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

September 28, 2012

Another Logistics company fined.

Filed under: Newsletter — admin @ 9:36 am

Yet another Logistics company has been fined for price fixing, this time in the US. The United States Department of Justice (DOJ) has indicted Japanese forwarder Yamato Global Logistics Japan Co Ltd in its ongoing investigation into price fixing on air freight shipments from Japan to the US from September 2002 until November 2007.

The Japanese forwarder was one of 14 companies in Japan charged by the DOJ with price fixing and as part of a plea deal, Yamato Global Logistics Japan will pay a fine of US$2.3 million for conspiring to fix fees.

According to Scott Hammond, deputy assistant attorney general for the Antitrust Division’s criminal enforcement programme, the companies didn’t just violate the Sherman Act but also impeded US commerce, reported Atlanta-area Air Cargo World.

“Consumers ultimately were forced to pay higher prices on the goods they buy every day as a result of the non-competitive and collusive service fees charged by these companies,” Mr Hammond said in a statement.

The DOJ has made more than $100 million in criminal fines since it launched its price fixing investigation in early 2006. Last year, the department slapped six other Japanese freight forwarders with fees totalling $46.8 million for their participation in an air freight cartel.

The DOJ hasn’t been the only government agency doling out fines for price fixing, however. In June, the High Court of New Zealand ordered Japan Airlines to pay NZD2.28 million (US$1.9 million) for participating in an air freight cartel. One month later, Korean Air became the latest carrier to settle with Canada’s Competition Bureau for conspiring to fix cargo surcharges from April 2002 to February 2006.


Recession fears deepen and indicates a gloomy outlook for 2013

Filed under: Newsletter — admin @ 12:30 am

Singapore’s monthly manufacturing performance in August fell once again, spelling more trouble for the local economy.

According to the report by the Economic Development Board (EDB), manufacturing output dip 2.2% last month. Excluding biomedical manufacturing which expanded 13%, output would record a heavier 5.4% decline.

The main contributors to the decline include that from the transport engineering cluster, which contracted a massive 20.1%. This was due to a “slowdown in demand for engine repair jobs from the US and Europe” in the aerospace sector, EDB reported. Marine and offshore engineering also plummeted because of lower contributions from oil rig projects.

The electronics cluster was also a major contributor, falling 7.3% on-year as a result of continued weak export demand.

According to Song Seng Wun, regional economist from CIMB, the market needs to see “industrial production rebound by at least 6% year-on-year in September” to not fall into recession in this third quarter.

However, he noted that with the current economic climate of the US and Europe, a 6% aim could be hard to hit. To counter this negative trend, Singapore continues to build on its business activities with other markets in the region, such as China.

Singapore has increased its trade activities with Tianjin and Jiansu, signing multiple memorandums of understanding with the cities, to boost various economic sectors and to strengthen Singapore-owned companies overseas.

International Enterprise (IE) Singapore had also reported an 11% decline in exports, a far worse dip than economists had predicted. Additionally, the Singapore Institute of Purchasing and Material Management had recorded a 0.7 point contraction in the local manufacturing economy in the Singapore Purchasing Managers’ Index (PMI). The performance of the global economy over the next couple of months will be a key indicator to how 2013 will look but at this stage it is not looking very positive.


September 25, 2012

Kill piracy with kindness, not force

Filed under: General,Newsletter — admin @ 6:55 am

The threat of piracy from Somalia is unlikely to abate because of the lucrative gains made, says Tim Holt, head of intelligence and special contingency risks at the London insurance broker Willis Group but Mr Holt opposed the use of force to combat this threat. “Communities must be presented with the opportunity to earn a wage that offers them a similar quality of life to what they currently experience,” said Mr Holt.

Providing such a standard of living would be expensive. “Piracy is the second largest generator of income in Somalia, yielding an estimated US$200 million annually,” said Mr Holt in his report on the problem.

“Somalia’s two main pirate syndicates continue to be active and show little sign of disarray. They have not had to shift anchorages and have the funds to consolidate their hold on it as necessary.

“The pirates have the capability to adapt. Some have begun to offer their services as ‘counter piracy’ and ‘negotiation’ experts. There has also been a recent acceleration in kidnap for ransom on land of aid workers and tourists who are then transferred to the coast for ransom negotiations,” he said.

“As pirate financiers invest more and more in the success of [pirate] operations, lucrative opportunities for local business have vastly expanded. A $4 million ransom will be injected back into the local economy, benefiting a community that once lived in abject poverty,” he said.

“There is little wonder why the practice has boomed when Somali per capita income is $600 and a minimum $10,000 is available for each perpetrator of a successful operation. With 90 per cent of the world’s trade is transported by sea, the opportunities are vast,” Mr Holt said


September 24, 2012

Malacca straits to continue being an important link

Filed under: Newsletter — admin @ 7:53 pm

The importance of the straits of Malacca and Singapore to the international community will grow exponentially with the rise of Asia in the global economy, said Transport Minister Lui Tuck Yew. As such, it is essential to ensure the straits remain open, safe and secure, he added.

Mr Lui made this point when he opened the 5th Co-operation Forum on Monday. At the event, Indonesia, Malaysia and Singapore also signed documents to formalise their agreement to sustain the Marine Electronic Highway (MEH) under the Co-operation Mechanism. The MEH provides shipmasters with a support system that links ships with marine information such as real-time tide, wind, current and weather conditions.

Mr Lui said the Co-operative Mechanism, which is the key platform for the three countries to share information on issues related to the straits, will press on with efforts for safe navigation, as well as development. “Demand for shipping will grow in tandem with economic growth. The maritime industry has to play a key role in supporting sustainable development,” said Mr Lui. “For our region, the Co-operative Mechanism is an important framework for promoting sustainable maritime development in the straits. We have to continue working through the mechanism to explore new ways to facilitate efficient shipping while protecting the maritime environment,” he added.


September 22, 2012

Disconnect between shipping lines and shippers

Filed under: Education,Logistics,Newsletter,Supply Chain Management — admin @ 10:29 am

Yet another indication of the disconnect that exists between shipping lines and shippers. More shipping lines are embarking on super-slow steaming in a bid to cut fuel costs whilst more shippers appear to be open to the idea of sending their goods by air, according to London’s Loadstar.

Six Asia-Europe strings are now adopting super-slow steaming and are going slower than the 19th century tea clippers. Although it’s a win-win for shipping lines – absorbing capacity while cutting fuel costs, the average rotation of Far East to Northern Europe loops is now 10.5 weeks – in 2007 it was 8.2 weeks, the publication pointed out.

The gap between sea freight and air freight is widening and for shippers who don’t want inventory – and thus working capital – tied up for long periods, super-slow steaming isn’t always their first choice. Equally, they don’t want to pay top dollar for their goods to arrive in just two or three days. They want something in between.

Loadstar’s shipper readership, for example, shows an interesting trend with a wide range of suppliers and manufacturers saying that they are interested in all transport modes with a few limiting themselves just to sea freight.

This was also evidenced earlier this week at the Eyefortransport Hi-Tech summit in Singapore, where debate on multi-mode options such as sea-air or even air-rail was met with some interests amongst panelists and participants

Cas Pouderoyen, SVP global ocean freight at Agility, speaking at the TOC Container Supply Chain event earlier this year said: “Lots of businesses can’t live with a 40-day transit time, but can cope with 25 days.” For the struggling air cargo industry, there surely must be an opportunity here. Of course, it has always been the emergency option for everyone. But a more constructive look at deferred cargo should be on the cards.

SBS Worldwide, working on contingency plans in case of an US east coast port strike, has struck a deal with airlines to deliver freight in 20, rather than 30-40 days, for a rate barely higher than the sea freight rate.

Carriers already offer it, but not as a product in itself. Dave Shepherd, head of global sales for IAG, said British Airways does have a deferred service, trucking freight in the US, for example, to fill gaps in capacity. “Customers are always on the look-out for a lower cost option. Freight doesn’t need to go on the most direct route available, and we can offer competitive rates as we are filling up capacity that wouldn’t otherwise be full.”

Mr Shepherd added that the sea-air option has always been a useful way to cheapen and slow down air freight. But while air freight rates on Asia-Europe are currently low, demand for sea-air has been negligible. “It doesn’t always suit the end customer, but they are certainly getting more used to a longer logistical cycle,” he said.

But Sean Smith, director southern region for Kerry Logistics, doesn’t believe the demand would be sufficiently strong – unless the rates were significantly lower. “It would come back to ‘what is the cost?’ If you offered a 20-day transit from Asia-Europe, the airlines would be pitching themselves against sea-air alternatives, which over the last few years have not been of great interest to many, especially the 18-20 day option. However, if there was a significant saving to be had, then it would be looked at for sure.”


US strike averted

Filed under: General,Logistics,Newsletter — admin @ 10:09 am

The International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) have agreed to a 90-day labour contract extension to December 29, ending fears of dock strike on the US east coast next month.

After two days of negotiations with the assistance from George Cohen, the director of the Federal Mediation and Conciliation Service (FMCS), the compromise made by both parties.

“In taking this step, the parties emphasised that they are doing so ‘for the good of the country’ to avoid any interruption in interstate commerce,” said Mr Cohen.

“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.”

Retailers were delighted with the news. “This should provide for stable holiday shipping and shopping over the next few months,” said National Retail Federation (NRF) vice president Jonathan Gold.

Said Kelly Kolb, vice president of the Retail Industry Leaders Association: “A 90-day extension ensures that a work stoppage will not interfere with the flow of goods during the critical holiday season.”


Lufthansa makes algae fuel a viable alternative

Filed under: Education,Newsletter — admin @ 10:01 am

Perth-based Algae.Tec has confirmed it has signed an agreement with Lufthansa to build a large scale facility in Europe to produce aviation biofuels produced from algae. The company said it will manage the project and receive license fees and profits, while Lufthansa will arrange 100 per cent funding for its construction, and will sign an off-take agreement for at least half of the crude oil produced.

The size and the cost of the plant were not released, but when chairman Roger Stroud spoke at the opening of the company’s pilot facility in Nowra in New South Wales, Australia in August, he said “commercial scale” facilities of around 400 units would likely cost $80-$100 million. A 2,000 container facility could generate annual revenues of around $350 million.

Algae.Tec said the site will be located in Europe, near an industrial source of Co2 emissions, which will be used as the feedstock for the algae, which is grown in its unique enclosed system, which each unit contained in a shipping container. “The agreement forms the base for a long-term cooperation between Algae.Tec and Lufthansa for the industrial production of crude algae suitable for conversion into aviation kerosene and conventional diesel fuels,” the company said in a statement.

The agreement is the first obtained by Algae.Tec, which is also pursuing similar deals in the NSW Hunter Valley and Brazil. It is also seeking to broaden its agreement with the likes of cement company Holcim in Sri Lanka, and potential partners in China and the US.

The news helped push the stock up 6c or 20 per cent to 36c on the Australian Stock Exchange, off its 52-week lows of 30c. It has fallen from a high of 62c. Alternative fuels have taken a prominent position at the Berlin Air Show, where this agreement was signed. The Advisory Council for Aviation Research this week said biofuels were essential to meeting the global airline industry’s goals of achieving carbon-neutral growth by 2020, and by 2050 cutting CO2 emissions in half compared to 2000. Germany has embarked on a long-term strategy to phase out oil in favor of renewable energy, with aviation playing an important role in planned reductions in oil use of 10 per cent by 2020 and 40 per cent by 2050.


September 8, 2012

British Airways and Qantas divorce after 17 years

Filed under: Newsletter — admin @ 8:07 am

British Airways and Qantas have agreed to terminate their joint business as of March 31, 2013 with Qantas leaving to enter a new global partnership with Emirates.

The BA-Qantas joint business was established in 1995 to enable close commercial cooperation on the airlines services between Australia and the UK.

A statement issued by Qantas said the airlines will continue to work together as part of the oneworld alliance and through bilateral codeshares.

“Over the past 17 years the joint business with British Airways has been central to the Qantas network. However, global operating conditions have changed and partnership with Emirates is the right strategy for Qantas,” said Qantas CEO Alan Joyce.

“I’d like to thank [BA parent] IAG CEO Willie Walsh and British Airways CEO Keith Williams for their support of the joint business and I look forward to a continued strong relationship in future,” Mr Joyce said.

International Airlines Group (IAG) chief executive Willie Walsh said: “We’re ending the joint business on amicable terms and support Qantas’ decision to work with Emirates. The world has changed since 1995 when the joint business started. This is a small part of our overall network and this move fits in with changes in our global strategy. Asia has become a key market focus for IAG and we’re talking to a number of airlines about alternative options for us.

“Qantas has made it clear that its international performance has been weak and the termination of the joint business won’t have any negative impact on IAG’s financial targets. The good relationship that we have with Qantas CEO Alan Joyce and his team will continue through our joint membership of oneworld,” added Mr Walsh.

Qantas said it will contact any customers due to travel after March 31 whose bookings may be affected by changes to the joint business.