Global Logistics–July 2010

Prince Rupert’s Princely Returns

As the rest of the world deals with the aftershock of a global economic recession, British Columbia’s Port of Prince Rupert keeps steaming along with record traffic. Because the port is two days closer to Asia than any other West Coast gateway, isn’t bottlenecked with congestion, and has made considerable investments in rail connectivity to hinterland markets, it has become a vital conduit for Asia-North American trade.

The port improved its performance in the first quarter of 2010, with shipment volumes up nearly 73 percent — handling 4,119,708 metric tons compared to 2,383,510 metric tons during the same period in 2009. The surge in traffic was driven by a 218-percent jump in throughput at Ridley Terminals and an 84-percent increase at the Fairview Container Terminal. This growth follows the best year (2009) at the Port of Prince Rupert since 1997. Much of the growth in containerized export cargo is due to the backhaul of Western Canadian commodities — such as lumber and aluminum — to China.

U.K. Duties Hit Air Freight

The International Air Cargo Association (TIACA) has warned that a rumored move by the United Kingdom to replace the existing Airline Passenger Duty with a new per-aircraft flight fee would result in higher taxation across the air cargo supply chain, increased costs for manufacturers and consumers, and no new environmental benefits.

The per-plane fee would ostensibly be imposed for sustainability reasons, as a means of addressing greenhouse gas emissions. TIACA argues that it is unlikely any of the additional revenues will be directed toward improving the environment; instead, they will feed the United Kingdom’s general funds.

The industry lobby also stresses that any new tax burden across the air cargo supply chain would impair the aviation industry’s ability to continue investing in new green technologies.

EU Rolls Out Tarmac For Garuda Indonesia

Garuda Indonesia, the country’s national airline, has taken the first step in rebuilding its long-haul international network with the launch of a new daily service from Jakarta to Amsterdam via Dubai. In line with the commencement of this new route, the airline has awarded a Europe-wide cargo contract to European Cargo Services to maximize bellyhold freight capacity.

Amsterdam is the first of several major European destinations, including Frankfurt, London, Paris, and Rome, that Garuda Indonesia intends to add to its network over the next four years. The airline’s re-entry into Amsterdam, after an absence of almost six years, marks a significant step forward in its global expansion strategy—and bodes well for further trade opportunities between Indonesia and European markets.

Garuda Indonesia is the first airline to reopen flights to Europe after the European Union’s (EU) ban prohibiting Indonesian carriers from operating on the continent was lifted in July 2009. In 2005, the EU began blacklisting airlines that were not compliant with essential safety standards from flying in European airspace.

Southeast Asia’s Diamond in the Rough

In a world run ragged by plummeting trade, one bright spot is Vietnam. The country’s export revenue jumped 26 percent year-on-year from January to April 2010 and industrial output grew 13.5 percent during the same period. Vietnam’s best-performing sectors include electronics and computers, which rose 39 percent to US $985 million, and tools and spare parts exports, which increased 75 percent to US $910 million.

Much of this growth is attributed to intra-Asia business, with 16 of Vietnam’s top 20 trade lanes within the region, and dominant import and export markets. Expansion is expected to continue.

A member of the World Trade Organization since 2007, Vietnam’s GDP is predicted to grow between 6.2 percent and 7.8 percent per year between 2010 and 2014 as a result of several key factors: its large, young, and highly literate population; continued success of the government’s foreign direct investment-friendly Doi Moi policy; political stability; and its proximity to China, Indo-China, and Southeast Asia.

Vietnam’s success also bodes well for carriers such as DHL, which has been aggressively mapping out its own plans for further investment in the country. In April 2010, DHL Express launched its Ho Chi Minh Gateway, located at the new Tan Son Nhat Cargo Express Service airside facility.

U.S., Switzerland Eye Open Skies Pact

U.S. and Swiss officials recently signed an enhanced Open Skies air transport agreement, replacing a previous arrangement ratified in 1995. The new pact includes all the essential elements of Open Skies and adds the right for airlines of both countries to operate all-cargo flights to third countries without a connection to the home country—“7th freedom rights” as it is commonly called.

Additionally, the new agreement permits Swiss airlines to be owned and controlled by nationals of any European Union member state. It also allows them to compete under the Fly America Act for certain U.S. government civilian agency-funded passenger and cargo traffic between the United States and Switzerland and between non-U.S. points.

Open Skies agreements have vastly expanded international passenger and cargo flights to and from the United States, promoting increased travel and trade, enhancing productivity, and spurring high-quality job opportunities and economic growth. They accomplish this by eliminating government interference in the airlines’ commercial decisions about routes, capacity, and pricing, freeing carriers to provide more affordable, convenient, and efficient air service to customers.

CRG Has Detroit Tunnel Vision

The Windsor Port Authority, Canadian Pacific Railway, and Borealis Infrastructure have formed the Continental Rail Gateway (CRG) coalition to pursue opportunities to develop, fund, and construct a replacement rail tunnel under the Detroit River.

Opened in 1910, the Detroit -Windsor Tunnel’s existing freight infrastructure carries approximately 350,000 railcars each year. While still in good condition, it cannot handle double-stacked containers and new generations of multilevel railcars used by shippers and auto manufacturers. The tunnel clearance was enlarged once in 1994 and cannot be expanded further.

Replacing the 100-year-old train tunnel is a key step toward making the Windsor/Essex County/Detroit/Wayne County region more competitive as a logistics hub. The high-clearance replacement rail tunnel would accommodate double-stacked container trains out of the Port of Montreal, which is important because the port plans to double its container-handling capacity over the next 10 years.

“Cargo Needs the Night” Sees Light

A who’s who of German transport and logistics companies, associations, and academia are joining forces to support the “Cargo Needs the Night” initiative, a cause championing competitive operating times at commercial airports throughout the country.

With special direction from Lufthansa Cargo, the effort intends to highlight the importance of the logistics sector to Germany’s economy through a series of conferences and related activities.

Currently, 40 percent of the value of Germany’s domestic exports is transported by air. Night flights are a key component in functioning global supply chains, but transport policy decisions are increasingly limiting the competitiveness of German industry.

In recent years, proposed bans on night flights have jeopardized the vitality of Germany’s airports and its entire export industry. In addition to challenging European air cargo hubs in Amsterdam, Paris, London, and Madrid, these restrictions threaten Germany’s competitiveness with airports in the Gulf region that also serve transcontinental routes between Asia, Europe, and the Americas.

UPS Lauds U.S.-South Korea Free Trade

UPS recently applauded the Obama administration’s move to re-engage South Korea and overcome remaining obstacles toward finalizing a bilateral free trade agreement. The U.S. government is attempting to end a three-year impasse on a pact reached with Korea in 2007 as another step in an initiative to double American exports over the next five years.

UPS has supported the negotiation of a U.S.-South Korea Free Trade Agreement from the start, as more than one quarter of domestic exports to the country come from small and medium-sized businesses—a key shipper demographic for the package delivery company.

Specifically, the U.S.-South Korea Free Trade Agreement contains vital provisions for the express delivery industry, including enhanced market access and improved customs clearance times that allow carriers such as UPS to better serve their customers’ global shipping needs.

China Looks to Consolidate Air Cargo Carriers

Following the announcement in early 2010 that Cathay Pacific and Air China would form a joint venture cargo airline, the Chinese government is now pushing for a merger of its three major airlines’ cargo operations. It marks the country’s latest move to produce stronger, internationally competitive carriers, and to create market stability.

The government has set up a team to work out details of a possible cargo merger between Air China, China Eastern, and China Southern. The proposed consolidation may jeopardize the Cathay -Air China cargo joint venture, which is still subject to final approval by the central government.

Foreign carriers transport approximately 70 percent of China’s international air cargo, with the three domestic carriers carrying the remaining 30 percent. Any move toward consolidation would likely give the country’s airlines impetus to seize even greater market share in the airfreight sector.[ ]

Caterpillar Constructs Manufacturing Foothold in Brazil

Construction and mining equipment manufacturer Caterpillar is looking to expand its production footprint in Brazil and meet growing customer demand across Latin America by siting a new facility there. The location of the new plant will be announced later in summer 2010.

The new plant will produce backhoe and small wheel loaders, which are among the products currently made at Caterpillar’s Piracicaba, Brazil, facility. Once the new plant begins production, it will allow the manufacturer to increase capacity for other machinery.

Caterpillar is capitalizing on the region’s relatively strong economic recovery during the past year. A rise in available credit has helped drive Brazil’s domestic prospects with demand for automobiles and housing, enabling the economy to grow nine percent year-on-year in the first quarter of 2010.

The manufacturer also has incentive to replicate what it has already created in Piracicaba. The current operation has been instrumental in developing the Caterpillar Production System, a business process strategy that stresses quality and manufacturing excellence within the organization.

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