Digital Edition

Feb. 17, 2014

Issue link: https://jocdigital.uberflip.com/i/350111

Contents of this Issue

Navigation

Page 5 of 63

PANAMA CANAL WORK STOPS; COMPLETION TARGET THREATENED ALL EYES ARE on Panama as shippers and con- tainer lines await word on whether the halt to work on the Panama Canal's expansion will push the project completion past the late 2015 target. Work stopped on the $5.25 billion proj- ect this month following a breakdown in talks between the canal authority and the construc- tion consortium tasked with completing the expansion aimed at resolving a bitter dispute over more than $1 billion in cost overruns. The dispute already had slowed the work to 25 to 30 percent of the normal pace, Manuel Benítez, the canal's deputy administrator, said at the Georgia Foreign Trade Conference on Feb. 3. The timing of the delays, in the midst of Panama's dry sea- son, is inopportune. Canal Administrator Jorge Quija no sa id the authorit y "con- tinues to try to find a solution," but stressed t hat t he cont ractor "must resume nor- ma l act iv it y wh ich is especially crucial during the dr y sea- son in Panama." The delays will particularly affect container trade between Asia and the U.S. East Coast, with containers being the largest segment of canal traffic and the U.S. accounting for the largest share of tonnage among countries sending or receiving cargo moving through the canal. P3 COULD CLEAR US REGULATORY HURDLE BY LATE MARCH THE P3 NETWORK could be sailing past a U.S. regulatory hurdle by late March, after the three largest container lines responded Feb. 7 to the Federal Maritime Commission's questions on the unprecedented vessel-sharing alliance. The commission is reviewing the responses submitted by Maersk Line, Mediterranean Shipping Co. and CMA CGM, FMC spokesman Rachel Dickon said. The FMC on Dec. 5 asked the three carriers for more information on the proposed P3 Network, stopping the clock on the agency's regulatory review of the VSA. The FMC has 45 days, or until March 24, to ask the container lines more questions, which would restart the regulatory clock; seek an injunction against the P3; or do nothing, allowing the VSA to take effect. Maersk Line, MSC and CMA CGM aim to launch the P3 in the Asia-Europe, trans- Pacific and trans-Atlantic trades in the second quarter. The alliance would represent approxi- mately 42 percent of Asia-Europe capacity, 24 percent of trans-Pacific capacity and 40 to 42 percent of the trans-Atlantic, according to the FMC. The P3 would allow the carriers to consoli- date their services around fewer but larger ships, resulting in lower per-container costs and giving the carriers an advantage over lines operating smaller vessels. THE BIG CHILL: WINTER WEATHER BURIES ECONOMY THE FRIGID WINDS of January and early Feb- ruary, which brought snow, ice and unusually cold temperatures to a large swath of the U.S., could have a longer lasting chilling effect on the economy and overshadow the first quarter. Another round of severe weather could deepen those losses further. Four separate periods of severe winter weather in January directly cost the U.S. economy $3 billion, with insured losses exceeding $1.4 billion, according to Impact Fore- casting, the catastrophe model development center of Aon Benfield, a reinsurance interme- diary and capital adviser. "The combination of physical damages and business interruption costs have quickly aggregated into direct eco- nomic losses well into the billions of dollars," said Steven Bowen, senior scientist and meteorolo- gist at Impact Forecasting. The storms have been blamed in part for disruptions in manu- facturing, drayage chassis shortages in the N or theast a nd at Midwest rail termina ls, slower freight trains in the West and trucking delays throughout the country. Winter weather has slowed work at the Port of New York and New Jersey and inland rail ramps, and reduced turnover of equipment has tightened supplies of intermodal chassis. Long queues have worn down drivers' patience and eaten up the time they can be on the road through tighter hours of service rules. If anyone should be making money while the snow falls, it's expe- dited transportation companies that provide emergency services that keep production lines moving when supply chains get snarled. Look to see evidence of that emergency demand in the quarterly results of Arkansas Best's Pan- ther Expedited, XPO Logistics' Express-1 and FedEx Custom Critical in a few months. And a spring thaw could release significant pent-up demand as consumers return to car lots and big box stores, just as retailers begin ramping up imports in March, the start of a shipping sea- son some truckers see as the new peak. "After allowing for companies that saw production and sales disrupted by the cold weather, the rate of growth of output and orders remained as strong, if not stronger, than seen late last year," Markit Chief Economist Chris Williamson said after the release of the company's Purchasing Managers Index on Jan. 23. In the meantime, shippers throughout the country have little choice but to plan for unexpected delays and, where possible, try to add a mid-winter cushion to their supply chains. Spotlight 6 THE JOURNAL OF COMMERCE www.joc.com FEBRUARY 17.2014 6 THE JOURNAL OF COMMERCE www.joc.com

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - Feb. 17, 2014