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Port Report: Europe’s ocean freight industry innovates while Los Angeles’s waits, again

LA caught between straits of labor and capital; group looks for ocean freight’s Esperanto; and digital-first forwarder gets $20m funding.

European container consortium gets okay to talk tech

A group of the world’s biggest container ship companies aims to end the Tower of Babel built over the last half century in ocean freight.

The Digital Container Shipping Association (DCSA), comprised of Maersk (Nasdaq OMX: MAER.B), Mediterranean Shipping Company (MSC), Hapag-Lloyd (XETRA: HLAG), and Ocean Network Express (ONE) said it is officially open after the U.S. Federal Maritime Commission gave its permission to allow the carriers to talk amongst themselves.

The DCSA is the official name of an initiative announced last year to help spur digital standards in the ocean freight industry. The earlier project included CMA CGM, which is not listed as a member of the DCSA.

But Thomas Bagge, the Chief Executive of DCSA, said the group is open to anyone.

 Thomas Bagge Thomas Bagge

“We have 50 percent of the world’s container trade represented in the group currently and we have sufficient size to move on,” Bagge said. “But anybody is welcome to join, whether they are in Asia or France.”

There is no shortage of new technology initiatives in ocean freight, including Maersk and IBM’s TradeLens blockchain platform and the Ocean Alliance-backed Global Shipping Business Network’s blockchain platform.

Outside of the carriers, Dutch bank ABN Amro (Euronext: ABN) is in a  joint venture with the software group of Samsung and the Port of Rotterdam for a blockchain project. Freight forwarder Kuehne + Nagel (SIX: KNIN) is also in another blockchain project with Accenture and CMA CGM’s APL subsidiary.

Bagge said the group does not aim to pick the winners and losers from these projects. Instead, it wants to help create standards that allow them to work in a uniform way across any carrier or shipper.

In the blockchain realm, that can mean something as simple as defining a European or U.S. date standard when transmitting information.

“Blockchain, in general, has tremendous potential in the container shipping industry in terms of physical container and documentation visibility,” Bagge said. “What we would like to work on is the underlying standards for the blockchains to work on.”

Bagge, who was employed for 12 years at Maersk before moving to DCSA, said the electronic data interchange (EDI) standard that underlies most of the container shipping industry suffers from differing formats among the carriers, along with differing formats in how customers themselves receive data.

Even simple information such as vessel arrivals, departures, bookings, and customs clearance for containers can be transmitted in different formats.

“That creates enormous complexity on the side of the ocean carriers,” Bagge said. “The message formats can differ tremendously.”

Bagge said better standards aim to address the biggest question for shippers — where is my container.

The global container ship alliances mean freight booked through one carrier can end up on a ship belonging to another carrier in the alliance. That happens up to 50 percent of time in busy trade lanes such as Asia-to-Europe, Bagge said. The upshot is that customers can lose track of where their container is.

“MSC has an Internet-of-Things functionality on some of its containers, which is great, as long as it’s loaded on an MSC ship,” Bagge said. “When MSC loads a container on a partner’s ship, then because the communications protocols are not the same, the customer loses their visibility.”

Bagge compares the DCSA’s efforts to what’s been done in international banking through the use of Swift Codes and telecommunications through international roaming.

“I remember going to the U.S. fifteen years ago and I had to have a different cell phone back then because of different networks,” Bagge said.

“It’s the same with ocean carriers,” he added. “If they can agree of different standards, they will be able to apply a lot of technology that is hard to deploy today.”

U.K. digital first freight forwarder gets funding

Zencargo’s recent capital raise adds to the haul going to start-ups in the logistics and freight forwarding industry.

The U.K.-based start-up announced it completed a funding round that included German venture capital firm HV Holtzbrinck Ventures, DST Global managing director and Goldman Sachs alum Tom Stafford, and Pentland Ventures. The latest round brings Zencargo’s total funding to $20 million.

Chief Executive Alex Hersham said he caught the logistics bug through his prior work at a large private equity firm that helped restructure a European bank’s portfolio of soured loans to the container shipping industry.

“When you realize how interesting and complex globalization is and how trade works, that fascinated me,” Hersham said.

Instead of dealing with hard assets as he did at his previous firm, Hersham’s new venture is an asset-light freight forwarding and logistics firm. Zencargo helps customers get a better visibility on their supply chains and load planning, all with a view to “minimizing freight spend,” Hersham said.

 Venture capital funding to shipping start-ups (Source: PitchBook) Venture capital funding to shipping start-ups (Source: PitchBook)

An optimized supply chain “is becoming a competitive advantage for companies and the forefront of how they succeed,” Hersham said.

Venture capital interest in the sector has led to a spike in funding forwarding and supply-chain visibility companies, culminating in the $1billion raised by Flexport earlier this year.

Hersham said Zencargo will use its new round to add to its presence in the Far East and Southeast Asia, with a target of overall headcount going from the current level of around 70 to over 100.

Most of Zencargo’s current customers come from the U.K’s consumer goods industry, including apparel, furniture and cosmetics. As for the primary mode, ocean freight makes up about 60 percent of the volumes it’s handling with the remainder split between air and road freight.

As with the U.S., most of that freight comes from Asia, so the Brexit does not have a direct impact on that trade lane. However the vagaries of the U.K.’s status within the European Union and the resulting impact on England’s economy remain risks that many shippers are trying to navigate.

 L to R: Zencargo’s founders Richard Fattal, Alex Hersham, and Jan Riethmayer. L to R: Zencargo’s founders Richard Fattal, Alex Hersham, and Jan Riethmayer.

As did U.S. shippers, Hersham said U.K. firms are double ordering and overstocking in the event of trade disruptions. Likewise, U.K. firms are seeking warehouse space on the European continent due to the unknowns of Brexit.

Hersham said the Brexit issue, while not impacting its business directly, has resulted in a “period of uncertainty” for many U.K. firms on planning their supply chain needs. But the need to reduce freight spend will remain regardless.

“Some companies are unwilling to change right now until the dust settles, and what their needs will be under a hard or soft Brexit,” Hersham said.

“U.K. consumer spending and sentiment is strong, but there has been this pressure on the High Street to be adept and agile in their supply chain due to the Brexit,” he added.

Los Angeles Mayor asks for another timeout on Pier 400

Los Angeles Mayor Eric Garcetti asked for another 30-day reset in the talks between APM Terminals and the local union representing dock workers at the Port of Los Angeles on how to go forward with APM’s request to install electric charging stations at its Pier 400 location.

The charging stations are the first step in adding automated straddle carriers to Pier 400 as it seeks to automate the process of moving containers off its wharf and into container stacking yards for delivery outside the Pier’s gates.

The International Longshore and Warehouse Union (ILWU) Local 13 remains opposed the idea on the fear that it will lower labor demand  at the biggest North American marine container terminal.

But APM, owned by Danish shipping conglomerate Maersk (Nasdaq OMX: MAER.B), sees the project as a way to meet customer demands for container moves that match those of the neighboring automated terminals.

Caught between the 8,464 members of the ILWU and Maersk, which pays $70 million per year to lease Pier 400 from the Port of Los Angeles, Garcetti asked for the second delay in a hearing over the ILWU’s appeal against APM’s permit.

Invoking both the ILWU’s history in organizing labor at the West Coast ports and its current role alongside Maersk in making Los Angeles “the busiest container port in the Western Hemisphere,” Garcetti asked the Los Angeles Board of Harbor Commissioners for a second delay in deciding on the ILWU’s appeal of the permit.

Making the Port of Los Angeles into the main gateway for container goods into the U.S. “has not come without occasional challenges,” Garcetti said. But “working together we have always found a way forward that has benefitted this port, our city, and our economy.”
APM Terminals, which hopes to take delivery of the straddle carriers by June, said in a statement: “We appreciate Mayor Garcetti’s leadership on this important matter. After months of delay, we look forward to working expeditiously through the process he’s outlined to make the port competitive.”

South Africa has no problem with scrubber equipped ships

Open loop, closed loop, it’s no worry for ships visiting South Africa. (Shipping and Freight Resource)

Southeast Asia says yes to soybeans in a box

Containerized imports of U.S. soybeans see major spike to region thanks to low prices. (Maritime Executive)

Port of Oakland is hub for new service

Pacific International Lines to offer new services on 12,000-TEU container ships. (Marine Insight)

ONE Chief warns on empties repositioning

Jeremy Nixon said industry needs better way to handle empty boxes. (The Loadstar)