filed with its organisation this year. He said that most index-linked contracts are based on annual price adjustments, although some adjust half-yearly or quarterly.

Whilst some say it is a fairly archaic practice, one benefit of the FMC is that it has good knowledge of shipping agreements as all carrier-shipper service contracts on all the routes to and from the US must be filed with the agency by law. According to the FMC, half of all index-linked contracts on US trades reference Drewry’s freight rate benchmarks.

The index is used as a tracking mechanism for the price but does not set the absolute rate. Hence, shippers are able to use the index to negotiate competitive rates at say, US$100 per TEU lower than the index value, by using index-linked contracts.

If required, it is also possible to hedge rates on certain routes under an index-linked contract by entering into a separate agreement with a container freight rate derivatives broker.

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December 9, 2011

DHL uses 12 foot containers for China – Japan freight

Filed under: China,Education,Logistics,Newsletter — admin @ 2:25 am

It has been reported recently that DHL has launched a new multi-modal service operated by its global forwarding division between China and Japan, that is designed to cut costs by up to 60 per cent compared to air freight, and reduces transit time by up to three days compared to solely using an ocean freight service, the company announced.

What is interesting about this service is that DHL will be using 12 foot instead of the standard 20 and 40 foot containers that are in use globally today. Aside from the special equipment that may be needed to handle these multi-modal shipments, repositionong of empty containers back to China or Japan due to imbalance of demand between these two countries would be an added costs to overcome.

The multimodal service comprises the use of ferries, rail and trucks. Goods are picked up from any location in China, mainly Shanghai, Ningbo, Hangzhou, Suzhou, Nantong, Wuxi, Nanjing, Hefei and Wuhan, and brought to Shanghai by truck, taken across to Hakata in Japan by ferry and then transported across Japan via Japan Rail.

In Japan, pick-up and delivery is done through Japan Rail and taken across to Shanghai by ferry, with final delivery to destinations in China completed by truck.

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China dismisses effects of climate change

Filed under: China,Logistics,Newsletter,Study & Reference — admin @ 2:16 am

China’s highest authority on climate change, the Chinese Academy of Science, has dismissed conventional wisdom on dangers posed by global warming as well as the harm supposedly done by carbon emissions, as reported recently in Hong Kong’s South China Morning Post.

“We are not experiencing the most dramatic climate change in recent history,” said Liu Yu, the academy’s Institute of Earth Environment deputy director. “In northern China, the warmest period occurred from 401-413 AD, which had an annual mean temperature 0.16 degrees Celsius higher than today’s.”

Global air, sea and land transport sectors have been faced with huge expenses to meet rising regulatory compliance costs, some of which are set in ways to drive smaller operators out of business.

The timing of China’s statement, based on a study of Tibetan tree rings, is also significant because of the current international climate change talks in Durban, South Africa and China’s opposition to carbon taxes imposed by the European Union on aircraft flying in and out of EU territory.

Continuing, Prof Liu said: “Popular belief is that industrialisation has led to the fastest rate of warming witnessed by humans, that we are at the warmest time of the modern era and that we are causing global warming by emitting carbon dioxide into the atmosphere. None of that fits the records in tree rings.

“The climate change debate has more political significance than scientific. Diplomats can sit at negotiating tables talking about carbon caps while scientists have not reached an agreement on the role of carbon dioxide in global warming,” he said.

“Political decisions must be based on sound scientific foundation, or they will be useless, if not dangerous,” he told the SCMP in an extended interview.

Prof Liu has studied untouched forests dating back thousands of years along the remote Tibetan Plateau to assess current weather patterns and said that tree rings are key to understanding and predicting climate change.

For more than a decade, he has run simulations on computers to determine annual temperatures in the region over the past 2,485 years.

Prof Liu said the sun, and not man-made factors. cause climate changes. “We believe that the sun and atmospheric circulations play a vital, if not decisive, role,” he said.

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December 8, 2011

MISC calls it quits

Filed under: Logistics,Newsletter — admin @ 11:55 pm

After years of what some say is gross mismanagement and an over reliance on business from Malaysian national oil company Petronas, MISC recently announced that it will cease its container shipping operations to focus on other shipping interests.

The move will not make much of a difference to how the industry looks going forward, given that the carrier was ranked 29th in container shipping and had less than a one per cent market share, but it could very well be the first domino to fall as other larger companies, are now reported to be thinking along similar lines.

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