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Aug.24, 2015

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MUMBAI PORT WOES UNDERSCORE LOGISTICS CHALLENGES A LABOR DISPUTE that shut down Gateway Terminals India at the Jawaharlal Nehru Port Trust port complex in Mumbai is over, but the negativity around the country's lack of invest- ment in its logistics infrastructure remains. The dispute between rubber-tire gantry oper- ators and their unionized workers ended on Aug. 12 but not before forcing shipping lines to announce congestion surcharges or to divert their vessels to neighboring terminals in the port of Nhava Sheva or to other ports entirely. The logistics sector in India faces challenges such as poor infrastructure, a complex tax regime as well as operational challenges in terms of the availability of trained manpower and a reluctance to upgrade and implement new warehouse management systems, said Amit Dhingra, director of operations, India, for Menlo Logistics. A consequence of these issues is poor productivity and operational efficiency. A joint operation between APMT and state- owned rail operator Container Corporation of India, GTI currently accounts for approx- imately 45 percent of JNPT's total through- put and about 20 percent of India's overall container volumes routed through major pub- lic port complexes. Steady congestion has taken its toll on the terminal, as April to July volumes fell 2.86 percent from 655,570 TEUs to 636,839 TEUs on a year-over-year basis. However, Dhing ra said there a re promis- ing signs that investment in infrastructure is increasing, which would be highly benefi- cial to the logistics sector. Another development he sees as positive is a proposal that a general sales tax be introduced from April 2016 to replace the current complex tax structure lev- ied on goods and services by central and state authorities. CHINA SLOWDOWN RIPPLES THROUGH SUPPLY CHAINS THE CHINESE GOVERNMENT'S trumpeting that GDP grew around 7 percent, keeping pace with Beijing's goal, is ringing hollow. The country's economic weakness is rippling through sup- ply chains and possibly adding momentum to the merger of China's two state-owned carrier champions. Analysts are divided on just how much an impact China's devaluation of its cur- rency will have on its exports and how much it spur more domestic sourcing. Exports to the European Union fell 12.3 percent in July, while those to the U.S. dropped 1.3 percent. Demand from Japan, another leading trading partner, declined 13 percent. Fortunately, the impact on container shipping is expected to be less than on the dry bulk market, according to Drewry Maritime Research. "But they are not inconsiderable and will contribute to slowing world box growth," the London-based analyst cautioned. Greater China, including Hong Kong, represents approximately 30 percent of all container moves in the world, having doubled since the start of the century following Beijing's entry into the World Trade Organization. "Clearly, with such a large piece of the pie, the Chinese economy has a huge bearing on world port through- put output," Drewry says in its latest weekly Container Insight. The International Monetary Funds' forecast of a slowing in China's GDP from 6.8 percent in 2015 to 6.3 percent in 2016 has prompted Drewry to downgrade its outlook for Chinese and world container traffic. Mean- while, it's looking increasingly likely that Cosco and China Shipping will merge after the duo this month suspended trading on Shanghai, Shenzhen and Hong Kong exchanges. A potential merger would create the world's fourth-largest single carrier, controlling a good 8 percent of global container shipping capacity. Going by first-half statistics from PIERS, a sister product of The Journal of Commerce within IHS, the duo would be the largest carrier on the east- bound trans-Pacific lane to United States, with a 12 percent share. In comparison, a newly formed company would only control 1.9 percent of U.S. imports on the trans-Atlantic trade lane, according to PIERS. 6 THE JOURNAL OF COMMERCE AUGUST 24.2015 Spotlight 6 THE JOURNAL OF COMMERCE

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