Month: May 2020

Qatar Airways, one of the largest airfreight operators in the world by volume, on Sunday announced it is increasing cargo capacity for Scandinavian cities and launching an emergency air bridge between Vietnam and France using both freighters and repurposed passenger jets to haul freight.

Qatar has added five Airbus 350 passenger planes to haul only freight to Copenhagen. That is in addition to its thrice-weekly flights to the Danish capital increasing its total weekly cargo capacity for Denmark to more than 500 tons. The airline said the flights will support the country’s exporters moving goods, such as insulin, perishables and mail, to destinations in Asia, Africa and Australia.

The airline also added two freighter flights to Oslo, Norway, to its existing six weekly freighter flights and three passenger flights for freight only. Qatar also said it will operate one of its Boeing 747-8 freighters to the Norwegian airport every Thursday in May.

Sweden has also attracted additional Qatar freighter flights, including one last week that carried 103 tons of automotive, pharmaceutical and other cargoes for customers around the world.

Inbound flights to the three Scandinavian airports are carrying COVID-19 medical supplies, foodstuff, flowers, apparel and machinery parts, Qatar said.

Qatar also established an “air bridge” from Vietnam to France to transport more than 2,000 tons of COVID-19-related medical gear on behalf of the French Ministry of Health. This action will require 11 Boeing 777 freighter flights from Hanoi in May and four weekly, freight-only 777 passenger planes from Ho Chi Minh City until June, the airline said. Bollore Logistics is managing flight and distribution coordination.

Qatar Airways is operating a similar air link between China and France.

Since March, Qatar said it has transported more than 5,000 tons of medical supplies to France using its Boeing 777 freighter charters and scheduled flights.

Despite government quarantines and travel restrictions resulting from the pandemic, Qatar said it has continued to operate about 175 cargo flights per day. In recent weeks it has beefed up its freighter frequencies around the world.

The airline said it continues to monitor the pandemic and believes that by the end of June it will resume scheduled flights to about 80 international destinations, including 23 in Europe, four in the Americas, 20 in the Middle East and Africa, and 33 in Asia-Pacific.

Qatar said its “gradual expansion” of flights will initially operate between its Doha hub and major hubs, such as London, Chicago, Dallas and Hong Kong.

“We have built a strong level of trust with passengers, governments, trade and airports as a reliable partner during the crisis and we intend to continue delivering on this mission as we gradually expand our network,” said Qatar Airways Group Chief Executive Akbar Al Baker in a statement.

International Consolidated Airlines Group (IAG), the parent of British Airways, (OTCMKTS: ICAGY) announced a profit loss of 535 million euros ($576 million) for the first quarter of 2020, compared to a profit of 135 million euros ($145 million) for the same period last year.

The company also said that Luis Gallego, who heads Spanish subsidiary Iberia, will succeed CEO Willie Walsh on September 24. Walsh postponed his planned retirement in March to help the company through the coronavirus crisis.

Group airlines, which include Aer Lingus, Vueling and Level, are operating at about 6% of normal capacity, but Walsh said the airline plans to restore a meaningful amount of service in July, assuming quarantines and travel restrictions are eased. Nonetheless, Wash said, the second quarter is expected to be “significantly worse” than the prior three months.

Long-term prospects remain bleak, with the company echoing other airlines that passenger demand is not expected to catch up to 2019 levels before 2023 “at the earliest.” That outlook is forcing additional restructuring, including efforts to defer delivery of 68 aircraft. 

Cargo revenue for the period ended March 31 fell 10.5% to 246 million euros ($265 million), compared to the first quarter of 2019 at 275 million euros ($296 million), largely resulting from the near-complete meltdown of passenger flights due to the COVID-19 outbreak.

Asia-Pacific and Middle East revenue fell the most at 19.2% because of the initial spread of the coronavirus in China and the subsequent closure of factories.

Like many global airlines, IAG has continued to operate freighter flights and empty passenger planes for cargo during the first quarter, mostly to transport emergency medical supplies from Asia to Europe.

Between March 22 and April 26, IAG Cargo said it operated 350 additional cargo-only return flights, primarily on long-haul routes with passenger widebody aircraft.

“When large numbers of passenger flights were suspended, IAG Cargo took immediate steps to provide creative solutions for our customers,” IAG Cargo CEO Lynne Embleton said. “We adapted quickly, and we were one of the first airline groups to announce scheduled cargo-only flights using passenger aircraft. In doing so we have kept routes around the world open to cargo.”

The coronavirus pandemic’s global spread earlier this year put the brakes on many U.S. industrial project cargoes, but truckloads of behemoth wind turbine components continue to roll across the nation’s highways.

“Our wind turbine component load count for this year is up 36%,” said Gene Lemke, vice president of projects for St. Cloud, Minnesota-based Anderson Trucking Service (ATS), in a telephone interview with American Shipper. “It’s been a huge bright spot during these difficult times.”

Family-owned ATS, which got its start in 1955 hauling Minnesota-quarried granite slabs on flatbed trucks, began transporting wind turbine components nearly 20 years ago. The company estimates that today its equipment handles 30% of the total U.S. wind turbine market share.

“When we’re humming in wind, we’ll typically have 300-plus trucks on the road at one time between transporting all the turbine nacelles, hubs, towers and blade pieces,” Lemke said.

The U.S. wind energy sector anticipated a banner year in 2020 for construction of wind farms –  combinations of giant wind turbines spread across thousands of acres of open spaces –  which was stimulated by a significant federal production tax credit. The electric power generated by these wind farms is fed into utility power grids.

According to the Washington, D.C.-based American Wind Energy Association (AWEA), the U.S. wind industry installed more than 1,800 megawatts of new wind power capacity during the first quarter of 2020. That is more than double the capacity installed during the first quarter of last year, the association said.

Eleven new wind projects totaling 1,821 megawatts became operational during the first quarter, which power an estimated 560,000 American homes, AWEA said.

Also, during the first quarter, wind farm developers started construction on 4,124 megawatts of wind projects, bringing the total construction activity across the U.S. for 2020 to 24,690 megawatts. After several years of prospecting and preparing the sites, typical wind farm construction in this country generally takes six to nine months.

Logistics for wind farms

Lemke said most wind farm construction is presently concentrated in the “central corridor” of the country, running from North Dakota to Texas.

AWEA noted that Texas led the country in the first quarter of 2020 with 540 megawatts of new wind turbines installed, followed by Iowa, Illinois and South Dakota. “We have our fingers in a lot of them,” he said.

The U.S. supply chain of wind turbine components is both domestic and international. In recent years, most turbine manufacturers headquartered in Europe and Asia have set up parts production in the U.S. However, ample volumes of turbine components still arrive by ship at break bulk ports, such as Corpus Christi, Texas, and Vancouver, Washington.

The individual turbine components have also continued to increase in size and weight as the rated electric output of the machines has quadrupled to more than 4 megawatts in the past two decades. For example, one of Denmark’s Vestas 4.2-megawatt wind turbines has individual wind blades measuring 243 feet in length.

Transportation equipment, which is specifically tailored to moving these massive blades and tower sections, has subsequently evolved with the wind power sector, Lemke said.

ATS is no stranger to this demand. Around 2003, when it began to encounter turbines with tower sections 197-feet long and 15-feet in diameter and a turbine original equipment manufacturer’s requirement to move two, 127-foot blades per load, the company worked with trailer manufacturer Trail King to build a version of the “Schnabel” trailer. This multi-axle trailer suspends and locks components in place for transport. Its low profile allows these loads to safely transit under most U.S. highway overpasses.

The trailer equipment is also rugged enough to safely transport these outsized pieces along windy, dirt roads to remote wind farm installation sites.

Lemke said today it requires nine to 12 trucks to transport individual pieces of one turbine to a wind farm.

ATS also moves its specialized wind turbine trailers throughout the U.S., including transportation of some of this equipment last year from the U.S. West Coast to Hawaii onboard a Pasha vessel to erect a new wind farm on the island of O’ahu, Lemke said.

With nearly 60,000 wind turbines operating across 41 states and two U.S. territories, wind energy is now the largest provider of renewable energy in the country, supplying more than 7% of the nation’s electricity in 2019 or enough to power 32 million American homes, AWEA said.

According to AWEA’s 2019 Wind Powers America Annual Report, the U.S. wind energy sector supported a record 120,000 American jobs, 530 domestic factories, and $1.6 billion a year in revenue for states and communities supporting wind farms.

Wheeling through 2020

However, the association is concerned that COVID-19 is now “posing significant challenges” to the industry, resulting in slowdowns of domestic and international wind turbine manufacturing and wind farm construction due to social distancing measures required by public health officials.

AWEA’s current analysis suggests that COVID-19 is putting about 25 gigawatts of planned wind projects, valued at $35 billion, and more than 35,000 American jobs at risk.

“The industry will continue working with Congress and other renewable energy leaders to address the challenges of COVID-19 and to ensure projects have the flexibility to continue development,” the association said in an April 29 statement.

While COVID-19 may slow down wind energy’s growth during the second half of 2020, Lemke believes that turbine manufacturers and wind farm developers in the U.S. will continue to do their utmost to fulfill their slated projects to benefit from this year’s production tax credits.

“For us, the wind industry is going pretty strong,” Lemke said. “There is nothing to suggest that our role in this process will slow down anytime soon.”

The Women’s International Shipping and Trade Association (WISTA) announced Monday that seafarers in some countries can get free membership in national chapters.

Membership in WISTA Norway, United Kingdom, Singapore, Brazil or Argentina gives seafarers from or working in those countries access to the largest network of female managers in the shipping industry as well as online programming.

WISTA Norway is credited with the idea of offering free memberships.

“While most of the world is on lockdown, there is a group of people — the seafarers out on the oceans — working hard to deliver energy to markets and food to homes. Due to border closures and stringent disembarking restrictions, a majority of the seafarers have been on board for longer than their regular working period. This project is an appreciation for all that they do and a connection to the greater community,” said WISTA Norway President Pia Meling.

Meling also is the vice president of Massterly, touted as the first company established to operate autonomous vessels. At WISTA’s annual international conference last fall, Meling explained the company was not launched to eliminate human jobs.

“Our purpose is not to take the jobs of the seafarers on oceangoing ships. It is actually to contribute environmentally friendly and cost-efficient and sustained maritime logistics that can enable transportation of ships at sea,” Meling said at the conference, held in the Cayman Islands.

WISTA events around the world now are being staged virtually due to the pandemic. This makes meetings and workshops accessible to seafarers who may be at sea for months at a time.

“Each of us can benefit from learning, sharing and furthering our capabilities during this challenging time. As the leading voice for women in the industry, we want seafarers to know that their views, input and hands-on perspectives are welcome and we encourage them to share their stories,” Meling said.

WISTA International President Despina Panayiotou Theodosiou said the organization of more than 3,500 members around the world “embraces seafarers as a key component of our membership. I hope this project expands the number of seafarers who view WISTA as an important part of their professional development and network.”

Theodosiou, the chief executive officer of Cyrpus-headquartered Tototheo Maritime Ltd., promotes the eradication of gender bias in the maritime industry.

“Prejudice and discrimination keep the doors of opportunity closed,” she said at the international conference. “We the WISTA members have an opportunity to inspire everyone — and I mean everyone — to be an agent of change.”

With 51 national associations, WISTA works with global maritime and governmental bodies to support professional development, opportunities and networking for female managers in the maritime industry.

Seafarers from or working in Norway, the U.K., Singapore, Brazil or Argentina may obtain free membership through Aug. 31 by contacting their national WISTA associations.

Steep reductions in containership sailings over the next several months due to the ongoing coronavirus pandemic have many U.S. marine terminal operators wondering how they are going to afford their annual lease payments to port authorities.

The country’s nearly 100 large and small container terminals are on some of the priciest industrial property. According to industry experts, terminal operators in the Port of New York and New Jersey annually spend about $90,000 per acre as port authority tenants, while that number jumps to about $100,000 per acre per year for those operating in the California ports of Los Angeles and Long Beach.

These operations are also significant employers. The Alexandria, Virginia-based National Association of Waterfront Employers (NAWE) estimates that the nation’s marine terminal operators generate more than 40 million man-hours annually, and each has between 300 and 1,000 additional direct employees on the payroll.

Lease amounts are generally predicated on annual average container throughput of the marine terminals. In recent years, container volumes within the U.S. ports have remained sustainable, allowing terminal operators to pay their leases and invest in new equipment and longshore workforce development.

Some analysts now predict the hundreds of blank sailings that container carriers expect in the months ahead will cause collective losses of $23 billion, or more than 20% compared to 2019, by this year’s end for U.S. marine terminal operators.

“The global pandemic has given [marine terminal operators] a one-two punch this year,” said NAWE President Lauren Brand in an email to American Shipper. “Blank sailings resulted in reduced volumes, activating minimum throughput guarantee clauses in land-lease agreements, which raise immediate expenses during a dramatic reduction in income.”

In addition, she said COVID-19 safety measures to protect waterfront employees have further increased overhead costs for marine terminal operators.

Marine terminal interests have pointed out this concern to the U.S. Federal Maritime Commission (FMC) through the agency’s recently launched Fact Finding 29 Supply Chain Innovation Teams. These teams allow industry representatives to identify pandemic-related pain points in container shipping to the FMC.

On Friday, FMC Commissioners Carl Bentzel and Louis Sola sent a letter to the leadership of the Senate Commerce and House Transportation and Infrastructure committees asking them to address this “financial gaps” anticipated by the nation’s marine terminals during the pandemic.

“We have specific concerns about the abilities of the United States marine terminal operators to continue operating considering their leases and other contractual commitments to local port authorities,” the commissioners wrote.

“It is our understanding that marine terminal operators have tried to engage with their port authority landlords to discuss the financial impacts of drastic reductions of cargo on lease economics,” they said. “To date, however, little progress has been made to help adjust lease payments considering market conditions.”

In a telephone interview with American Shipper, Bentzel said the marine terminal operators will probably sustain current container volume losses if they only last another month or two. However, if those losses continue for another three to four months, he warned that many terminal operators will not be able to cover their lease payments this year.

Marine terminal operations have been deemed vital industries to keep open during the COVID-19 pandemic. However, unlike the domestic airlines, no financial aid has been set aside for these entities.

“It should be in the national interest to protect their continued existence and prosperity both to support the industrial base and to ensure that strategic assets continue to operate,” Bentzel and Sola told Capitol Hill lawmakers.

“We understand that there may be impediments that will preclude or limit the ability of terminals to use existing relief funds,” the commissioners said, but urged lawmakers to “consider a means to help alleviate and bridge the financial gaps that could jeopardize continued healthy operation of our domestic marine terminal industry and of our maritime transportation system.”

NAWE’s Brand suggests Congress establish a grant reimbursement program for marine terminal operators and stevedoring firms to cover the expense of protecting workers against COVID-19’s spread.

“A short-term grant program for the coming 12 months will give them a chance to provide a safer workplace, while they stay on the front lines of moving cargoes,” she said.

This is no ordinary year for American shippers and freight forwarders that are attempting to finalize their annual ocean service contracts with the container carriers.

The uncertainty of how much cargo will be available from the shippers and the amount of capacity offered by the carriers for the next contract season, which generally starts in May, remains anyone’s guess in the face of the ongoing coronavirus pandemic.

“The biggest obstacle we face in service contract negotiations this year is the great unknown about how much volume will move,” said Rich Roche, vice president of international transportation at Mohawk Global Logistics in Syracuse, New York, who also serves as the NVOCC (non-vessel-operating common carriers) subcommittee chair for Washington, D.C.-based National Customs Brokers and Forwarders Association of America (NCBFAA). “Few cargo owners can give confident forecasts right now.”

“How long this global reduction in demand, and thus carrier reductions in service will last, is unknown,” Peter Friedmann, executive director of the Agriculture Transportation Coalition, which is also based in Washington, D.C., and represents numerous agricultural and forest product exporters, told American Shipper in an interview.

“Thus, it is very difficult for carriers to make service/sailing commitments, and without those commitments, shippers and NVOCCs are cautious about making volume commitments with a particular carrier,” he said.

Remote negotiations

Interactions that typically occur during ocean service contract negotiations – face-to-face meetings and office conference calls – were disrupted this spring as negotiators among shippers, forwarders and ocean carriers scrambled to set up home offices in March and early April due to the emergency COVID-19 social distancing restrictions.

“We experienced some limited delays in response to timing as the carrier corporate account and trade/pricing management teams shifted to ‘work remote’ setups,” said a logistics executive for a U.S. equipment manufacturer, who requested anonymity because they did not have corporate permission to speak publicly about its service contract negotiations.

Carmen Gerace, chief transportation officer for Philadelphia-based forwarder-NVOCC BDP Transport, said the back-and-forth between the ocean carrier representatives and his team via email to finalize service contracts was more laborious this year. He also lamented “the lack of face-to-face communication to discuss and negotiate with an individual” during the pandemic.

“Contract negotiations are a little tougher without all the face-to-face meetings, but in some ways the meeting platforms make us a bit more efficient by eliminating travel,” Mohawk Logistics’ Roche said.

Forwarder-affiliated NVOCCs often enter service contracts for container space with ocean carriers and retail it back to shippers on a spot market basis. Neutral ocean freight consolidators, which enter service contracts for capacity with ocean carriers, sell their services to other forwarders on a spot-rate basis.

Negotiating points

Due to the unknowns caused by COVID-19, some shippers and forwarders have considered extending their current carrier contracts by 30 days, 60 days, or through the end of the year, to even rolling them over altogether. “That works for incumbents already in a contract, but new bids have to be treated separately,” Roche said.

This year’s service contract negotiations might allow shippers to zero-in on certain ongoing service and fee concerns with the ocean carriers, such as container availability and demurrage and detention fee assessments, said Friedmann of the Agriculture Transportation Coalition.

The U.S. Federal Maritime Commission (FMC) on April 28 announced that it has finalized its long-awaited guidance on how it will assess whether ocean carriers’ and marine terminal operators’ demurrage and detention practices are reasonable.

“With the entire U.S. international export and import economy demanding that the FMC issue its rule establishing demurrage and detention guidelines, will ocean carriers be willing to accept the detention/demurrage contract terms sought by shippers?” Friedmann said.

“As these charges, as well as ‘earliest return date’ (ERD) charges, have over the past few years often matched the actual freight charges, this is a major cost to shippers and revenue for carriers,” he said. “With COVID-19 constraining volumes for both shippers and carriers, and thus hurting the bottom line, detention and demurrage, and ERD, will be difficult, but critical negotiations.”

To assist its members, the Agriculture Transportation Coalition drafted language which could be inserted into service contracts to protect exporters and importers from unfair demurrage and detention charges by the carriers.

“Some of our members report that they have proposed some of those provisions (without sharing which provisions they are selecting) and have had some success in gaining their inclusion,” Friedmann said.

The logistics executive for the U.S. equipment manufacturer noted the surprising drop in bunker surcharges while the global ocean carrier industry implements the International Maritime Organization January 1, 2020 mandate to power ships with new 0.5% sulfur bunker fuel.

Shipping industry analysts last year estimated that the implementation of the IMO 2020 low-sulfur fuel mandate could cost the container shipping industry another $10 billion to $20 billion on top of its usual annual fuel bill, which the shippers have been expected to absorb through increased bunker surcharges from the ocean carriers.

The unexpected change in container volumes due to the COVID-19 disruption during the first quarter of 2020 “is driving a significant amount of internal dialogue as we review annual fuel cost impact forecasts that may change significantly from original estimates established in 2019,” the logistics executive said.

Roche said, so far, the ocean carriers have managed their capacity well enough to prevent ocean container rates from significantly falling. “But with so many void sailings to navigate through, service consistency has suffered quite a bit,” he added. “It’s hard to put the contract to work when there’s no ship to load that week.”

Service contract filing relief

Shippers and forwarders, with whom American Shipper spoke in recent days, also praised the FMC’s April 27 order temporarily allowing service contracts to be filed up to 30 days after they take effect to provide relief to shippers and container carriers impacted by the coronavirus pandemic. The order will remain in effect through December 31, 2020.

Under the Shipping Act, service contracts reached between ocean carriers and shippers must be filed within 30 days to the FMC for monitoring competition of U.S. container shipping.

The relief measure was identified by the Fact Finding 29 Supply Chain Innovation Teams, which include more than 50 industry representatives who hold regular telephone meetings with FMC Commissioner Rebecca Dye to identify pain points in container shipping due to the COVID-19 pandemic.

“We applaud the FMC’s initiative at this time in the interest of keeping freight moving,” Roche said. “The benefit will be felt more in relieving some of the administrative burden of [service contract] filing.”

The U.S. equipment manufacturer’s logistics executive interviewed by American Shipper also called the FMC order “a positive development” toward reducing service contract filing burdens during the COVID-19 pandemic. “This is especially relevant within a contract period when critical lanes must be agreed to and added with relatively short notice,” the executive said.