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July 07, 2014

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IPHONE 6 COULD BOOST AIR CARGO CARRIERS RUMORS THAT THE new iPhone 6 will be launched in September have air cargo carriers salivating for much-needed new cargo to ship from China to the rest of the world. Global air cargo traffic expanded 4.7 percent year-over-year in May, an acceleration from the 3.8 percent gain in April, according to the International Air Transport Association. Asia- Pacific carriers, however, have seen capacity grow faster than demand, making a new gadget just the ticket to close the gap. The iPhones are assembled by Taiwan's Foxconn at factories in Zhengzhou and Shenzhen, China. Airlines competing for a share of the cargo include freighter operators Cargolux, AirBridgeCargo, Cathay Pacific, China Airlines Cargo, Air China Cargo, China Southern Cargo and UPS. A host of passenger airlines also call at Zhengzhou Xinzheng International Air- port, adding significant belly cargo capacity to the market. All that capacity will be required if the reaction to the iPhone 6 release is anything like that of its predecessor. The launch of the iPhone 5 on Sept. 21, 2012, saw more than 2 million orders received by Apple within 24 hours of release; 34 million units were sold in the first 100 days. AT&T said the iPhone 5 was the fastest-selling iPhone the company had ever offered, selling more than 5 million units on launch weekend. CHINA DOUBLES DOWN ON EUROPEAN GATEWAY EFFORT EVEN AS IT shot down an ambitious plan by Europe's three largest ocean carriers to join forces, China was building on its bid to create a continental gateway to distribute its products across its largest export market. The June 17 decision by Beijing's antitrust regulators to block the P3 Network among Maersk Line, Mediterra- nean Shipping Co. and CMA CGM overshadowed a slew of multibillion-dollar shipping deals struck during Chinese Prime Minister Li Keqiang's three-day visit to Greece. While its eurozone partners see Greece as a troublesome economic basket case that has been rescued twice from near-bankruptcy by massive European Union and International Monetary Fund bailouts, Beijing views its strategic location on the EU's periphery as an ideal transshipment hub for its lucrative European and African markets. Greece is already a leading European gateway thanks to Hong Kong-based Cosco Pacific, which paid some $5 billion in 2009 for a 35-year concession to operate two of the three container terminals in Piraeus, the country's top port. Defying bitter opposition from Greek labor unions, Cosco has transformed inefficient, strike-happy Piraeus into a successful Mediterranean transshipment hub and one of Europe's most dynamic ports. Cosco's Greece traffic soared 28 percent in the first quar- ter to more than 685,000 20-foot-equivalent units, outpacing the southern Spanish hub of Algeci- ras, which posted an increase of 19.3 percent, to 1.5 million TEUs, in the same period. Cosco has expanded the two Piraeus terminals' annual capacity by 1 million TEUs to 2.6 million TEUs since 2009 and will add another 1 million TEUs by 2015, when a new facility begins to operate. China's growing attraction to Greece was under- scored by a clutch of deals signed during Li's visit, topped by China Development Bank's $1.5 billion credit line to Costamare, which fueled specula- tion the Athens-based and NYSE-listed container shipowner is poised to place a large order for 10,000-plus-TEU vessels at Chinese shipyards. In all, Chinese banks signed more than $2.6 billion in credit lines for Greek shipowners, mostly for con- tainer vessels and bulk carriers, and there's talk that another $5 billion could be in the pipeline. SHIPPERS TAKE SOLACE IN ILWU-PMA PLEDGE SHIPPERS BREATHED A sigh of relief after the International Longshore and Warehouse Union and waterfront employers said there won't be cargo disruptions at U.S. West Coast ports while negotiations on a new contract continue. There was some trepidation that the expiration of the contract on July 1 could pave the way for work slowdowns while negotiations between the ILWU and the Pacific Maritime Association continue. "Both sides understand the strategic importance of the ports to the local, regional and U.S. economies, and are mindful of the need to finalize a new coastwide contract as soon as possible to ensure continuing confidence in the West Coast ports and avoid any disruption to the jobs and commerce they support," the union and employers' group said in a joint statement. Expiration of the previous contract also means the "no-strike" clause contained in ILWU contracts has expired. By stating that "cargo will keep moving," however, both parties were sending a message to the shipper community that neither a strike nor a lockout is anticipated as a way to influence negotiations. Failure to meet the July 1 deadline is par for the course in ILWU-PMA negotiations because it adds leverage to the bargaining positions of both parties. Dockworkers don't get paid if they're on strike, and employers feel pressure from beneficial cargo owners to reach an agreement. The issues involved in the current negotiations aren't considered to be of the same magnitude as the issues under negotiation in the 2002 and 2008 contracts, though a three-year contract is possible as the two sides hold out hope for repeal of the so-called Cadillac Tax on generous health care plans, which is part of the Affordable Care Act and scheduled to take effect in 2018. Spotlight 6 THE JOURNAL OF COMMERCE JULY 7.2014 6 THE JOURNAL OF COMMERCE

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