RLL Container Report - 02 April 2014
From: John Keir, Ross Learmont Ltd
Date: 02 April 2014
"Going against the grain"
Global demand for major grains, such as maize, rice and wheat, is projected to increase by nearly 48 percent from 2000-2025 and by 70 percent between 2000 and 2050. In February, prices for US wheat rose 1.3% after the U.S. Department of Agriculture (USDA) forecast lower than expected domestic supplies amid rising overseas demand. Export demand for U.S. grain stocks is strong due in part to reduced competition from Argentina, where wheat farmers faced drought last year. The USDA raised its export sales forecast for the 2013-14 season to 1.175 billion bushels from 1.125 billion last month. The UDSA liaises closely with its colleagues in Canada to ensure there is sufficient transport capacity, both on land and at sea, to cope with the projected rise in grain exports from North America.
Currently, Canada is facing a major logistics problem when trying to ship out its record grain harvest. Canadian railroads are despatching an average of 4.336 hopper cars to grain elevators in the prairie provinces: this is 23% more rail hopper capacity than in the same period last year. However, all these hoppers may overload the grain elevator terminals in Canada’s West Coast ports. The shipping lane via the Great Lakes has yet to re-open and the Port of Thunder Bay in Ontario is still ice-bound. Both Canada and the USA have, therefore, to address the question of transporting grain by making efficient use of all the logistical options they have available. To this end, the USDA now provides a weekly report on container availability at major US terminals. As ever-larger container vessels call at West Coast Ports and Maersk serves East Coast ports with their 18,000 teu vessels, the potential export box capacity is not being allowed to lie idle.
Already, the USDA’s plans are beginning to bear fruit: the Port of Long Beach reports that the number of laden outbound units rose by 4.9% to 707,539 in the current fiscal year. In the month of February, which coincided with the Chinese New Year, laden exports rose by 2.1% to 143,572 teu. Despite a period of economic instability in the past few years, the U.S. has experienced a modal shift in domestic traffic. During the five years up to August 2013, domestic container transport rose by a healthy 6.8%, as shippers moved first from road to rail and from truck to container.
Russia may also have to make maximum use of all available space, bulk as well as container, as exports of grain from Pacific ports are projected to rise dramatically. FESCO, Marubeni Corporation and United Grain Company have signed a memorandum of co-operation on regular grain shipments via Russian Far East ports. The first phase of the project involves 100,000 metric tons of grain exports but volumes may rise to 5 million tons. The grain will be shipped to Japan, South Korea, China, Taiwan and other countries in South East Asia. The three partners are considering the construction of a dedicated grain facility at Zarubino. However, until the Zarubino terminal is completed, the grain will be shipped via Fesco’s existing port facilities in Vladivostok, through which ever-larger numbers of boxes are sent back empty to Japan.
Just up the coast from Vladivostok, the Port of Nakhodka is discussing with South Korea the possibility of establishing a second major grain terminal in the Russian Far East. The Koreans are looking around for reliable sources of grain and the combination of Russia’s proximity and the availability of suitable agricultural land is a major attraction. Additionally, Nakhodka already possess the necessary port infrastructure, which is currently not operating to its full capacity. Coincidentally, the decision to invest in conventional container terminals in Nakhodka and Zarubino comes as Global Ports, which handles one-in-three of all containers passing through Russian Far East ports, may raise capacity at its Vostochny Stevedoring Company by six-fold. Currently the terminal, which is only a short distance from Nakhodka, has an annual capacity of half a million teu but this will have to be expanded to cope with projected increases in box traffic.
There were signs of expansion elsewhere in the first two months of this year, as box traffic via Russian ports rose by 4.8% to over 840,000 teu. During the same period, 455,000 teu passed through Baltic ports, an improvement of 6% on the same period in 2013. The number of laden export containers rose by an impressive 28.5% to just over one hundred thousand twenty-foot or equivalent units. However, that still leaves over 120,000 teu in Baltic ports seeking gainful employment. If we assume an average potential load of 10 metric tons per teu, then theoretically, these empty units could have carried 1.2 million tons of export cargo back out of the countries bordering on the eastern Baltic. The situation is much the same on the Pacific coast.
Fesco’s parent, Summa may provide Vladivostok with an even greater flow of box traffic by making an offer to RZD for their 50% shareholding in their intermodal joint-venture, Russkaya Troika. Currently, Russkaya Troika controls just under 5% of all boxes carried on the Russian rail network and last year RT transported 134,900 teu, a rise of 16.4% on the 2012 figure. Of this total, sixty-four thousand teu moved on domestic routes and the balance of seventy thousand operated on cross-border services. Simultaneously, Summa’s other intermodal joint venture with RZD, TransContainer may purchase a 50% stake in the Slovak rail operator, ZSSK Cargo Intermodal. The investment would cost around Euro 15 million and would give the sucessful bidder access to 450 container platforms and two terminals in Dobre and Bratislava. The acquisition would also give Transcontainer an extended reach into the heart of Central Europe, which is the furthest point away from main ports used by their deepsea container rivals.
Of course, container ports are not without their problems. Hamburg reported problems with congestion as several inbound container vessels were delayed by storms. As export containers continue to arrive by feeder vessel, the average dwell time for a container on the terminal doubles and all available space quickly fills up. Generally speaking, a port works best at 75 to 80% of capacity but terminal capacity has not grown as rapidly as slot capacity meaning that a delay to a number of big vessels can bring the logistics chain to a grinding halt. It is probably a good idea to split grain exports between both bulk and container vessels.
John Keir Ross Learmont Ltd
02 April 2014
Copyright © 2014 John Keir