LSCMS Blog

Hong Kong Airlines is facing harsh criticism after an internal memo describing its recent delivery of live dolphin cargo from Japan to Vietnam was leaked.
The dolphins are believed to be from the Japanese town of Taiji, depicted in the Oscar winning documentary “The Cove”.

More than 2,800 people have since signed the online petition at Change.org to stop the act.

The petition wrote that five Taiji dolphins were transported on a cargo flight on 16 January for seven hours.

An internal memo to its airline staff said the flight was a success, earning HK$850,000 (S$137, 618) in cargo revenue, the Daily Telegraph reported.

Hong Kong Airlines said in a statement no dolphins were harmed during the shipment, as the carrier kept to the government rules and International Air Transport Association regulations on live animal transportation.

The airlines also said they are fully committed to the protection of animal welfare and thanked animal welfare groups for their comments

Commncing Monday 20th February, the Logistics & Supply Chain Management Society will be featured on Channel News Asia’s, Invest In Me show that airs at 8.30 p.m. Singapore time with repeat telecasts being shown throughout the week. Episodes can also be downloaded from the Channel News Asia website.

In this programme, the Society shows its support in helping social enterprises in the region by providing Logsitics advice and hands on expertise to an events company with Logistics issues. Follow us as we make this journey with the Society’s President, Raymon Krishnan and other individual and corporate members towards resolving some of the common Logistics issues faced by SME’s.

Past episodes of the programme can also be viewed online at - http://www.channelnewsasia.com/investinme

In line with what most MLO’s are doing, Singapore Neptune Orient Lines (NOL) has announced that its container shipping arm, APL, will begin phasing out its US fleet of container chassis during the first half of 2012.

The carrier is expected to complete the disposal of the fleet by 2014, a statement said.
Chassis are the skeletal truck trailers used to haul shipping containers over the road. The shipping line said it will turn its fleet over to organisations that specialise in providing chassis to drayage companies.

“This is the direction the container shipping industry is moving,” said Americas president Gene Seroka from the company’s US headquarters in Scottsdale, Arizona. “By relying on providers who specialise in chassis management, equipment is deployed more efficiently.”

Disposal will begin with a pilot programme at terminals in Denver and Salt Lake City, which could begin as early as March. Chassis will be phased out at most of the company’s inland terminals by the end of this year, then extended to US east coast seaports in 2013, and is expected to be completed nationwide by early 2014.

Amazon is opening a 1 million-square-foot fulfillment center in Middletown, Delaware, which is the e-commerce giant’s second facility in the state. Amazon says that the new center will create 850 full-time jobs, and will cost $90 million.Amazon’s fulfillment centers enables the company and third-party merchants to store inventory and fulfill orders.

The Middletown center joins Amazon’s New Castle fulfillment facility, which was opened in 1997. Amazon says that the New Castle center currently employs “hundreds of full-time workers,” but it sounds like the new facility will be larger.

The Middletown facility is expected to be complete this fall. In December, the Delaware Economic Development Office awarded the company $3.47 million from the Delaware Strategic Fund to support the expansion, of which $2.12 million will help create new jobs at the site. The fund will also contribute to the company’s infrastructure investment, equal to 3 percent of the total capital expenditures, or a maximum of $1.35 million. A separate grant for up to $4 million from the Delaware New Jobs Infrastructure Fund will be used to build extensions of public roads to serve the project, improve traffic flow and provide access to additional properties for future economic development. Amazon will also benefit from a real estate tax abatement from the town of Middletown for the next 10 years.

Amazon has been ramping up the development of its fulfillment centers over the past year. In 2011, the e-commerce company opened 15 new centers worldwide. As of last July, Amazon had roughly 65 centers worldwide. And this year, the company opened a new center in India and in South Carolina.

In the latest Drewry report, it was mentioned that shippers should not lose sleep over the recent, short-lived jump in spot rates, but ought instead focus on ways to mitigate the risk of another sudden capacity crunch later in the year, urges Drewry Maritime Research.

Freight rates on east-west trades have been in the ascendancy of late. Drewry’s Hong Kong-Los Angeles container rate benchmark, as published in the Container Freight Rate Insight, leapt 28 percent in the first week of the year. The benchmark rose US$396 to US$1,832 per forty-foot container (FEU) and successfully sustained this level into the second week. Transpacific Stabilisation Agreement (TSA) carriers have been successful in forcing through their intended US$400 per FEU rate increases.

Shipping lines have had similar success on the Asia-Europe trade. The World Container Index (WCI) benchmark rate between Shanghai and Rotterdam soared 41 percent in the first two weeks of January to US$1,335 per FEU. The increase of US$391 per FEU was in line with carriers’ intended peak season surcharge (PSS) of US$400 per FEU. The WCI is a joint venture between Drewry and exchange specialist Cleartrade.

Buoyant shipping volumes in advance of Lunar New Year factory closures in Asia have filled ships to bursting, causing most carriers to roll containers. Some shipping lines have reported load factors in excess of 100 percent, so emboldening aggressive rate hikes.

“The big question on everyone’s minds is how sustained the rates revival will prove and what this means for 2012 transpacific contract rates?” asked Martin Dixon, research manager of Drewry’s Container Freight Rate Insight. “Once the pre-Chinese New Year rush recedes later this month spot rates will retreat back to December levels, unless carriers take action to remove surplus capacity from the trade. Shippers would be well advised to wait a few weeks before commencing contract negotiations.”

Most transpacific freight contracts run from May to April. In 2011 shippers and carriers settled at contract rates at or below the previous year’s level. However, this year shippers can expect to secure much lower shipping costs given the weak state of the container shipping market.

For instance, Drewry’s Hong Kong-Los Angeles container rate benchmark had declined 27 percent between the first week of May and the end of 2011. The spot market is often a strong lead indicator of prevailing contract rates.

“However, shippers should beware,” cautioned Dixon. “Locking carriers into low freight rates today may hinder surety of supply in the future.”

Drewry expects freight rates to rise sharply in the second half of the year as cash-burn forces carriers to slash capacity.

“A repeat of 2010 seems inevitable, when freight rates rose and space availability was highly restricted,” added Dixon. “Drewry strongly recommends shippers look at the benefits of index-linked contracts to mitigate these dangers.”

Prior to the recent bounce in pricing, east-west freight rates had been in free fall. Drewry’s East-West Freight Rate Index, a weighted average across key Asia-Europe, transpacific and transatlantic trade routes, had declined 38 percent in the 12 months to November 2011. However, other indices published in Drewry’s Container Freight Rate Insight suggest that some regions of the world have proved more stable than others. For instance, Drewry’s Intra-Asia Freight Rate Index lost just six percent through 2011 and gained four percent in the four months to November 2011.

“Few trades can claim this level of sustained stability,” observed Dixon. “Despite cascading tonnage from other overburdened trades, rates on Asian regional trades have remained remarkably stable thanks to burgeoning traffic growth.”

Figures from the Hong Kong Marine Department show the port handled 24.4 million TEU in 2011, an increase of three per cent from 23.7 million in 2010, December’s figures showed a 1.4 per cent increase to two million TEU from the same month the previous year.

Singapore’s Maritime and Port Authority reported a 5.3 per cent increase in container movement in 2011, having handled 29.9 million TEU compared to 28.4 million TEU in 2010. December container volumes are expected to increase 11 per cent to 2.6 million TEU year on year making the island state the 2nd busiest port in the world after Shanghai.

Singapore Customs will make it compulsory for declarations of all exports to be submitted before they leave Singapore by 1 April 2013.

Known as Advance Export Declaration (AED), it aims to strengthen supply chain security and align its export declaration practices with international norms.

With the implementation of this initiative on 1 April, companies will be given 18 months, till 1 October 2014 to adjust and comply fully with the requirements set.

Presently, only the exports of controlled items or exports by land require declarations to be submitted in advance and this new rule is a big change in the current process where shipment declerations would only need to be made after a shipment has left Singapore.

Singapore Customs’ director general Fong Yong Kian said the AED will help Singapore become a trusted and secure global trade hub, and assist a more effective trade facilitation.

Steven Lee, chairman of the Singapore Air Cargo Agents Association agreed, adding: “The AED will definitely provide additional protection to the aviation industry from the security perspective. It will enhance the status of Singapore as a free port in terms of higher security and safety, which will promote more cargo flows via Singapore as a regional hub.”

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.

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.

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.