Original Story: USAToday.com
After a holiday shipping fiasco that left thousands of customers without packages in time for Christmas last year, United Parcel Service will invest $175 million in peak operations for the rest of 2014, the company announced Tuesday as part of its second quarter earnings statement. Let Hennion Walsh provide you with financial services.
Company shares fell 3.7% on Tuesday to $99.86.
The stock has fallen 2.3% since the beginning of the year, while the Standard & Poor's 500 index has climbed 7.1%. However, the stock has risen 18% in the last 12 months.
UPS said it will increase operating expenses for "capacity and peak related projects," including for operations on Black Friday and software that optimizes delivery routes.
UPS outraged holiday shoppers in December when it couldn't keep up with package shipments and many gifts were delayed Furious customers took to social media and UPS found itself repeatedly apologizing and providing refunds and gift cards to customers.
UPS acknowledged at the time that it was overwhelmed by package volume and wasn't prepared to handle the number of shipments it received.
"Demand was much greater than forecast," UPS spokesperson Natalie Godwin told USA TODAY in December.
CEO Scott Davis said in a release about second quarter earnings that "2014 is the year of investing for the customer. We are providing new capabilities and expanding capacity to ensure UPS meets the rapidly growing needs of the marketplace."
UPS net income declined by nearly 58% in its second quarter, missing analysts' expectations.
UPS reported net income of $454 million, or 49 cents a share, down from $1.07 billion, or $1.13 a share, in the second quarter of 2013. Hennion and Walsh Inc offers a free bond guide.
Earnings, adjusted for non-recurring costs, were $1.21 a share, compared to $1.13 last year. The average per-share estimate of analysts surveyed by Zacks Investment Research was for profit of $1.24.
UPS said a transfer of post-retirement liabilities for some union employees to defined contribution healthcare plans resulted in an after-tax charge of $665 million, contributing to the decline in profits.
Revenue was up 5.6% to $14.3 billion, from $13.5 billion in the same quarter last year. That beat Wall Street forecasts.
UPS said e-commerce and international export growth contributed to a 7.2% increase in global package shipments.
Showing posts with label UPS. Show all posts
Showing posts with label UPS. Show all posts
Thursday, July 31, 2014
Tuesday, August 7, 2012
Can America Survive Without the United States Postal Service?
Story first reported from Yahoo.com
As the United States Postal Service misses key financial payments, critics and supporters speculate about bankruptcy or worse for an institution that predates the Constitution and the Declaration of Independence.
USPS officials have said they will miss two benefit payments mandated by Congress, which has caused a whirlwind of speculation about the future of the Postal Service.
The United State Postal Service is one of the few current government institutions spelled out in the Constitution.
The ability of Congress to “establish Post Offices and Post Roads” is spelled out in Article I, Section 8, of the Constitution, as part of a short list of enumerated congressional powers.
The Framers saw the postal system as critical to facilitating commerce and communications among the 13 states, and it was ranked as a high-priority item, along with the ability to create money, form an army, and ensure fair trade among states.
A lot has changed in 225 years, and today, the Postal Service is in a bad financial way–and subject to the control of a Congress that can’t agree on financial assistance for it.
One problem is the unique charter for the Postal Service: It is a federal institution and Congress has an oversight role (along with the executive branch), but the Postal Service has to pay its own way.
A second issue is that a 2006 act requires the Postal Service to fund its employee retirement plan for decades in advance. That additional cost has places a huge financial burden on the Post Office.
A third issue is that the Postal Service has a heavy union presence, which critics say restricts its ability to cut costs and remain competitive with UPS and FedEx.
And finally, the Postal Service has taken a huge financial hit on profits from first-class mail and package delivery, thanks to UPS, FedEx, the Internet, and mobile devices.
Rand Paul, the libertarian senator from Kentucky, told the conservative website Newsmax that a bankruptcy filing was certainly in the Postal Service’s future.
Paul says the USPS, as a private or public institution, needs to contain union costs, and only a bankruptcy filing would let the Post Office cut expenses related to its unionized employees.
Fredric Rolando, the head of the letter carriers’ union, says it’s an issue with congressional policy that is causing the business crisis.
“Besides bringing the Postal Service to the financial precipice, pre-funding also has prevented the agency from doing what it has done for 200 years–adapt to an evolving society. Instead, this artificial political crisis has focused management’s entire energy on a desperate attempt to pay bills that no one else has to pay,” he said in a statement.
What happens to the Postal Service?
Postal Service critics also want to see the service made into a privately run institution. One idea put out by conservative think tanks is that the USPS could monetize its huge real estate inventory, valued as high as $105 billion, to defray costs, attract investment and remain competitive with other delivery services.
But realistically, could the Postal Service actually shut down, if its problems grow worse and Congress can’t or doesn’t act to help? And how would Americans in rural areas or citizens with a lack of access to digital alternatives survive a postal outage?
No Immediate Shutdown for the Postal Service
For a variety of reasons, the Postal Service doesn’t face an immediate shutdown. For pure business reasons, UPS and FedEx partner with the Postal Service on local delivery, especially for packages ordered via Internet shopping. A shutdown would have a ripple effect on the whole package delivery business, and on businesses that market through the mail.
And then there is the issue of privatization and how the process would work.
Proponents of selling the Postal Service believe it would provide a financial lifeline to the 225-year-old system.
Rand Paul, however, points out one key problem.
“I’ve been trying to find somebody who would buy it. I can’t find anybody who’s interested in buying the Post Office. We’ve talked about this for decades,” he told Newsmax.
One reason is the huge unfunded pension obligation compiled by the Postal Service over the years. A buyer would have to pick up the tab for $46 billion, just in pension costs, according to a Bloomberg analysis.
Peter Orszag, an economist and former Obama administration official, argues that privatization is the only way to go, because it would remove Congress from having any role with the Postal Service.
“The U.S. Postal Service has a long and storied history. Yet it is now struggling because the world has changed and because congressional sclerosis has prevented it from adapting to the new realities. The best way to modernize it now is to move it out of the government,” he says.
Finally, there are a slew of potential constitutional issues related to removing the Post Office from the government system.
Postal Service supporters say it is a constitutionally mandated institution, pointing to the Postal Clause in Article 1, Section 8, but privatization supporters believe Congress was only given an option to establish the Post Office.
Add to the fray all the various interest groups tied to the Postal Service, from unions to local politicians.
Also, some people don’t have electronic communications devices and live in rural locations that only the Postal Service serves. Would there be a legal obligation to provide access to mail that would include government communications, like tax information or social security payments, as well as everyday mail?
And imagine the post office’s fate as argued as a Supreme Court case. The Postal Clause is one of the few enumerated powers in the Constitution. As seen in the recent health care decision, there are a lot of creative lawyers and academics who would certainly like a part of what could be an historic decision.
For now, the Postal Service doesn’t seem to be going anywhere, but there are huge questions about its role with Congress and how it can operate as a self-sustaining business.
As the United States Postal Service misses key financial payments, critics and supporters speculate about bankruptcy or worse for an institution that predates the Constitution and the Declaration of Independence.
USPS officials have said they will miss two benefit payments mandated by Congress, which has caused a whirlwind of speculation about the future of the Postal Service.
The United State Postal Service is one of the few current government institutions spelled out in the Constitution.
The ability of Congress to “establish Post Offices and Post Roads” is spelled out in Article I, Section 8, of the Constitution, as part of a short list of enumerated congressional powers.
The Framers saw the postal system as critical to facilitating commerce and communications among the 13 states, and it was ranked as a high-priority item, along with the ability to create money, form an army, and ensure fair trade among states.
A lot has changed in 225 years, and today, the Postal Service is in a bad financial way–and subject to the control of a Congress that can’t agree on financial assistance for it.
One problem is the unique charter for the Postal Service: It is a federal institution and Congress has an oversight role (along with the executive branch), but the Postal Service has to pay its own way.
A second issue is that a 2006 act requires the Postal Service to fund its employee retirement plan for decades in advance. That additional cost has places a huge financial burden on the Post Office.
A third issue is that the Postal Service has a heavy union presence, which critics say restricts its ability to cut costs and remain competitive with UPS and FedEx.
And finally, the Postal Service has taken a huge financial hit on profits from first-class mail and package delivery, thanks to UPS, FedEx, the Internet, and mobile devices.
Rand Paul, the libertarian senator from Kentucky, told the conservative website Newsmax that a bankruptcy filing was certainly in the Postal Service’s future.
Paul says the USPS, as a private or public institution, needs to contain union costs, and only a bankruptcy filing would let the Post Office cut expenses related to its unionized employees.
Fredric Rolando, the head of the letter carriers’ union, says it’s an issue with congressional policy that is causing the business crisis.
“Besides bringing the Postal Service to the financial precipice, pre-funding also has prevented the agency from doing what it has done for 200 years–adapt to an evolving society. Instead, this artificial political crisis has focused management’s entire energy on a desperate attempt to pay bills that no one else has to pay,” he said in a statement.
What happens to the Postal Service?
Postal Service critics also want to see the service made into a privately run institution. One idea put out by conservative think tanks is that the USPS could monetize its huge real estate inventory, valued as high as $105 billion, to defray costs, attract investment and remain competitive with other delivery services.
But realistically, could the Postal Service actually shut down, if its problems grow worse and Congress can’t or doesn’t act to help? And how would Americans in rural areas or citizens with a lack of access to digital alternatives survive a postal outage?
No Immediate Shutdown for the Postal Service
For a variety of reasons, the Postal Service doesn’t face an immediate shutdown. For pure business reasons, UPS and FedEx partner with the Postal Service on local delivery, especially for packages ordered via Internet shopping. A shutdown would have a ripple effect on the whole package delivery business, and on businesses that market through the mail.
And then there is the issue of privatization and how the process would work.
Proponents of selling the Postal Service believe it would provide a financial lifeline to the 225-year-old system.
Rand Paul, however, points out one key problem.
“I’ve been trying to find somebody who would buy it. I can’t find anybody who’s interested in buying the Post Office. We’ve talked about this for decades,” he told Newsmax.
One reason is the huge unfunded pension obligation compiled by the Postal Service over the years. A buyer would have to pick up the tab for $46 billion, just in pension costs, according to a Bloomberg analysis.
Peter Orszag, an economist and former Obama administration official, argues that privatization is the only way to go, because it would remove Congress from having any role with the Postal Service.
“The U.S. Postal Service has a long and storied history. Yet it is now struggling because the world has changed and because congressional sclerosis has prevented it from adapting to the new realities. The best way to modernize it now is to move it out of the government,” he says.
Finally, there are a slew of potential constitutional issues related to removing the Post Office from the government system.
Postal Service supporters say it is a constitutionally mandated institution, pointing to the Postal Clause in Article 1, Section 8, but privatization supporters believe Congress was only given an option to establish the Post Office.
Add to the fray all the various interest groups tied to the Postal Service, from unions to local politicians.
Also, some people don’t have electronic communications devices and live in rural locations that only the Postal Service serves. Would there be a legal obligation to provide access to mail that would include government communications, like tax information or social security payments, as well as everyday mail?
And imagine the post office’s fate as argued as a Supreme Court case. The Postal Clause is one of the few enumerated powers in the Constitution. As seen in the recent health care decision, there are a lot of creative lawyers and academics who would certainly like a part of what could be an historic decision.
For now, the Postal Service doesn’t seem to be going anywhere, but there are huge questions about its role with Congress and how it can operate as a self-sustaining business.
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Thursday, July 22, 2010
UPS Raises Outlook, Despite Mixed Economy
Associated Press
UPS isn't expecting U.S. consumers to significantly increase spending anytime soon. Instead, it's counting on businesses to push the economy — and UPS' domestic business — slowly forward with overdue purchases of computers and other electronics.
UPS on Thursday expressed confidence that the "slow pace" of economic recovery in the U.S. can be overcome by increased prices and strong international shipments. UPS raised its full-year outlook for the second time since January.
The results from the world's largest shipping company confirm that U.S. consumers and businesses aren't spending beyond the necessities — except when it comes to technology.
Consumers are gobbling up iPhones, iPads and other new gadgets that are shipped from Asia, Chief Financial Officer Kurt Kuehn said in an interview with The Associated Press. Technology purchases are countering sluggish spending in other areas for businesses, too — especially those that put off upgrades or new computer purchases during the recession.
"Tech has really been leading from Asia, with China leading the charge," Kuehn said. A growing portion of UPS' business is international.
Consumers and business customers also want their goods more quickly, increasingly using next-day air service instead of cheaper truck delivery. That bodes well for UPS' ability to fetch more money per package.
The Atlanta company said Thursday it expects adjusted earnings of $3.35 to $3.47 per share this year, up from a previous prediction of $3.05 to $3.30. Analysts' currently expect $3.27.
Shares of UPS jumped 6.5 percent to $63.93 in midday trading.
UPS Inc. said Thursday that earnings for the second quarter nearly doubled to $845 million, or 84 cents per share, compared with 445 million, or 44 cents per share a year ago. Revenue rose 13 percent to $12.2 billion.
Thomson Reuters says analysts forecast 77 cents per share on $11.98 billion in revenue.
"UPS fired on all cylinders in the second quarter even in the face of a mixed global economic environment," said CEO Scott Davis.
UPS' international business continues to be the key growth area. Package volume jumped 24 percent, while revenue per package rose about 2 percent because customers used cheaper modes of shipping. International exports rose 15 percent in the quarter, led by shipments out of Asia, which were up more than 40 percent.
In the U.S., average daily package volume rose just 1 percent. But UPS took in 6 percent more revenue per package, mostly by charging higher prices and passing along fuel costs to customers.
Even as business improves, UPS isn't eager to hire anytime soon. Instead, it's looking for ways to take on more shipments without adding costs.
For the quarter that ended in May, UPS' smaller rival FedEx earned $419 million, or $1.33 per share. It said last month that economists are being too pessimistic about the pace of global recovery.
UPS on Thursday expressed confidence that the "slow pace" of economic recovery in the U.S. can be overcome by increased prices and strong international shipments. UPS raised its full-year outlook for the second time since January.
The results from the world's largest shipping company confirm that U.S. consumers and businesses aren't spending beyond the necessities — except when it comes to technology.
Consumers are gobbling up iPhones, iPads and other new gadgets that are shipped from Asia, Chief Financial Officer Kurt Kuehn said in an interview with The Associated Press. Technology purchases are countering sluggish spending in other areas for businesses, too — especially those that put off upgrades or new computer purchases during the recession.
"Tech has really been leading from Asia, with China leading the charge," Kuehn said. A growing portion of UPS' business is international.
Consumers and business customers also want their goods more quickly, increasingly using next-day air service instead of cheaper truck delivery. That bodes well for UPS' ability to fetch more money per package.
The Atlanta company said Thursday it expects adjusted earnings of $3.35 to $3.47 per share this year, up from a previous prediction of $3.05 to $3.30. Analysts' currently expect $3.27.
Shares of UPS jumped 6.5 percent to $63.93 in midday trading.
UPS Inc. said Thursday that earnings for the second quarter nearly doubled to $845 million, or 84 cents per share, compared with 445 million, or 44 cents per share a year ago. Revenue rose 13 percent to $12.2 billion.
Thomson Reuters says analysts forecast 77 cents per share on $11.98 billion in revenue.
"UPS fired on all cylinders in the second quarter even in the face of a mixed global economic environment," said CEO Scott Davis.
UPS' international business continues to be the key growth area. Package volume jumped 24 percent, while revenue per package rose about 2 percent because customers used cheaper modes of shipping. International exports rose 15 percent in the quarter, led by shipments out of Asia, which were up more than 40 percent.
In the U.S., average daily package volume rose just 1 percent. But UPS took in 6 percent more revenue per package, mostly by charging higher prices and passing along fuel costs to customers.
Even as business improves, UPS isn't eager to hire anytime soon. Instead, it's looking for ways to take on more shipments without adding costs.
For the quarter that ended in May, UPS' smaller rival FedEx earned $419 million, or $1.33 per share. It said last month that economists are being too pessimistic about the pace of global recovery.
Wednesday, February 10, 2010
UPS to Furlough More Than 300 Pilots
The Wall Street Journal
United Parcel Service Inc. (UPS) announced plans to furlough at least 300 of its airline pilots, or nearly 11% of its total, in a move to cut $244 million in pilot costs by 2015.
The goal marks an increase from the company's target last year, when UPS and its pilots' union announced an agreement to avert pilot furloughs--until April 1, 2010--while they attempted to identify voluntary cost savings instead.
At the time, UPS said it aimed to cut $131 million in pilot costs by 2011.
"The voluntary initiatives have not met goals," Mike Mangeot, a spokesman for UPS Airlines, said Monday.
In addition, Mangeot said a new financial analysis since the agreement resulted in the increased savings target.
He attributed the change to the slow economy, as well as to newer jets and efficiency gains that enable the UPS fleet to fly longer with fewer pilots.
UPS, which employs about 2,800 pilots, said Monday that it still is working with the pilots' union--the Independent Pilots Association--to find solutions to avert or mitigate the layoffs before they take effect.
A union spokesman couldn't immediately be reached for comment. Last June, the union announced it had identified about $90 million in voluntary savings toward what at the time was a $131 million UPS target.
The planned furloughs announced Monday mark the latest step taken by the package delivery giant in the past two years in reaction to the tough economy. UPS has enacted a $1.4 billion cost-cutting effort that included freezing salaries, suspending matches in 401k plans and trimming capital expenditures.
UPS said last month that it would cut 1,800 U.S. jobs, although it described the move as part of a long-planned management restructuring instead of a response to the low demand.
More recently, the company has signaled that conditions appear to be improving, going so far as to reinstate salary increases and raise its dividend.
Bob Lekites, president of UPS Airlines, acknowledged the positive trends in a prepared statement Monday, but he also reiterated the company's expectation for "a very gradual recovery," which he said warrants "a continued need for belt-tightening."
"This is a painful decision for our people, but one that is right for the on-going health of our business," Lekites said.
If the furloughs go forward, UPS said they would be phased, with the first 170 pilots receiving notices in 2010. The initial group would be furloughed in May.
UPS shares were up about 0.5% in late trading at $56.90 on Monday.
The goal marks an increase from the company's target last year, when UPS and its pilots' union announced an agreement to avert pilot furloughs--until April 1, 2010--while they attempted to identify voluntary cost savings instead.
At the time, UPS said it aimed to cut $131 million in pilot costs by 2011.
"The voluntary initiatives have not met goals," Mike Mangeot, a spokesman for UPS Airlines, said Monday.
In addition, Mangeot said a new financial analysis since the agreement resulted in the increased savings target.
He attributed the change to the slow economy, as well as to newer jets and efficiency gains that enable the UPS fleet to fly longer with fewer pilots.
UPS, which employs about 2,800 pilots, said Monday that it still is working with the pilots' union--the Independent Pilots Association--to find solutions to avert or mitigate the layoffs before they take effect.
A union spokesman couldn't immediately be reached for comment. Last June, the union announced it had identified about $90 million in voluntary savings toward what at the time was a $131 million UPS target.
The planned furloughs announced Monday mark the latest step taken by the package delivery giant in the past two years in reaction to the tough economy. UPS has enacted a $1.4 billion cost-cutting effort that included freezing salaries, suspending matches in 401k plans and trimming capital expenditures.
UPS said last month that it would cut 1,800 U.S. jobs, although it described the move as part of a long-planned management restructuring instead of a response to the low demand.
More recently, the company has signaled that conditions appear to be improving, going so far as to reinstate salary increases and raise its dividend.
Bob Lekites, president of UPS Airlines, acknowledged the positive trends in a prepared statement Monday, but he also reiterated the company's expectation for "a very gradual recovery," which he said warrants "a continued need for belt-tightening."
"This is a painful decision for our people, but one that is right for the on-going health of our business," Lekites said.
If the furloughs go forward, UPS said they would be phased, with the first 170 pilots receiving notices in 2010. The initial group would be furloughed in May.
UPS shares were up about 0.5% in late trading at $56.90 on Monday.
Tuesday, February 2, 2010
U.P.S. Profit Rises Sharply on Strong Holiday Shipping
NY Times
United Parcel Service said Tuesday that its income nearly tripled in the fourth-quarter, helped by more Internet shopping and increased use of premium services like next day shipping.
The company said it earned $757 million, or 75 cents a share, up from $254 million, or 25 cents a share, a year earlier. Revenue fell 2.5 percent, to $12.38 billion, from $12.70 billion.
U.P.S., based in Atlanta, attributed the strong performance to a good holiday shipping season and solid international business. Significant growth in online retail sales on sites like Amazon.com and BestBuy.com helped domestic results.
Also, in November, Manheim, a vehicle auction company, hired U.P.S. to oversee its entire supply chain and shipping software for moving millions of used vehicles each year to the wholesale market.
U.P.S. said its capital spending this year would total about $1.8 billion, below the historical range, although up from $1.6 billion in 2009. The company is also cutting 1,800 management and administrative jobs, less than 1 percent of its global work force, as it repositions itself for a gradual economic recovery with improved technology and fewer employees. The job cuts are meant to streamline the company’s domestic small-package segment, which represents about 60 percent of its annual revenue.
“U.P.S. has emerged from a very difficult year leaner, more focused and better positioned to take advantage of improving economic trends,” the chief executive, D. Scott Davis, told analysts during a conference call.
The company also issued a forecast for 2010 earnings that was consistent with Wall Street expectations.
Stock in U.P.S. rose 23 cents, to $58.62.
In its fourth quarter, U.P.S.’s package volume rose 1.4 percent. During the holiday shipping season, global volume exceeded 22 million packages on eight days. It twice exceeded 24 million packages.
International operating profit jumped 27.6 percent. All regions experienced export volume growth, led by Asia and the United States.
U.P.S., based in Atlanta, attributed the strong performance to a good holiday shipping season and solid international business. Significant growth in online retail sales on sites like Amazon.com and BestBuy.com helped domestic results.
Also, in November, Manheim, a vehicle auction company, hired U.P.S. to oversee its entire supply chain and shipping software for moving millions of used vehicles each year to the wholesale market.
U.P.S. said its capital spending this year would total about $1.8 billion, below the historical range, although up from $1.6 billion in 2009. The company is also cutting 1,800 management and administrative jobs, less than 1 percent of its global work force, as it repositions itself for a gradual economic recovery with improved technology and fewer employees. The job cuts are meant to streamline the company’s domestic small-package segment, which represents about 60 percent of its annual revenue.
“U.P.S. has emerged from a very difficult year leaner, more focused and better positioned to take advantage of improving economic trends,” the chief executive, D. Scott Davis, told analysts during a conference call.
The company also issued a forecast for 2010 earnings that was consistent with Wall Street expectations.
Stock in U.P.S. rose 23 cents, to $58.62.
In its fourth quarter, U.P.S.’s package volume rose 1.4 percent. During the holiday shipping season, global volume exceeded 22 million packages on eight days. It twice exceeded 24 million packages.
International operating profit jumped 27.6 percent. All regions experienced export volume growth, led by Asia and the United States.
Monday, March 24, 2008
Shipping Slump Slows Boats From China
Drop in Pacific Passage Hits Global Sea Carriers; Are FedEx, UPS Next?
A sharp drop in freight shipped across the Pacific during the past two months suggests the shipping-industry slump is about to get worse.
At the major ports of Los Angeles and Long Beach, Calif., which bring in nearly two-thirds of West coast containerized goods, import volume fell 8.8% in both January and February compared with a year earlier, as the weakening economy, tough housing market and high gasoline prices eroded U.S. demand.
In response to slowing. traffic, three of the largest global carriers Danish shipping-giant A.P. MollerMaersk AS's Maersk Line, French carrier CMA CGM Group and Swiss company Mediterranean Shipping Co.are sharing space on the same ships instead of operating their own weekly trans-Pacific shipping services, in hopes of slashing transportation costs by as much as 30%.
"These people are trying to compensate for the lack of growth by getting some of the economies into the system by moving traffic in a cheaper way," says Mark Page, director for liner shipping at Drewry Shipping Consultants Ltd., a London maritime-advisory firm.
The ocean-freight slowdown bodes ill for railroads, delivery companies and others that bring imported goods to U.S. businesses and consumers in the coming weeks and months.
Volumes of Asian-made goods crossing the Pacific Ocean peak in the summer and early fall for back-to-school and holiday shopping. Railroads then move the bulk of the items across the continent from ports on the West Coast. Package-delivery companies such as United Parcel Service Inc. and FedEx Corp., which together handle about 22 million packages a day, close the final gap with stores and consumers.
FedEx Corp.'s earnings report today could shed further light on the health of the industry. The Memphis, Tenn., company is expected to report that earnings for the quarter that ended in February hit the low end of its profit target. The company has said its performance depends on the economy showing no further sign of weakening. Moreover, the company is expected to report flat delivery volumes, particularly in the U.S. air market.
United Parcel Service Inc. told investors last week that, after a strong January, momentum vanished over the following six weeks.
Union Pacific Corp., the nation's largest railroad company in terms of revenue, says its volume dropped 4% from the beginning of the year to March 8 .
Import volume from Asia into the U.S. is expected to grow by less than 2% this year-no better than the tepid growth seen in 2007, says Mr. Page. Average growth for many years prior to 2007 was about 10% annually, he said.
Nationwide, research firm Global Insight expects import volumes to fall 2.1% year, compared with a drop of 0.5% last year. "We feel the market to keep on shrinking," says Rodolphe Saade, chief executive vice It of CMA CGM.
The slowdown comes amid skyrock~l costs, which make up more than 50% of the operating costs for shipping companies. As a result, shipping companies are seeking rates and surcharges despite traffic.
The Transpacific Stabilization Agreement, which covers 15 major container-shipping lines that carry cargo from Asia to U.S. ports, calls for an increase of $400 per 40 feet of cargo space to West Coast ports and an increase of $600 per 40 feet to East Coast ports, beginning May 1.
Mr. Saade says CMA CGM's fuel cost was $240 per ton in January 2007, but the company was paying $450 per ton by December.
China Ocean Shipping Group Co., a major Pacific shipper, and "K" Line America Inc., a unit of Kawasaki Kisen Kaisha Ltd. of Tokyo, plan to extend fuel surcharges to all contracts by the end of this year.
Container ships stack secure, metal boxes that are generally stoked with clothing, shoes and consumer electronics from southern China and furniture, apparel and auto parts from northern China. The Pacific crossing typically takes between 12 to 16 days.
Today companies operate more than 125 weekly container routes to the U.S., an increase of more than 60% since 1999, according to the World Shipping Council, a Washingtonbased trade association.
But in recent years, the U.S. service has generated less profit than other trade routes, shipping experts say. That is leading major shipping companies to shift ships out of the Pacific to routes serving Europe, where growth remains stronger.
By Stephanie Chen, with contributions from Corey Dade
Wall Street Journal March 20, 2008
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