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 shipping. Show all posts
Showing posts with label shipping. Show all posts
Thursday, July 31, 2014
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.
Sunday, May 23, 2010
Wal-Mart Asks Suppliers to Cede Control of Deliveries
Bloomberg
Wal-Mart Stores Inc., the world’s largest retailer, is seeking to take over U.S. transportation services from suppliers in an effort to reduce the cost of hauling goods.
The company is contacting all manufacturers that provide products to its more than 4,000 U.S. stores and Sam’s Club membership warehouse clubs, said Kelly Abney, Wal-Mart’s vice president of corporate transportation in charge of the project. The goal is to take over deliveries in instances where Wal-Mart can do the same job for less and use those savings to reduce prices in stores, he said.
“It has allowed our suppliers to focus on what they do best, manufacturing products for us,” Abney said in a telephone interview yesterday from Bentonville, Arkansas, where Wal-Mart is based. “With lower costs usually comes increased sales.”
Under the program, Wal-Mart is increasing the use of contractors, as well as its own private fleet of trucks, to pick up products directly from manufacturers and transport the goods to its distribution centers and stores. The retailer currently moves most goods only from its distribution centers to stores.
The plan allows Wal-Mart’s fleet of 6,500 trucks and 55,000 trailers to carry more per truck and improve on-time delivery rates, said Leon Nicholas, a director at consulting firm Kantar Retail. Wal-Mart would also have more sway in negotiating fuel prices, he said.
“They are reaching further back into the supply chain,” said Cambridge, Massachusetts-based Nicholas, who has spoken with vendors about the move. “It is an effort to ultimately reduce costs of goods sold, which will ultimately increase their gross margins. They believe they can ship and transport product more efficiently than the suppliers can.”
Cost Disconnect
The price cuts Wal-Mart is seeking are twice as much as the cost for transporting goods in some cases, said officials from two suppliers. In two instances, Wal-Mart asked for a 6 percent reduction in the price it pays for products based on its own cost calculation, while suppliers estimated the actual expense was equal to about 3 percent, the people said.
“There may be a disconnect when we walk into the room on what that cost might be,” Wal-Mart’s Abney said. “But we work collaboratively. As soon as a supplier shares the data, almost always those differences are quickly resolved.”
Abney said Wal-Mart has thousands of suppliers and he has taken part in talks with more than 100. Some manufacturers have already shifted their deliveries and associated costs to Wal- Mart, he said.
Lowering Expenses
One side effect of the plan is that manufacturers may face increased transportation costs on deliveries to other retailers as they lose scale, said Randy Huffman, a former Wal-Mart executive who now runs GBD 360, a Bentonville consulting firm that works with suppliers.
“That aligns with Wal-Mart’s taking cost out of the supply chain for their benefit and not their competitors,” he said. “Suppliers are going to have to apply that increased freight cost somewhere, so it’s more than likely it will be passed onto other retailers.”
Wal-Mart is looking to defray expenses after saying this week that sales at U.S. stores open at least a year fell for a fourth straight quarter. Mike Duke, who took over as chief executive officer last year, pledged in October that costs would rise slower than sales.
Since then, Wal-Mart has sharpened its focus on transportation expenses, escalating talks to take over trucking from suppliers this year, Abney said.
Wal-Mart gained 7 cents to $51.37 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 3.9 percent this year, compared with a 0.4 percent decline for the Standard & Poor’s 500 Consumer Staples Index.
Trucker Mike
The retailer has sought to offer goods like cereal and laundry detergent for less to lure shoppers back to stores, and lowering transport costs provides room to do that. The strategy is part of what Wal-Mart calls its “productivity loop” -- efficiency reflected in lower bills at the cash register.
The loop is already the theme of a national commercial, where a truck driver identified as Mike touts the system, saying packing fuller loads has cut fuel costs and retail prices. Last year, Wal-Mart truckers logged 749 million miles, or about 100 million miles less than in 2008, according to spokesman Lorenzo Lopez. That trimmed expenses by almost $200 million, he said.
A Wal-Mart truck coming from a distribution center in Bentonville to stores hundreds of miles away may pick up goods from manufacturers on the way home, said Don Lanham, Milwaukee- based director of consumer products at Clarkston Consulting.
“It’s efficient, economical and environmental to have fully loaded trucks, not empty ones,” said Lanham, whose firm advises suppliers to Wal-Mart and other retailers. “Those Wal- Mart trucks are all over the United States.”
Price Cut Pledges
Shoppers are seeing the benefits, with Wal-Mart pledging on May 18 to cut prices on 22 items families routinely purchase for an average savings of 30 percent.
As for the suppliers, they may have to give in even if their other transport expenses rise, given Wal-Mart’s status as the world’s largest retailer, said Vic Gallese, an independent retail consultant based in Fort Worth, Texas.
“The vendors might say, ‘My other overhead costs will rise,’” said Gallese, who has spent 25 years in the industry. “And Wal-Mart will say, ‘That’s your problem.’”
The company is contacting all manufacturers that provide products to its more than 4,000 U.S. stores and Sam’s Club membership warehouse clubs, said Kelly Abney, Wal-Mart’s vice president of corporate transportation in charge of the project. The goal is to take over deliveries in instances where Wal-Mart can do the same job for less and use those savings to reduce prices in stores, he said.
“It has allowed our suppliers to focus on what they do best, manufacturing products for us,” Abney said in a telephone interview yesterday from Bentonville, Arkansas, where Wal-Mart is based. “With lower costs usually comes increased sales.”
Under the program, Wal-Mart is increasing the use of contractors, as well as its own private fleet of trucks, to pick up products directly from manufacturers and transport the goods to its distribution centers and stores. The retailer currently moves most goods only from its distribution centers to stores.
The plan allows Wal-Mart’s fleet of 6,500 trucks and 55,000 trailers to carry more per truck and improve on-time delivery rates, said Leon Nicholas, a director at consulting firm Kantar Retail. Wal-Mart would also have more sway in negotiating fuel prices, he said.
“They are reaching further back into the supply chain,” said Cambridge, Massachusetts-based Nicholas, who has spoken with vendors about the move. “It is an effort to ultimately reduce costs of goods sold, which will ultimately increase their gross margins. They believe they can ship and transport product more efficiently than the suppliers can.”
Cost Disconnect
The price cuts Wal-Mart is seeking are twice as much as the cost for transporting goods in some cases, said officials from two suppliers. In two instances, Wal-Mart asked for a 6 percent reduction in the price it pays for products based on its own cost calculation, while suppliers estimated the actual expense was equal to about 3 percent, the people said.
“There may be a disconnect when we walk into the room on what that cost might be,” Wal-Mart’s Abney said. “But we work collaboratively. As soon as a supplier shares the data, almost always those differences are quickly resolved.”
Abney said Wal-Mart has thousands of suppliers and he has taken part in talks with more than 100. Some manufacturers have already shifted their deliveries and associated costs to Wal- Mart, he said.
Lowering Expenses
One side effect of the plan is that manufacturers may face increased transportation costs on deliveries to other retailers as they lose scale, said Randy Huffman, a former Wal-Mart executive who now runs GBD 360, a Bentonville consulting firm that works with suppliers.
“That aligns with Wal-Mart’s taking cost out of the supply chain for their benefit and not their competitors,” he said. “Suppliers are going to have to apply that increased freight cost somewhere, so it’s more than likely it will be passed onto other retailers.”
Wal-Mart is looking to defray expenses after saying this week that sales at U.S. stores open at least a year fell for a fourth straight quarter. Mike Duke, who took over as chief executive officer last year, pledged in October that costs would rise slower than sales.
Since then, Wal-Mart has sharpened its focus on transportation expenses, escalating talks to take over trucking from suppliers this year, Abney said.
Wal-Mart gained 7 cents to $51.37 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 3.9 percent this year, compared with a 0.4 percent decline for the Standard & Poor’s 500 Consumer Staples Index.
Trucker Mike
The retailer has sought to offer goods like cereal and laundry detergent for less to lure shoppers back to stores, and lowering transport costs provides room to do that. The strategy is part of what Wal-Mart calls its “productivity loop” -- efficiency reflected in lower bills at the cash register.
The loop is already the theme of a national commercial, where a truck driver identified as Mike touts the system, saying packing fuller loads has cut fuel costs and retail prices. Last year, Wal-Mart truckers logged 749 million miles, or about 100 million miles less than in 2008, according to spokesman Lorenzo Lopez. That trimmed expenses by almost $200 million, he said.
A Wal-Mart truck coming from a distribution center in Bentonville to stores hundreds of miles away may pick up goods from manufacturers on the way home, said Don Lanham, Milwaukee- based director of consumer products at Clarkston Consulting.
“It’s efficient, economical and environmental to have fully loaded trucks, not empty ones,” said Lanham, whose firm advises suppliers to Wal-Mart and other retailers. “Those Wal- Mart trucks are all over the United States.”
Price Cut Pledges
Shoppers are seeing the benefits, with Wal-Mart pledging on May 18 to cut prices on 22 items families routinely purchase for an average savings of 30 percent.
As for the suppliers, they may have to give in even if their other transport expenses rise, given Wal-Mart’s status as the world’s largest retailer, said Vic Gallese, an independent retail consultant based in Fort Worth, Texas.
“The vendors might say, ‘My other overhead costs will rise,’” said Gallese, who has spent 25 years in the industry. “And Wal-Mart will say, ‘That’s your problem.’”
Monday, March 29, 2010
U.S.-Bound Boxes Pile Up at Asian Ports as Ship Lines Avoid Adding Vessels
Bloomberg
South Korea’s biggest port, overwhelmed with empty containers a year ago, is now dealing with shipping lines that have more cargo than they can carry.
Surging shipments of furniture, electronics and clothes to the U.S. and Europe, coupled with capacity cuts by shipping lines, has caused as much as 15 percent of containers to be delayed in Busan this year, often by more than a week, according to Park Jong Ho, assistant general manager at Busan International Container Terminal Co.
“With the economy recovering, we have been seeing a lot of containers that didn’t make it out on time because there wasn’t enough space on ships,” he said.
A capacity crunch on transpacific routes has disrupted deliveries of Asian and U.S. exports, prompting a probe by U.S. regulators. Container lines have cut trips and imposed higher rates on customers, or shippers, after slumping trade and an excess supply of vessels caused industrywide losses of about $20 billion last year, according to Drewry Shipping Consultants Ltd.
“There is seething anger in the shipper community over the way rates have been raised,” said Bjorn Van Jensen, who manages more than 100,000 container shipments a year as logistics head at appliance-maker Electrolux AB. “Carriers see a tight supply situation and they are looking to get rates back up.”
Container Traffic
Container shipments at Busan, the world’s fifth-busiest port, rose 21 percent in the first two months, rebounding from the slump last year that forced Park to lease extra space to help store more than 31,000 empty boxes. In the U.S., retail container traffic will likely rise 13 percent this month and by 17 percent in the first half as shops restock, according to the Washington-based National Retail Federation.
That’s caused rates for ad hoc shipments on Asia-U.S. routes to jump about 50 percent this year to around $2,100 per forty-foot box, according to Johnson Leung, a Hong Kong-based analyst at Tufton Oceanic Ltd., the world’s largest shipping hedge-fund group.
“The volume is surprisingly high,” he said. “Still, rates were at low levels at the beginning of this year, and shipping lines have to increase them to break even.”
U.S. customers have also contributed to the disruptions and higher rates by cutting inventories to two-year lows and placing more rush orders on concerns about holding stock.
“The trend now is that orders are always made from Europe and the U.S. very rapidly and at the very last minute,” said Ken Lee, a general manager in the sea-freight unit at Hong Kong- based Vinflair Shipping Ltd.
The U.S. Federal Maritime Commission earlier this month began a “fact-finding investigation” into shipping capacity because of U.S. importers and exporters’ struggles to find space.
Temporary Trend?
Lines haven’t added more vessels on transpacific routes, citing concerns about the sustainability of demand. The jobless rate in the U.S. remains near 10 percent. Building permits, a sign of future construction, also fell 1.6 percent last month after a 4.7 percent drop in January.
“We have seen no reason to add extra ships as the trend is temporary,” said A.P. Moeller-Maersk A/S CEO Nils Smedegaard Andersen. “With the problems this industry has had, I think we’re all be very cautious before sending new ships into service.”
Maersk expects a “modest” 2010 profit following its first loss in six decades last year. Industrywide, container lines may pare loses to about $7 billion this year, according to Drewry.
Annual Contracts
The surge in shipments coincides with annual contract negotiations between lines and customers. Maersk and Mediterranean Shipping Co., the world’s two largest container lines, and 13 others are seeking an extra $800 per cargo box on Asia-U.S. west coast routes. That’s about a 50 percent increase, according to Leung.
“If we can get an agreement for that kind of rate increase, then a lot of the shipping companies will become profitable,” said Kim Young Min, chief executive officer of Hanjin Shipping Co. and chairman of the Transpacific Stabilization Agreement, or TSA, whose 15 members carry almost 90 percent of Asia-U.S. boxes.
Lines in the group, which has limited U.S. antitrust protection, are already imposing a $400 per container “emergency revenue charge” to pare losses on contracts agreed last year during the worst of the trade slump. Rates fell by as much as half in those deals, according to the TSA. The charge will be discontinued when the new contracts start around May.
Hardened Gamblers
Customers have to accept additional levies or lines won’t carry their cargo, Stockholm-based Electrolux’s Jensen said. That’s causing “enormous uncertainty” as shippers don’t know whether additional levies will follow, he said.
“I don’t know anybody who thrives on this kind of volatility except hardened gamblers,” he said. Even so, “shippers understand that rates have to come back up” as the lines’ losses are unsustainable, he said.
New ship deliveries may disrupt lines’ efforts to raise rates this year as shipyards hand over vessels ordered before the trade slump began. Shipbuilders hold container-vessel orders with a combined capacity equal to about 33 percent of the existing global fleet, according to data compiled by Bloomberg.
“New capacity entering service this year could weigh on rates,” said Jay Ryu, a Hong Kong-based analyst at Mirae Asset Securities Co. “This isn’t really a recovery because lines have reduced capacity and manipulated the market.”
Amid last year’s slump, lines mothballed more than 500 ships worldwide to pare capacity. They also began operating vessels at slower speeds, which cuts fuel usage and reduces the total amount of cargo each ship can haul per month.
Such steps are likely to continue because of the oversupply of ships, said Tung Chee Chen, chairman of Orient Overseas (International) Ltd., Hong Kong’s biggest container line.
“We learnt a very bitter lesson last year,” he said about the industry. “We will all be more careful and disciplined in managing our tonnage and warehouse material handling this year.”
Surging shipments of furniture, electronics and clothes to the U.S. and Europe, coupled with capacity cuts by shipping lines, has caused as much as 15 percent of containers to be delayed in Busan this year, often by more than a week, according to Park Jong Ho, assistant general manager at Busan International Container Terminal Co.
“With the economy recovering, we have been seeing a lot of containers that didn’t make it out on time because there wasn’t enough space on ships,” he said.
A capacity crunch on transpacific routes has disrupted deliveries of Asian and U.S. exports, prompting a probe by U.S. regulators. Container lines have cut trips and imposed higher rates on customers, or shippers, after slumping trade and an excess supply of vessels caused industrywide losses of about $20 billion last year, according to Drewry Shipping Consultants Ltd.
“There is seething anger in the shipper community over the way rates have been raised,” said Bjorn Van Jensen, who manages more than 100,000 container shipments a year as logistics head at appliance-maker Electrolux AB. “Carriers see a tight supply situation and they are looking to get rates back up.”
Container Traffic
Container shipments at Busan, the world’s fifth-busiest port, rose 21 percent in the first two months, rebounding from the slump last year that forced Park to lease extra space to help store more than 31,000 empty boxes. In the U.S., retail container traffic will likely rise 13 percent this month and by 17 percent in the first half as shops restock, according to the Washington-based National Retail Federation.
That’s caused rates for ad hoc shipments on Asia-U.S. routes to jump about 50 percent this year to around $2,100 per forty-foot box, according to Johnson Leung, a Hong Kong-based analyst at Tufton Oceanic Ltd., the world’s largest shipping hedge-fund group.
“The volume is surprisingly high,” he said. “Still, rates were at low levels at the beginning of this year, and shipping lines have to increase them to break even.”
U.S. customers have also contributed to the disruptions and higher rates by cutting inventories to two-year lows and placing more rush orders on concerns about holding stock.
“The trend now is that orders are always made from Europe and the U.S. very rapidly and at the very last minute,” said Ken Lee, a general manager in the sea-freight unit at Hong Kong- based Vinflair Shipping Ltd.
The U.S. Federal Maritime Commission earlier this month began a “fact-finding investigation” into shipping capacity because of U.S. importers and exporters’ struggles to find space.
Temporary Trend?
Lines haven’t added more vessels on transpacific routes, citing concerns about the sustainability of demand. The jobless rate in the U.S. remains near 10 percent. Building permits, a sign of future construction, also fell 1.6 percent last month after a 4.7 percent drop in January.
“We have seen no reason to add extra ships as the trend is temporary,” said A.P. Moeller-Maersk A/S CEO Nils Smedegaard Andersen. “With the problems this industry has had, I think we’re all be very cautious before sending new ships into service.”
Maersk expects a “modest” 2010 profit following its first loss in six decades last year. Industrywide, container lines may pare loses to about $7 billion this year, according to Drewry.
Annual Contracts
The surge in shipments coincides with annual contract negotiations between lines and customers. Maersk and Mediterranean Shipping Co., the world’s two largest container lines, and 13 others are seeking an extra $800 per cargo box on Asia-U.S. west coast routes. That’s about a 50 percent increase, according to Leung.
“If we can get an agreement for that kind of rate increase, then a lot of the shipping companies will become profitable,” said Kim Young Min, chief executive officer of Hanjin Shipping Co. and chairman of the Transpacific Stabilization Agreement, or TSA, whose 15 members carry almost 90 percent of Asia-U.S. boxes.
Lines in the group, which has limited U.S. antitrust protection, are already imposing a $400 per container “emergency revenue charge” to pare losses on contracts agreed last year during the worst of the trade slump. Rates fell by as much as half in those deals, according to the TSA. The charge will be discontinued when the new contracts start around May.
Hardened Gamblers
Customers have to accept additional levies or lines won’t carry their cargo, Stockholm-based Electrolux’s Jensen said. That’s causing “enormous uncertainty” as shippers don’t know whether additional levies will follow, he said.
“I don’t know anybody who thrives on this kind of volatility except hardened gamblers,” he said. Even so, “shippers understand that rates have to come back up” as the lines’ losses are unsustainable, he said.
New ship deliveries may disrupt lines’ efforts to raise rates this year as shipyards hand over vessels ordered before the trade slump began. Shipbuilders hold container-vessel orders with a combined capacity equal to about 33 percent of the existing global fleet, according to data compiled by Bloomberg.
“New capacity entering service this year could weigh on rates,” said Jay Ryu, a Hong Kong-based analyst at Mirae Asset Securities Co. “This isn’t really a recovery because lines have reduced capacity and manipulated the market.”
Amid last year’s slump, lines mothballed more than 500 ships worldwide to pare capacity. They also began operating vessels at slower speeds, which cuts fuel usage and reduces the total amount of cargo each ship can haul per month.
Such steps are likely to continue because of the oversupply of ships, said Tung Chee Chen, chairman of Orient Overseas (International) Ltd., Hong Kong’s biggest container line.
“We learnt a very bitter lesson last year,” he said about the industry. “We will all be more careful and disciplined in managing our tonnage and warehouse material handling this year.”
Tuesday, March 2, 2010
USPS May Go to 5-Day Delivery
The Detroit Free Press
The U.S. Postal Service will move this month toward reducing mail delivery from six days a week to five, a change Postmaster General John Potter has said is critical to reducing the agency's massive debt.
Potter said Monday he'll submit a formal request by the end of this month to the Postal Regulatory Commission, which must issue an advisory opinion on any change in mail service that would have national impact.
Once Potter makes the request, the commission plans to hold public hearings around the nation and seek expert testimony. Even if the commission approves the dropped day, the Postal Service also needs congressional consent: Federal law requires six-day delivery.
Potter is to release the details today of a $4.8-million study that projects how steeply mail volume will fall and how deeply the Postal Service will be in debt by 2020. The Postal Service already has borrowed $10 billion from the U.S. Treasury. Potter said it expects to borrow another $3 billion this year, leaving it just $2 billion under the $15-billion cap set by Congress.
Potter said Monday he'll submit a formal request by the end of this month to the Postal Regulatory Commission, which must issue an advisory opinion on any change in mail service that would have national impact.
Once Potter makes the request, the commission plans to hold public hearings around the nation and seek expert testimony. Even if the commission approves the dropped day, the Postal Service also needs congressional consent: Federal law requires six-day delivery.
Potter is to release the details today of a $4.8-million study that projects how steeply mail volume will fall and how deeply the Postal Service will be in debt by 2020. The Postal Service already has borrowed $10 billion from the U.S. Treasury. Potter said it expects to borrow another $3 billion this year, leaving it just $2 billion under the $15-billion cap set by Congress.
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, January 25, 2010
Economic Indicators: Shipping Industry is Picking Up
New Orleans Business News
If shipping volume is any indication of the health of the retail industry, then Elroy Pinkins says 2009 has given retailers reason to celebrate.
"Last year was the worst year out of the 17 years I've been doing this, but this year volume is bouncing back," Pinkins said. "I'd say it's up 45 or 50 percent over last year."
"Last year was the worst year out of the 17 years I've been doing this, but this year volume is bouncing back," Pinkins said. "I'd say it's up 45 or 50 percent over last year."
A FedEx subcontractor whose trucks operate out of a central terminal in St. Rose, Pinkins believes that next year will be better still.
"Fedex hasn't provided us with specific percentages, but they've done projections and let us all know to expect things to continue to improve," Pinkins said.
The recent holiday shipping period helped end 2009 on a high note, according to Pinkins and the small neighborhood-based mailing and packaging businesses that help many individuals and businesses with their shipping.
"Business has been way down this year, but it's picked up a lot since the end of November," said Trevail Thomas, whose family owns Royal Mail in the French Quarter. "From what I've seen, the volume (during the holiday season) was about the same as it was in the past, except people got packages out earlier and didn't wait until the last minute when they have to spend more to send things by air."
However, Thomas reports that customers who rent post office boxes don't seem to be receiving as many packages as in the past.
"I guess in other parts of the country, they aren't sending out as much as they used to and so my mail box holders aren't receiving as much as they used to," Thomas said.
At Pack Rat on Magazine Street in the Irish Channel, owner Marielou Ray says she was relieved that the volume of holiday business matched that of the 2008 season.
"Overall, my business has been down about 10 percent this whole year compared to 2008, so I was expecting the same for the holiday shipping," she said. "But I've been tracking volume since the end of November and it's flat with what we had last year. That's good, because it could have been down 10 percent like the rest of the year."
Ray says that her customers economized in their shipping during the recent holiday period.
"I noticed that a lot of packages are smaller in size than we usually see, so they are cheaper to ship," Ray said. "Some people figure that if something isn't breakable, they can probably send it in a padded envelope instead of a box and save money that way. And people sent packages out early so they could go ground. They didn't want to bite the bullet and pay a premium for air."
Even the record-setting rainstorms that swept through New Orleans in mid-December failed to deter consumers from shipping early to take advantage of ground rates.
"Weather was not a factor for them. Through rain, sleet or snow, they felt like they had to get that package out in time for it to be sent ground," Thomas said. "They'd rather go through horrendous rain conditions than pay an extra $10 for air."
For Pinkins, this year's healthy holiday shipping season meant adding three trucks to the five he normally runs to routes in Metairie and Baton Rouge.
"Come October, I start advertising for people who can qualify to drive the extra trucks and then I train them," he said.
On a recent day, during the heaviest shipping period of the year, one of Pinkins' eight drivers was out so Pinkins himself took the wheel.
"I like to do it every now and then. It shows me what my drivers have to deal with," he said. "I like keeping in shape and seeing people."
With online retailers capturing a larger part of the holiday shipping business, Pinkins says that FedEx keeps an eye on promotions like "Cyber Monday" or "Free Shipping" days so that the company can prepare for the added volume.
"The national sales office works with retailers in advance of their promotions," he said. "That way, we aren't caught off guard by unexpected volume and the retailer knows they have a dependable shipper lined up."
Pinkins' drivers make an average of 1,200 stops a day during holiday season, or about 150 stops per day per driver.
"It can be stressful for them, with traffic and weather conditions," he said. "On average, drivers usually stay with it about two-and-a-half years before they move on to something new or become a subcontractor themselves."
Snowy conditions in the Northeast last weekend concerned Pinkins, who said that a major weather event like a snow storm can easily disrupt all of his careful planning and use of shipping software.
"It could be weather or an accident or someone getting sick -- you just have to be prepared for whatever comes your way and know from the start that something will come up you will just have to adapt to," Pinkins said.
"Fedex hasn't provided us with specific percentages, but they've done projections and let us all know to expect things to continue to improve," Pinkins said.
The recent holiday shipping period helped end 2009 on a high note, according to Pinkins and the small neighborhood-based mailing and packaging businesses that help many individuals and businesses with their shipping.
"Business has been way down this year, but it's picked up a lot since the end of November," said Trevail Thomas, whose family owns Royal Mail in the French Quarter. "From what I've seen, the volume (during the holiday season) was about the same as it was in the past, except people got packages out earlier and didn't wait until the last minute when they have to spend more to send things by air."
However, Thomas reports that customers who rent post office boxes don't seem to be receiving as many packages as in the past.
"I guess in other parts of the country, they aren't sending out as much as they used to and so my mail box holders aren't receiving as much as they used to," Thomas said.
At Pack Rat on Magazine Street in the Irish Channel, owner Marielou Ray says she was relieved that the volume of holiday business matched that of the 2008 season.
"Overall, my business has been down about 10 percent this whole year compared to 2008, so I was expecting the same for the holiday shipping," she said. "But I've been tracking volume since the end of November and it's flat with what we had last year. That's good, because it could have been down 10 percent like the rest of the year."
Ray says that her customers economized in their shipping during the recent holiday period.
"I noticed that a lot of packages are smaller in size than we usually see, so they are cheaper to ship," Ray said. "Some people figure that if something isn't breakable, they can probably send it in a padded envelope instead of a box and save money that way. And people sent packages out early so they could go ground. They didn't want to bite the bullet and pay a premium for air."
Even the record-setting rainstorms that swept through New Orleans in mid-December failed to deter consumers from shipping early to take advantage of ground rates.
"Weather was not a factor for them. Through rain, sleet or snow, they felt like they had to get that package out in time for it to be sent ground," Thomas said. "They'd rather go through horrendous rain conditions than pay an extra $10 for air."
For Pinkins, this year's healthy holiday shipping season meant adding three trucks to the five he normally runs to routes in Metairie and Baton Rouge.
"Come October, I start advertising for people who can qualify to drive the extra trucks and then I train them," he said.
On a recent day, during the heaviest shipping period of the year, one of Pinkins' eight drivers was out so Pinkins himself took the wheel.
"I like to do it every now and then. It shows me what my drivers have to deal with," he said. "I like keeping in shape and seeing people."
With online retailers capturing a larger part of the holiday shipping business, Pinkins says that FedEx keeps an eye on promotions like "Cyber Monday" or "Free Shipping" days so that the company can prepare for the added volume.
"The national sales office works with retailers in advance of their promotions," he said. "That way, we aren't caught off guard by unexpected volume and the retailer knows they have a dependable shipper lined up."
Pinkins' drivers make an average of 1,200 stops a day during holiday season, or about 150 stops per day per driver.
"It can be stressful for them, with traffic and weather conditions," he said. "On average, drivers usually stay with it about two-and-a-half years before they move on to something new or become a subcontractor themselves."
Snowy conditions in the Northeast last weekend concerned Pinkins, who said that a major weather event like a snow storm can easily disrupt all of his careful planning and use of shipping software.
"It could be weather or an accident or someone getting sick -- you just have to be prepared for whatever comes your way and know from the start that something will come up you will just have to adapt to," Pinkins said.
Thursday, April 16, 2009
Los Angeles Port's Rivals Make Gains
by Wall Street Journal
Next month, shipping giant AP Moeller-Maersk will make a move that would have been unlikely a decade ago. A line of 6,000-container ships that now goes to Southern California will dock in Seattle instead.
While that represents a small fraction of the eight million containers handled annually at the Port of Los Angeles, it is an example of how the nation's largest port is coming under pressure as volumes drop. New regulations, such as tougher environmental restrictions, have made the port more fuel efficient, but the additional costs have made it more vulnerable to losing market share of U.S.-bound goods.
The Port of Los Angeles, shown idled by protests in 2008, is coming under pressure as volumes decline. Container volume fell 6% last year. Associated Press
"Business on the West Coast will be more competitive" in the current economy, said Geraldine Knatz, the executive director of the port. "Pacific Northwest ports are marketing against us."
For years, the Los Angeles container harbor and its adjacent port in cruises Long Beach Harbor had a stranglehold on U.S. imports, serving as the point of entry for goods headed as far as Chicago and Miami. Together, the two handle four out of 10 containers that come to the U.S.
But container volume at Los Angeles was down 6% in 2008 and fell 32% in February from a year earlier. The hub of roughly 42,000 jobs is preparing for possible midyear budget cuts, and many longshoremen are working part-time. Other ports have seen large declines, too.
This drop in volume comes just as ports from Portland, Ore., to British Columbia are rolling out new infrastructure in a bid to grab more of the container business. Some offer quicker transport times from Asia, or fewer environmental restrictions on trucks -- pitches that are increasingly compelling in the global trade slowdown.
"Every dollar matters," said David Arsenault, a vice president at Hyundai Merchant Marine. Some changes came this summer, Mr. Arsenault said, when surging fuel prices made ground transport from Los Angeles less competitive over long distances -- turning ports that offered better routes to distant markets into more attractive options.
Prince Rupert Port in British Columbia was once a site for shipping timber and pulp out of Canada, but it reopened in 2007 to service container vessels from Asia. The port makes the case that with its rail connections, lack of urban congestion and shorter distance from Asia by sea, it shaves a day or two off of transport to places like the Midwest. "We service the heartland of North America," said Don Krusel, president and chief executive of the port. "We're 99 hours to Chicago, 133 hours to Memphis" by train. Mr. Krusel said the port, which handled roughly 180,000 containers last year, will expand its capacity to two million containers by 2014.
No one is predicting the cruises port of Los Angeles and Long Beach will lose their spot as the country's largest port complex by volume -- its proximity to the vast Southern California market is enough to ensure major business for years to come. But "because they were the first there, they were the first target" by West Coast upstarts, said Paul Bingham, an economist at IHS Global Insight.
On Monday, the Long Beach Harbor Commission was scheduled to vote on whether to approve the environmental report for a $750 million project to modernize two terminals. Officials said the project, which will take 10 years to complete, will enable the ports to handle larger ships and make it easier for containers to be transferred from a ship to an awaiting train, among other things.
Mr. Bingham predicted companies will increasingly re-evaluate what he calls "discretionary cargo" -- freight bound for places far from its port of entry. It is a process that has already happened at Wal-Mart Stores Inc., which went from shipping 80% of its freight through Southern California in 2002, to 15% today.
And major interruptions at the Port of Los Angeles -- including a West Coast lockout of dockworkers in 2002 and a large backup at the port in 2004 -- made companies wary of working exclusively with Los Angeles.
by Wall Street Journal
Next month, shipping giant AP Moeller-Maersk will make a move that would have been unlikely a decade ago. A line of 6,000-container ships that now goes to Southern California will dock in Seattle instead.
While that represents a small fraction of the eight million containers handled annually at the Port of Los Angeles, it is an example of how the nation's largest port is coming under pressure as volumes drop. New regulations, such as tougher environmental restrictions, have made the port more fuel efficient, but the additional costs have made it more vulnerable to losing market share of U.S.-bound goods.
The Port of Los Angeles, shown idled by protests in 2008, is coming under pressure as volumes decline. Container volume fell 6% last year. Associated Press "Business on the West Coast will be more competitive" in the current economy, said Geraldine Knatz, the executive director of the port. "Pacific Northwest ports are marketing against us."
For years, the Los Angeles container harbor and its adjacent port in cruises Long Beach Harbor had a stranglehold on U.S. imports, serving as the point of entry for goods headed as far as Chicago and Miami. Together, the two handle four out of 10 containers that come to the U.S.
But container volume at Los Angeles was down 6% in 2008 and fell 32% in February from a year earlier. The hub of roughly 42,000 jobs is preparing for possible midyear budget cuts, and many longshoremen are working part-time. Other ports have seen large declines, too.
This drop in volume comes just as ports from Portland, Ore., to British Columbia are rolling out new infrastructure in a bid to grab more of the container business. Some offer quicker transport times from Asia, or fewer environmental restrictions on trucks -- pitches that are increasingly compelling in the global trade slowdown.
"Every dollar matters," said David Arsenault, a vice president at Hyundai Merchant Marine. Some changes came this summer, Mr. Arsenault said, when surging fuel prices made ground transport from Los Angeles less competitive over long distances -- turning ports that offered better routes to distant markets into more attractive options.
Prince Rupert Port in British Columbia was once a site for shipping timber and pulp out of Canada, but it reopened in 2007 to service container vessels from Asia. The port makes the case that with its rail connections, lack of urban congestion and shorter distance from Asia by sea, it shaves a day or two off of transport to places like the Midwest. "We service the heartland of North America," said Don Krusel, president and chief executive of the port. "We're 99 hours to Chicago, 133 hours to Memphis" by train. Mr. Krusel said the port, which handled roughly 180,000 containers last year, will expand its capacity to two million containers by 2014.No one is predicting the cruises port of Los Angeles and Long Beach will lose their spot as the country's largest port complex by volume -- its proximity to the vast Southern California market is enough to ensure major business for years to come. But "because they were the first there, they were the first target" by West Coast upstarts, said Paul Bingham, an economist at IHS Global Insight.
On Monday, the Long Beach Harbor Commission was scheduled to vote on whether to approve the environmental report for a $750 million project to modernize two terminals. Officials said the project, which will take 10 years to complete, will enable the ports to handle larger ships and make it easier for containers to be transferred from a ship to an awaiting train, among other things.
Mr. Bingham predicted companies will increasingly re-evaluate what he calls "discretionary cargo" -- freight bound for places far from its port of entry. It is a process that has already happened at Wal-Mart Stores Inc., which went from shipping 80% of its freight through Southern California in 2002, to 15% today.
And major interruptions at the Port of Los Angeles -- including a West Coast lockout of dockworkers in 2002 and a large backup at the port in 2004 -- made companies wary of working exclusively with Los Angeles.
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
Subscribe to:
Posts (Atom)