Latest News - May 20, 2013

 

Energy & Diesel Fuel & Other Commodities

Diesel prices head up after ten straight weeks of declines EIA

The average price per gallon of diesel gasoline snapped a ten-week stretch of declines, rising 2.1 cents to $3.866 per gallon this week, according to the Department of Energy's Energy Information Administration (EIA).

TODAY IN ENERGY: Monday, May 13, 2013

Mexico Week: U.S. is Mexico's primary energy trade partner amid shifting trade dynamics Energy trade between Mexico and the United States in 2012 topped $65 billion and accounted for 13% of the $494 billion in overall trade between the countries. Crude oil and petroleum products account for most of the energy trade; in 2012, Mexico was the third-largest crude oil exporter to the United States, behind only Canada and Saudi Arabia,

Commerce - Regulatory & Compliance

Study: Imports Support 16 Million US Jobs

JOC Staff | May 06, 2013

More than 16 million U.S. jobs depend on imports, according to a new study commissioned by the Consumer Electronics Association, the U.S. Chamber of Commerce, the National Retail Federation, and the American Apparel & Footwear Association. Findings are:

• More than half the firms that import directly are small businesses, employing fewer than 50 workers.
• Imports improve American families’ standard of living by ensuring a wide selection of budget-friendly goods from clothing and footwear to electronics and fresh fruits and vegetables.
• A large number of these import-related jobs are union jobs, and many are held by minorities and women.
• American manufacturers and farmers rely on imports of raw materials and intermediate goods to lower their production costs and stay competitive in domestic and international markets. Factories and farms purchase more than 60 percent of U.S. imports.
• Imports generate exports. The United States is integrated into international supply chains so that even U.S. imports contain U.S. exports, particularly those generated in high-skilled and capital-intensive stages of production such as R&D and design.
• The study employed a widely used computable general equilibrium economic model known as the Global Trade Analysis Project, which is maintained by a consortium of more than 30 international organizations and government agencies, including the U.S. International Trade Commission, World Trade Organization, the Organization for Economic Co-operation and Development, World Bank, and several U.S. government agencies.

Labor, Staffing & Issues

New Foxconn report finds some progress

The New York Times | May 17 2013

A new audit of Chinese Apple producer Foxconn found that the company has not reduced the average workweek to be within Chinese law. The workweek is supposed to be capped at 49 hours a week but the audit said it was still too high. The report also found that unions at the company are still dominated by management. Foxconn said that they had made progress, and were still looking to do more. Critics say that the group doing the auditing, which was paid for by Apple, is too lenient, and that they are missing problems that have been found by other investigators.

Logistics: Carriers, All Transportation Modes & International

Capacity Pinch Seen as Truck Fleets Continue to Shrink and Demand Rises

Fleet Owner | May 20, 2013

Although fleet bankruptcies get most of the attention, the slow, steady and largely unnoticed downsizing of fleets will have a major impact on freight capacity as tonnage picks up, according to Derek Leathers, president and COO of Werner Enterprises.

While Werner's average tractor age stands at 2.3 years, the company has invested over $650m in new equipment over the last three years. As a whole the truckload industry average tractor age is now 6.6 or 6.7 years, up from 5.5 years less than a decade ago, Leathers reported.

“To claw back from 6.6 years to get to 5.5 years, the industry would have to spend $24bn within a 24-month window,” he said. “I don’t know where that money comes from. Banks are not lined up to lend money to an industry whose return on assets at this point is still very unimpressive.”

Saddled with aging trucks, significantly higher prices for new replacement vehicles and banks unwilling to fund fleet capital requirements, “fleets are slowly shrinking,” he said during the keynote address at the ALK Technology Summit. “They’re trading two or three old trucks for one new one. And because they can’t afford new trucks, the cost of maintenance [for the older trucks] puts them in a death spiral.”

Truckload capacity has dropped 17.6 percent since the end of 2006, according to Leathers. “That is a huge, huge amount of trucks taken off the road, but it’s happened quietly,” he said.

The 3PL & 4PL World

With recapitalization efforts complete, CEVA CEO is confident about the future

Logistics Management | May 10, 2013

In recent weeks, global third-party logistics (3PL) services provider CEVA Logistics has made considerable strides in regaining its financial footing and setting a course for future growth in the 3PL marketplace.

Earlier this month, CEVA Logistics reached an agreement with its major note holders to recapitalize its balance sheet and raise new capital. CEVA said that through these efforts it will reduce its consolidated net debt by more than $1.7 billion ($1.3 billion euros) and its annual cash interest expense by more than $170 million ($130 million euros) and also receive a capital infusion of a minimum of $301 million ($230 million euros) for investment in its business plan.

CEVA CEO Marv Schlanger that these efforts will make for a stronger balance sheet for CEVA, which will enable the company to grow faster and better compete in the logistics and supply chain marketplace, as well as give CEVA the flexibility of making additional capex investments, which will allow it to better serve its customers as they grow globally and build and sell new supply chain products.

Fuel Prices as of May 13, 2013

	U.S. On-Highway Diesel Fuel Prices* (dollars per gallon) full history
						Change from
		4/29/2013	5/6/2013	5/13/2013		week ago	year ago
	U.S.	3.851	3.845	3.866		-0.021	-0.138
	East Coast (PADD1)	3.886	3.863	3.865		-0.002	-0.189
	New England (PADD1A)	3.993	3.986	3.995		-0.009	-0.197
	Central Atlantic (PADD1B)	3.934	3.911	3.91		-0.001	-0.225
	Lower Atlantic (PADD1C)	3.831	3.804	3.807		-0.003	-0.162
	Midwest (PADD2)	3.839	3.868	3.909		-0.041	0.012
	Gulf Coast (PADD3)	3.757	3.737	3.739		-0.004	-0.176
	Rocky Mountain (PADD4)	3.81	3.804	3.822		-0.018	-0.182
	West Coast (PADD5)	3.949	3.923	3.969		-0.046	-0.308
	West Coast less California	3.833	3.83	3.883		-0.053	-0.309
	California	4.047	4.001	4.042		-0.041	-0.307
	*prices include all taxes

Fuel Prices as of May 6, 2013

	U.S. On-Highway Diesel Fuel Prices* (dollars per gallon) full history
						Change from
		4/22/2013	4/29/2013	5/6/2013		week ago	year ago
	U.S.	3.887	3.851	3.845		-0.006	-0.212
	East Coast (PADD1)	3.924	3.886	3.863		-0.023	-0.245
	New England (PADD1A)	4.027	3.993	3.986		-0.007	-0.246
	Central Atlantic (PADD1B)	3.982	3.934	3.911		-0.023	-0.283
	Lower Atlantic (PADD1C)	3.862	3.831	3.804		-0.027	-0.217
	Midwest (PADD2)	3.868	3.839	3.868		-0.029	0.094
	Gulf Coast (PADD3)	3.802	3.757	3.735		-0.022	-0.227
	Rocky Mountain (PADD4)	3.846	3.81	3.804		-0.006	-0.243
	West Coast (PADD5)	3.99	3.949	3.923		-0.026	-0.389
	West Coast less California	3.885	3.833	3.83		-0.003	-0.396
	California	4.076	4.047	4.001		-0.046	-0.384
	*prices include all taxes

Latest News - May 2, 2013

Energy & Diesel Fuel & Other Commodities

EIA

Diesel prices are down for ninth straight week. The average price per gallon fell 3.6 cents to $3.851 per gallon.

TODAY IN ENERGY: Thursday, May 2, 2013

U.S. exports of liquefied petroleum gases projected to continue through 2040
In 2012, the United States became a net exporter of liquefied petroleum gases (LPG) for the first time. LPG includes the natural gas liquids (NGL) components ethane, propane, butanes, and marketed refinery olefins. In its Annual Energy Outlook 2013 (AEO2013), EIA projects that the United States will continue to be a net exporter of LPG through 2040, mainly because of continued increases in natural gas and oil production
 

TODAY IN ENERGY: Thursday, April 18, 2013

Lower residential energy use reduces home energy expenditures as share of household income
Consumers spent 2.7% of their household income on home energy bills last year, the lowest percentage in 10 years. Aggregate home energy expenditures by U.S. households fell $12 billion in 2012 from the 2011 level. In 2012, prices for residential natural gas decreased 3% from the previous year, while household electricity prices stayed about the same. Warmer weather contributed to lower energy consumption in 2012, and because household energy expenditures reflect both prices and consumption, these changes resulted in lower household energy expenditures.
 

Commerce - Regulatory & Compliance

Chemistry Council lends support to class action rail suit

American Shipper | 04/30/2013

A federal appeals court will soon rule on whether an antitrust case against four railroads that allegedly engaged in price-fixing can be tried in the courts as a class action suit. Dakota Granite Co., Zinifex Taylor Chemicals and 11 other shippers brought a suit

U.S. trade deficit fell in March

The U.S. trade deficit fell by nearly $5 billion from February to March, ending the month at $38.8 billion, according to the Commerce Department. Last month, the United States exported $184.3 billion in goods, but imported $223.1 billion in cargo.

Economic Growth to Continue Throughout 2013

World Trade/WT 100 | May 2, 2013

Economic growth is expected to continue in the United States throughout the remainder of 2013, say the nation's purchasing and supply executives in their spring 2013 Semiannual Economic Forecast. Expectations for the remainder of 2013 continue to be positive in both the manufacturing and non-manufacturing sectors. These projections are part of the forecast issued by the Business Survey Committee of the Institute for Supply Management (ISM).

MANUFACTURING SUMMARY

From the panel of manufacturing supply management executives, 66 percent of respondents predict their revenues will be 9.9 percent greater in 2013 compared to 2012, 12 percent expect a 14.6 percent decline and 22 percent foresee no change. This yields an overall average expectation of 4.8 percent revenue growth among manufacturers in 2013, which is a slight increase of 0.2 percentage point from December 2012 when the panel predicted a 4.6 percent increase in 2013 revenues.

With operating capacity at 80.2 percent, an expected capital expenditure increase of 9.1 percent, prices paid expected to increase a modest 0.9 percent from now through the end of 2013, and employment expected to grow only 0.9 percent for the balance of 2013, manufacturers are positioned to grow revenues while containing costs through the remainder of the year.

"With 17 out of 18 industries within the manufacturing sector predicting growth in 2013 over 2012, U.S. manufacturing continues to demonstrate its broad-based strength, efficiency and leadership in the world economy," said Holcomb.

The 17 industries reporting expectations of growth in revenue for 2013, listed in order, are:

• Wood Products;
• Furniture and Related Products;
• Nonmetallic Mineral Products;
• Petroleum and Coal Products;
• Electrical Equipment, Appliances and Components;
• Miscellaneous Manufacturing;
• Printing and Related Support Activities;
• Food, Beverage and Tobacco Products;
• Paper Products;
• Plastics and Rubber Products;
• Textile Mills;
• Computer and Electronic Products;
• Machinery;
• Primary Metals;
• Chemical Products;
• Apparel, Leather and Allied Products; and

Logistics: Carriers, All Transportation Modes & International

Tonnage of Trucking Industry Surges in United States

Procurement Leaders | May 02, 2013

Trucking freight tonnage has increased in four of the last five months across the U.S., research reveals. The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index gained 0.9 percent in March after decreasing 0.7 percent in February.

In March, the SA index equaled 123.5, after the highest level was recorded in December 2011 at 124.3. Compared with March 2012, the SA index was up a "solid" 3.8 percent, beating February’s 3.1 percent year-over-year gain. Year-to-date, compared with the same period in 2012, the tonnage index is up 3.9 percent. Since November 2012, the index is up 7.6 percent. The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 125.2 in March, 11.5 percent above the previous month.

"Fitting with the expectation for solid gross domestic product growth in the first quarter, tonnage was strong in March and the quarter overall," ATA chief economist Bob Costello said. "At 3.9 percent year-over-year growth, the first quarter increase was the best since the final quarter 2011. Expect freight tonnage will slow in the months ahead as the federal government sequester continues and households finish spending their tax returns," he added.

The 3PL & 4PL World

UPS to acquire pharma logistics company, announces major LNG transportation plans

Logistics Management | April 29, 2013

Parcel bellwether UPS made inroads on other fronts, too, including its planned acquisition of CEMELOG, Zrt., a pharmaceutical logistics company based in Hungary, and rolling out its plan to purchase roughly 700 liquefied natural gas (LNG) vehicles and build four refueling stations by the end of next year. CEMELOG: As an active player in healthcare logistics, UPS said that adding CEMELOG to its portfolio in this sector boosts its presence in Europe, coupled with the fact that it will help to enable comprehensive and compliant services to pharmaceutical, biotech, and medical device shippers for emerging markets in Central and Eastern Europe. This acquisition is expected to be completed during the second quarter and is subject to customary closing conditions, according to UPS.

Supply Chain News

Report: U.S. manufacturing costs are now equal to Mexico and will be equal to China by 2015

Alix Partners | April 29, 2013

Four out of five executives surveyed say nearshoring will be an important decision in coming year. In another sign that America is becoming more competitive in manufacturing, the U.S. is now equal to Mexico in “attractiveness” as a source for manufacturing operations and is on track to achieve cost parity with manufactured imports from China by 2015. These are among the findings from new research released by Alix Partners, a global business consulting firm.

According to the survey, 37% of manufacturing executives said they would choose the U.S. as their preferred location for nearshoring. An equal percentage of respondents cited Mexico as the most attractive nearshoring locale, but in the firm’s survey just two years ago, 63% chose Mexico, while only 19% said they would choose the U.S.

Foster Finley is managing director at Alix Partners and director of its Supply Chain Practice. In a recent interview, Finley spoke with Modern about the research and what it says about nearshoring and reshoring efforts among global manufacturers. He stressed the report’s statements on the attractiveness of various regions for the production of U.S.-bound goods is a projection – not a prediction – based on straight-line extrapolations from 2013 trends.

“If the United States reaches parity with China in 2015, that would be more about luck than any statistical certainty,” said Finley. “A lot could happen in the next few years.”

The cost gap with China has on average been closed by approximately 70% for the products Alix Partners analyzed. If current trends remain in place, on average, by 2015 the cost of importing manufactured products from China will be about the same as manufacturing them in the U.S, said Finley. However, other key low-cost countries, such as Mexico and India, will remain highly competitive.

With a resounding 84% of the C-level executives saying that the decision to nearshore their manufacturing would be an important one during the next year (versus just 53% who said the same last year), it is clear that nearshoring and reshoring decisions are moving to the front burner in 2013. Approximately 58% of the respondents said for production that has either already been nearshored or is being considered for nearshoring, they have either reduced or expect to reduce their total “landed cost” by 5% to 20%.

The third annual survey captures the sentiments of executives, but Alix Partners has also been tracking the raw macroeconomic data in seven key factors related to global manufacturing costs. They are:

• Direct Labor
• Direct Material
• Overhead
• Territory (time in transit between place of manufacture and destination market)
• Harmonized tariffs
• Transportation
• Exchange rates

Generally, the raw numbers line up very well with the sentiments expressed by survey respondents, but Finley was careful to note that there are no direct lines between any one of these costs in a given country and the advantage of manufacturing there.

“Some of the less sophisticated companies are almost entirely focused on labor,” he said. “Depending on the product or mix of products made in a facility, labor could be inconsequential. It’s about an analysis of the products, not the facility, that will make the justification for relocation.”

For example, while the “China cost” for items analyzed such as machined aluminum parts, plastic molded parts, non-denim slacks, and knit apparel and sweaters is indeed on the rise, that cost is still lower than Mexico’s in each case – and is forecast to remain lower through at least 2015.

The one-time costs associated with a move are also critical to such a decision. Tax incentives, utility incentives and other governmental programs might help ease the transition to the U.S. or ensure a company doesn’t leave, but the U.S. is not alone in considering and implementing such incentives. “We think China will get into that as well, as they realize they need to get competitive to grow manufacturing or keep it in China,” said Finley. “China has its work cut out for it, because it has to deal with an export-based economy with a rising wage rate and a small consumer market.”

Automation will continue to play a big role as manufacturing welcomes what Finley called the “democratization of robotics.” In the list of economic factors above, automation seeks to transfer labor costs to overhead, which improves predictability. As the costs for automated technologies fall to the point where more small manufacturers can afford them, it increasingly places control of the labor costs in their hands.