Southern California port congestion hits APL bottom line

APL says it will realign network to facilitate smooth cargo flow through the U.S. West Coast.    Neptune Orient Lines, the parent company of the container liner company APL, reported a loss of $23 million in the third quarter, blaming the loss partly on Southern California port congestion.
   The company earned a profit of $20 million in the same 2013 period.
   NOL’s revenue was essentially flat: $2.060 billion in the fourth quarter this year, compared with $2.062 billion in the same 2013 period.
   Core earnings before interest and tax were $21 million in the third quarter, compared with $22 million in the same period a year earlier.
   Singapore-based NOL said its cost management and efficiency drive has delivered $290 million of cost savings this year. The savings were primarily achieved through a more efficient fleet and network optimization, it said. But it added that those savings were largely offset by lower rates, lower volumes and increased costs from Southern California port congestion.
   “Our focus on increasing operational efficiencies remains on track,” said Ng Yat Chung, the chief executive officer of NOL. “However, our liner business faced tough operating conditions in the second and third quarters due to severe port congestion in Southern California, and this has negatively impacted our financial performance.”
   NOL is involved in both the container liner and logistic businesses.
   The company’s liner company, APL, reported third quarter before-tax earnings of $6 million, up from $3 million in the same period last year.
   Revenue was $1.7 billion, a year-over-year dip of 2 percent, which the company attributed to freight rate pressures and lower cargo volumes. Port congestion also impacted the number, and the congestion caused a significant increase in operating costs.
   “Given APL’s significant business presence in Southern California, we are working simultaneously on several fronts to urgently address these issues,” said APL President Kenneth Glenn. “This includes realigning our network to facilitate smooth cargo flow through the U.S. West Coast and working with our partners on equipment and productivity challenges.”
   APL told customers last week that congestion at the ports of Los Angeles and Long Beach has reached a critical point, saying that ships were waiting to berth or were delayed in working because of a shortage of International Longshore and Warehouse Union labor. It told customers to expect later-than-scheduled arrivals for the following services: ACA (Asia Central America Service), CC1 (Central China 1), CC2 (Central China 2), CC3 (Central China 3), CC4 (Central China 4), PA1 (Panama Atlantic 1), PA2 (Panama Atlantic 2), SC1 (South China 1), SC2 (South China 2), SE1 (Southeast Asia 1), and SE2 (Southeast Asia 2).
   APL is part of the G6 Alliance, which also includes Hapag Lloyd, Hyundai, NYK, MOL and OOCL.
   The CC2 service will be temporarily suspended as part of its winter program, with the last sailing from Shanghai today by the OOCL Italy. APL noted that all ports called by CC2 will be covered by other G6 Alliance services.
   The German carrier Hapag-Lloyd said that in addition to the services mentioned by APL, several other of its services are being affected by the congestion in the ports of Los Angeles and Long Beach. They are the JPX (Japan Express), MPS (Mediterranean Pacific), SE3 (Southeast Asia 3), WAN (U.S. West Coast – Australasia Loop 2), and WAS (U.S. West Coast – Australasia Loop 1).
   Congestion in the two ports “has reached a critical point,” Hapag-Lloyd said, with container ships anchoring off the harbor and waiting in line to berth.
It attributed the congestion to several other factors including a shortage of truck power and said it “continues to explore opportunities to contract additional vendor companies.”
   It noted there is a lack of chassis to pre-mount containers prior to truckers arriving at terminals to pick up containers. The company asked import customers and their motor carrier vendors to “confirm availability of their cargo by checking the terminal’s website prior to sending a truck to the terminal in order to avoid a denial of service when they arrive at the terminal gate.”
   It said the chassis shortage is exacerbated due to the fact that its services are “fragmented over many terminals. A chassis relief team comprising of terminals, chassis vendors and PierPass has been established and is looking to set up a temporary asset-sharing plan among the chassis providers with the next 30-90 days. A long term solution is expected in 2015.”
   NOL’s supply chain management business, APL Logistics, recorded third-quarter revenue of $399 million, an increase of 8 percent from a year ago. It recorded before-tax earnings of $15 million.
   “We remain focused on growing our business in key industry verticals and high-growth markets,” said APL Logistics President Beat Simon. The company said the logistics business saw “steady demand growth across all markets, particularly in the Asia-Middle East region.”