From SCDigest's On-Target e-Magazine
April 25, 2012
Global Logistics News Round Up for April 25, 2012
Port of Savannah Deepening Project Update; Ocean Rate Hikes Seem to be Sticking for Now on Asia to North America Routes; Panama Canal Proposes 7-8% Increases in Tolls for 2012 and 2013, Plus New Segment Definitions
SCDigest Editorial Staff
Project to Deepen Waters at Port of Savannah Continues On with New State Funding: Announcing another round of funding commitment - $46.7 million - for a project to deepen the waters around the Port of Savannah, Georgia Gov. Nathan Deal said this week the state will do whatever is necessary — including putting up more than its share of the cost — to make sure the Savannah Harbor deepening project continues to move forward.
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The Panama Canal Authority notes that its “pricing policy, through the changes implemented since 2002, has been evolving from a cost-recovery system to a structure that considers the value that the route provides to its clients”
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This latest round brings the total state commitment thus far to some $181 million. The deepening of the Savannah River leading to the port and Harbor area is necessary for the port to be able to handle some of the larger mega-ships that will start coming through the Panama Canal in late 2014. The total cost of the project is estimated at $631 million.
The federal government is supposed to pay for 60% of the project’s costs, but apparently that funding is in part on shaky ground due to federal budget deficits and push back against “earmarks.” The state was supposed to fund 40% of the costs, but while Deal expects the feds to pay its promised share, he said “if they don’t, we will accommodate accordingly.”
Two weeks ago, the US Army Corps of Engineers delivered its final environmental impact statement and overall assessment report on what is called the Savannah Harbor Expansion Project. The report recommended deepening the shipping channel to 47 feet from its current 42-foot depth. The state had asked for one more foot, to 48 feet. Will that one foot make a difference? Hard to say at this point, but on the margin it could preclude some ships from entering port waters. The maximum “draft” of the megaships can sometimes be as deep as 50 feet, experts say, though many are below the 47-foot level.
“The Corps’ study has shown the project will reduce shipping costs faced by private companies by at least $174 million a year,” Deal said. That savings come from the inherent costs advantages of using the larger ships.
These reports come after 15 years of economic and environmental study of the project, and are required before federal regulatory agencies can approve the project. Approvals are required from the US Army, the departments of the Interior and Commerce, and the Environmental Protection Agency.
That is quite gauntlet. Given the approval time uncertainty, when the project will be started and thus complete is unclear.
Asia to US Spot Rates Holding on to Gains After Recent General Rate Increase: The analysts at Drewry Shipping Consultants say that two weeks in, a significant increase in spots rates for ocean shipments from Asia to North America is holding after a $400 per fort- foot equivalent unit (FEU) general rate increase (GRI) was put into place by the carrier consortium the Trans-Pacific Stabilization Agreement on April 15.
Though the spot market prices did slip by 2.8% last week, that was just a tad down from the 19.9% spike the carriers saw the week immediately succeeding the GRI. That leaves the spot rate for a shipment from Hong Kong to Los Angeles at about $2,337.00.
That rate is about 30.2% higher than it was in the same week a year ago, Drewry says, and 62.7% higher than the $1,436-per-FEU rate seen in last week of 2011, as carriers try desperately to reduce losses resulting from way too much capacity and slowing growth in container volumes.
Analysts at Alphaliner said this week that container capacity in the face of what was already too much supply has grown 10% in the last 12 months, as ships ordered in most cases years ago come on-line. That increase in capacity is running far ahead of overall global growth in volumes, though most carriers are now laying up some smaller ships as they receive new mega-ship deliveries. But not fast enough.
(Global Supply Chain Article Continued Below)
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